When Money Is "Free," Discipline Evaporates; When Discipline Evaporates, Decisions Are Disastrous

Tyler Durden's picture

Authored by Charles Hugh-Smith via OfTwoMinds blog,

The only possible output of a system lacking any discipline is self-destruction.

Whatever is free is squandered. When water is free, it's freely wasted. When electricity is free, there's no motivation to use it wisely.

The same principle holds true for money. If money is free, or nearly free, there is no motivation to invest it wisely, or consider the opportunity costs of spending it versus investing it or preserving it as savings.

Money that can be borrowed for next to nothing is essentially "free" because the costs of interest are negligible. Money that can be borrowed in virtually unlimited quantities is also "free," as whatever funds are squandered or lost to malinvestment can be easily replaced with more borrowed money.

Nothing enduringly productive can be built without discipline and a steady focus on the bottom line of production costs, revenues, overhead expenses and opportunity costs, i.e. what else could have been done with this capital and labor?

These dynamics are scale-invariant, meaning they apply to individuals and households as well as to companies, institutions and nation-states.

Thus we see the same poor results in trust-funders whose income is "free" (pouring in monthly whether the individual was productive or not) and national governments that can simply borrow another trillion dollars (or $10 trillion, hey why not?) when they've squandered all the tax revenues.

We intuitively grasp the necessity of discipline to corral impulses and desires that are self-destructive in the longer term. Eating chocolate cake and ice cream might appeal to our immediate cravings, but longer term the consequences of unbridled consumption of this kind of sweets are dire.

We also grasp the role discipline plays in learning difficult subjects/tasks and in accomplishing long-term, often arduous projects.

If there is any commonality to genius, it is a prodigious work ethic based on a highly disciplined schedule of daily productive effort.

All of which leads us to ask: what precisely have we accomplished by borrowing and blowing $9 trillion in additional national debt over the past eight years? With interest rates near-zero and the credit line of the nation essentially unlimited--recall that the central bank created $3.5 trillion of money out of thin air and used much of it to buy federal bonds--there was no need for any difficult choices or trade-offs--that is, discipline.

The trillions could be borrowed from future taxpayers painlessly, and squandered on propping up unaffordable entitlements and programs that were each immune to discipline.

So a pharmaceutical company raises the cost of a pinworm medication from $3 to $600. When money can be borrowed in endless quantities for "free," there's no need to ask if this predatory piracy is justified or necessary for the good of the nation; just borrow another trillion to pay for Medicare and Medicaid costs that are largely skims, scams, fraud or unproductive paper-shuffling.

As long as the money spigot is "free," there's no need to ask why the F-35 fighter aircraft is four times as costly as the aircraft it replaces.

As long as the money is "free," why should any politico risk telling a National Security agency such as the CIA "no more money for your agency until you can account for the tens of billions you're spending on gosh knows what."

Lowering interest rates to near-zero has reduced the need for fiscal-political discipline to near-zero. Politicos of all stripes are only too willing to borrow trillions from future generations--why not borrow and blow the money now to assure my re-election, and let future taxpayers figure out what to do about the crushing burden of debt we're leaving them?

High interest rates were basically the only mechanism of discipline imposed on short-term, free-spending politicos. Once the cost of interest was reduced to signal noise, politicos were freed of the burdens of discipline: of having to reckon the burdens of future interest, of opportunity costs, of trade-offs and the difference between productive investments and cronyist pork-barrel spending on marginal (but highly profitable) "infrastructure."

How disciplined will your gambling be in the casino when all your losses are covered by future taxpayers? Why hold back from risky gambles when any losses will be paid by others? Go head and gamble wildly--any lucky wins will be yours to keep, and all the losses will be covered by nameless others.

This is how "free money" leads to disastrous decisions. With the need for discipline eliminated, there's no motivation not to gamble wildly, fund every special interest group's demand, and grease the palms of every insider, every crony and every oligarch.

This is how a great nation will self-destruct. The only possible output of a system lacking any discipline is self-destruction.

*  *  *

If you found value in this content, please join Charles in seeking solutions by becoming a $1/month patron of my work via patreon.com. Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

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LawsofPhysics's picture

Do NOT overthink this you stupid fuck.

The term you are looking for is called moral hazard.

Remember, when fraud is the status quo, possession is the law.


Get your tribe in order, maintaining possession is something else altogether.

techpriest's picture

These articles are a lot more fun to read with this playing in the background:


The_Juggernaut's picture



...until the free money stops.

Douche McGoosh's picture
Douche McGoosh (not verified) techpriest Mar 17, 2017 12:50 PM

Free money yes.. or rather "free credit". I'm from a dusty town where people used to drive rusty old pick up trucks. Now every drunk Indian has a new Dodge. Went to teh market to get some stuff... $300 English wool sweaters, $40 balls of yarn from Llamas in Peru, $25 pieces of cheese and I was like "wow what happened here?"

techpriest's picture

Yes, this is textbook economics, and when the free money evaporates, the $7 Starbucks coffee is going, at minimum, to be replaced with $0.20 brew-it-yourself coffee.

In the end, money is just a proxy for the resources you can get with it. If there are no resources to buy, then it doesn't matter what kind of currency you have.

