Managed to Death

January 20, 1999

The concept of a "managed economy" pleases most people. After all, we wouldn't want an unmanaged economy, would we? You just can't let things like the economy flounder around untended, so let's hear it for a managed economy.

Wait! Hold on a minute! How could there be an unmanaged economy? In its broadest terms, the economy simply is the productive activity of a people: making, trading, saving. For it to be unmanaged would mean that the activities of the people were random, disordered, more or less pointless. Even animals don't behave that way.

A free economy is managed, even if no one consciously manages it, by the marketplace. People do not simply continue producing what isn't in demand. My father's father was a saddlemaker. He made a variety of items from leather; I have some of his old tools in the basement. When I need to make a new hole in a belt, Grandpa's tools are just right for the job. The automobile put Grandpa out of business. His son-in-law, my uncle, was a farrier. He, also, was made redundant by the automobile. For either of these men to have continued in their occupations in the face of non-existent demand for their services would have been insane. Grandpa retired; Uncle George found other work. They managed their tiny segments of the economy.

Similarly, the lamplighter of yesterday isn't still advertising in the yellow pages, hoping for a new opportunity to work lighting streetlamps. The milkman who made his daily rounds delivering milk, cream, cottage cheese, etc., isn't waiting at the phone for a new dairy to hire him. They found something else to do.

Left to itself, the economy manages very nicely, without fuss or bother, and without the help of experts to guide the process. The term "managed economy," therefore, means something else. It means the direction of the economy by outside forces, in the way those outsider consider beneficial--at least to themselves.

This is because our economy today is dominated by bankers, for the very good reason that they are the sole source of our money--or what can be passed for it. The bankers must continually create more money to enable existing debts to be serviced. If they did not, the money supply would contract and the economy would stumble and falter into a depression. If they create too much, however, rising prices will stifle business, and a similar slowdown could occur. Besides, runaway inflation, if it comes to that, always demonstrates that the defect is in the money itself, although, surprisingly, no one seems to notice, and once things settle down, the process of inflation begins again. The new money creation is always as an interest-bearing debt of course, so an inevitable problem arises: how much debt can society tolerate? In America, we are beginning, I believe, to approach the limit. If, however, borrowing slows, the whole system of monetized debt crashes like a house of cards. Of course, government is always the borrower of last resort, and there are no end of government programs to finance. Also, foreigners--and especially, their governments--can become indebted, thus sharing the debt load with the home folk. It's a tricky business, however, and the bankers walk a tightrope between excessive money creation, and too little. How much is enough? To answer that question, information about the economy is needed. Credit cards, and debit cards, provide this information quickly. In addition, anyone seeking to operate outside the system must be identified and neutralized.

This is the reason, in my opinion, for the "Know Your Customer" programs being urged upon banks by the FDIC. The information being given Congress about this program states that "the regulation would require each nonmember bank to develop a program designed to determine the identity of its customers; determine its customers' source of funds; determine the normal and expected transactions of its customers; monitor account activity for transactions of its customers; monitor account activity for transactions that are inconsistent with those normal and expected transactions; and report any transactions of its customers that are determined to be suspicious, in accordance with the FDIC's existing suspicious activity reporting regulation.."

The big boys are frightened! They realize that large numbers of people dealing in cash, for example, will be able to transact business privately, and without providing information about their economic activities. To manage the economy, knowledge of such things is important, particularly as the economy deteriorates and the bankers find themselves on that tightrope balancing between runaway inflation and global depression. Millions of bucks disappearing into the black hole of the "underground" economy is, for them, a terrifying concept.

Taxation exists as a primary means of economic regulation, and as it becomes increasingly oppressive, more and more will opt out of the system. This "underground," or free economy, is unregulated. People who avoid taxes can spend funds in whatever way they wish, and may bid up prices, revealing the intrinsic inadequacy of our money as a store of value and medium of exchange. If people lose confidence in the currency, the advantage in printing it diminishes.

So banks will, under the Know Your Customer program, create "profiles." Each bank will determine the amount of risk a potential customer might present by having a bank account. Might he be using his account for money laundering? Secondly, a profile will be created to determine what is the ordinary pattern of deposits and withdrawals, and when "suspicious" activity is taking place in an account. If you should win at the race track, and dump a couple of thousand in cash in your account, it will be reported. Be prepared for a visit from the feds. Should you withdraw a few thousand in cash, that might be reported also, as a suspicious activity.

To manage the economy, you must manage the people. That management is difficult or impossible if they operate outside the system, in an unreported and private manner. Anyone even contemplating such a course of action must be intimidated, or actually punished. Moreover, economic information is essential if the managers are to make the right decisions; the use of cash is particularly vexing to them in this regard. Many banks already have in place a fingerprint program requiring any non-customer cashing a check to give a thumbprint. Do you feel like a criminal when required to give a thumbprint to get cash at a bank? Good! That's exactly the idea! Cash is nasty, and if you use it, you associate yourself with gangsters! Why, you're unAmerican!

Would these alarming measures be necessary if our economy were as healthy and robust as we are constantly being told it is? The regulations are touted as necessary to combat crime, especially money laundering by drug czars, or other criminals; but perhaps one reason drugs are such big business is because the drug business is an unregulated business which, although dangerous, is profitable enough to warrant taking the risk. In times of genuine prosperity, such risky enterprises may not be worth the trouble.

Governments are created to safeguard our freedoms; banks are created to safeguard our money. Today there is no money, and very little freedom; and the two situations are not unrelated. Take away the people's money and trick or force them into using borrowed bank credit instead, and you put into action forces which will, inevitably, destroy the economy and diminish personal freedom. In other words, they will make our productive efforts less and less productive, until we seek some form of relief. The purpose of "Know Your Customer" is to make sure we don't get it!

The ship is going down, and we are supposed to go down with it. It's our patriotic duty.

The world’s gold supply increases by 2,600 tons per year versus the U.S. steel production of 11,000 tons per hour.

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