Douche McGoosh's picture
Douche McGoosh (not verified) techpriest Mar 17, 2017 1:06 PM

...the sad part is that people start to identify with their material trappings. And a lot of times, when all that stuff goes away they off themselves.

LawsofPhysics's picture

Let evolution work.

that is all.

knukles's picture

On a happier note, the heavy rains in CA and other points west have already removed massive layers of overburden and will do so in spades once the melt begins, uncovering heretofore unknown gold deposits.  Nothing commercial, but a lot of places are actually stocking gold pans and people funnin' it up.

Also, everybody be prepared for lotsa bugs.  Skeeters and the like gonna be heavy this year.  Out here. 
May you always be blessed with no no-see-ums

Gold and bugs.  What more can anybody ask for?  And he says a Spam sandwich.

Consuelo's picture



Zika/Dengue/Mad yellow-jacket syndrome...???

LawsofPhysics's picture

Let evolution work.

That is all.

mily's picture

"What are you on?" ex-FED Richard Fisher said they were on ritalin

GUS100CORRINA's picture

"When Money Is "Free," Discipline Evaporates; When Discipline Evaporates, Decisions Are Disastrous"


AR15AU's picture

i was told that if we believe there are no consequences to QE1, QE2, QE3, QE4 then it would become true.

LawsofPhysics's picture

Show us the same graph for Japan.

thanks, LoP

Consuelo's picture



It used to be once/week, now it's one-a-day, replete with the obligatory: '$Buy my book...'


Fear must be in the air again...

wisehiney's picture

EVERYTHING tastes sweeter in proportion to what it cost you (not neccessarily in dollar terms).

Killdo's picture

with me it's the opposite - I find the stuff I make out of nothing the most valuable. And the ways I improve stuff with nothing, just my experience and judgement

Smedley's picture

Well, how come we didn't get any of this 'free' money???


Hugh G. Rection's picture

Nailed it!

Aloha from the leeward metropolis, Mr Hughes-Smith!

coast1's picture

Someone told me long ago
There's a calm before the storm,
I know; it's been comin' for some time.
When it's over, so they say,
It'll rain a sunny day,
I know; shinin' down like water.

I want to know, have you ever seen the rain?
I want to know, have you ever seen the rain
Comin' down on a sunny day?

 regards, CCR
adr's picture

Of course there is no discipline. Discipline requires consequences for action.


Speaking of no discipline, PE firms who have bid Uber up to $50+ Billion with a future IPO expected to turn the unprofitable company into a few hundred billion dollar powerhouse might want to think again.

Just like I said many times. WE AREN'T GETTING SELF DRIVING CARS ANY TIME SOON!!!!!!!


Turns out an Uber self driving car can't even go one mile without a human driver intervening. The Uber cars also have a catastrophic failure that would have resulted in a major accident without a human taking control once every 114 miles. BUT THE TECH IS WORTH BILLIONS, BILLIONS THEY SAY!!!!!!

Carnegie Mellon has been working on the self driving car in Pittsburgh since the early '90s. Uber bought the entire self driving lab including all the grad students and professors, promising them million of dollars worth of Uber shares. It has been almost 30 years and even driving on the same exact roads the whole time, they still can't go more than a few miles without an intervention. Sure it might just be for one second, but that one second could mean the world.

Since I got my driver's license I have driven over 1.5 million miles. During that entire time I have caused ZERO accidents. I am 13k times safer than an Uber self driving car.

Osmium's picture

No self driving cars?  Damnit.  I'm still waiting for my flying car that popular Mechanics has been writing about for 45 some odd years.  Can you imagine the carnage flying cars would cause?  

Doppelganger71's picture

Will never happen, and for one simple reason. No matgter how good the software gets, or how fast the processors become, even with "AI", or "quantum computing", computers do not, and never will, understand the meaning of the word "NOW!"...........................


Next time you're on Youtube, search for a video called "Children of The Magenta". It'll tell you a few things about automation..........

DaveA's picture


But but but... that Tesla crashed because construction workers left the original road lines in place, guiding the Tesla into a temporary barrier. It's not Tesla's fault that roads are often confusingly and inconsistently marked!

Seriously, when you engineer robots, you must also engineer the entire environment in which they will be operating. Amazon didn't just buy a warehouse and put robots in it, they designed a warehouse for robots.

CRM114's picture

I did some work on adapting mobile robots to existing buildings back in the 1980's - it's bloody difficult!!

Sam Spayed's picture

Wow, when you look at that chart above it's hard to believe that half of that debt is from one little skinny left wing bastard.

cashtoash's picture

hard to believe that this skinny kept going with the war started by conservative idiots and spent another 4 trillion. should have called all troops home on day 1, F the iraqi-syria-libya or whatever else rots in that region

cashtoash's picture

hard to believe that this skinny kept going with the war started by conservative idiots and spent another 4 trillion. should have called all troops home on day 1, F the iraqi-syria-libya or whatever else rots in that region

silverer's picture

I remember reading if you give some chimpanzees a big bowl of cocaine they will do it until they kill themselves. Well, it's not just chimps. It's chumps, too.

Able Ape's picture

The title says it all; there's really no need to expound upon that....But thanks anyway!...