Some Thoughts On Government And "Wealth Creation"

Tyler Durden's picture

All courtesy of The Privateer author Bill Buckler

The Essence

“What I was looking at was a tussle between two groups of mass-men, one large and poor, the other small and rich. As judged by the standards of a civilised society, neither of them any more meritorious or promising than the other. The object of the tussle was the material gains accruing from control of the State’s machinery. It is easier to seize wealth than to produce it; and as long as the State makes the seizure of wealth a matter of legalised privilege, so long will the squabble for that privilege go on.”


Alfred Jay Nock - Memoirs Of A Superfluous Man - 1943

Mr Nock published his memoirs after a lifetime of watching the state enhance and widen its means of making “the seizure of wealth a matter of legalised privilege.” He recognised the process as being exactly what it was far better than the vast majority of his fellow Americans and described it better still. Were he alive today, he would not be surprised at the state of the world. Nor would he be surprised at the degree of gullibility shown by the fact that most people still cling to the hope that the perpetrators of the mess can “fix” it if only the necessary power is invoked. He would, perhaps, be surprised that the entire structure has not yet fallen down around the ears of those who constructed it.

A Declining Power?

Here is a quote from the other “sophisticate” who runs the US financial system. A few days before Mr Bernanke’s speech, Treasury Secretary Tim Geithner was speaking at the Economic Club of Chicago. Among many other things, he said this: “Cutting government investments in education and infrastructure and basic science is not a growth strategy. Cutting deeply into the safety net for low-income Americans is not financially necessary and cannot plausibly help strengthen economic growth.”

Government investment is a contradiction in terms. Since a government produces no real wealth but merely expropriates it from those who do, it has nothing to invest. To buy the concept that government spending is “investment” you must also buy the concepts that taxes are “contributions” and that money created by edict out of thin air is “wealth”. But Mr Geithner goes on to talk about a “growth strategy”. It is true that any move to curtail the government’s ability to expropriate and inflate will curtail “growth”. It will in fact curtail the growth of government, a “strategy” that Mr Geithner does NOT approve.

As for the assertion that cutting into the welfare state is “not financially necessary”, the unasked question is - TO WHOM? Cutting very deeply indeed into the welfare state is a necessary pre-requisite to ANY progress towards genuine prosperity. But again, doing so would curtail the growth of government.

The crowning glory of Mr Geithner’s latest contribution to the debate goes like this: “This strategy is a recipe to make us a declining power.” If the “us” here refers to Mr Geithner, Mr Bernanke, Mr Obama and all the rest, we couldn’t agree more. And the sooner the better!

The Reason For The Fix

By its nature, government intervention in an economy cannot take place to any great extent until the government gains monopoly control over what is used as money in that economy. Next year will see the centennial of the US government putting itself in that position - the Fed was created in 1913. Once the government DOES control the money, the intervention always increases. The size and rapidity of that increase is inversely proportional to the REAL wealth generating capacity of that economy. The more the government (which produces NOTHING) interferes, the less is left over for those who do produce.

The US government passed a law prohibiting its citizens from owning Gold in 1933. Shortly after that, it passed a series of laws which created the US welfare state. By the time Americans were again allowed to own Gold in early1975, the government’s stranglehold on the circulating money was complete. The US Dollar was redeemable in NOTHING. In the meantime, the US welfare state had pushed funded and UNFUNDED government debt into the $US TRILLIONS. In the US and everywhere in the world, we are witnessing a long delayed but always inevitable phenomenon. The welfare state can no longer be sustained by the dwindling wealth-creating capacity of the economy. The jig is up.


* * *

And this simple visual addition from Zero Hedge:

Finally, one chart which shows the precise moment when US welfare spending (fell free to check what the biggest "Fiscal Year To Date" expenditure categories are in the Daily Treasury Statement Table 2: Social Security and Medicare/Medicaid) shifted to totally out of control: the date - 1973, and the event was the Nixonian edict ending the gold standard, resulting in the complete break of the linkage between the US Dollar and hard asset backing. The rest is history.

Until that point, there would be consequence for profligate government spending, and the country ran a balanced budget for decades: the key events keeping the size of government in check.

Afterwards, there were no consequences at all, as the US government could run up any deficit it wanted and just issue any amount of meaningless paper (full faith and credit dollar bills via the Fed matched by full faith and credit US "obligations" via the Treasury) it had to.

Which brings us to where we are today, and where the government, now at epic, gargantuan proportions, is being preached as the best thing since sliced bread. Kinda like the Kolhoz.

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LULZBank's picture

Fuck the Wealth, WE print MONEY Bitchezz!!!

DoChenRollingBearing's picture

James Bovard lustily attacks wasteful government as the Editorial Page writer this week at Barron's!  Miss-alloocation of HUGE amounts of capital in programs that not only do not work, but have further unintended consequences.

Peru's currency (the Sol) reached a new record high vs. the buck

Read all about it (and more) at my "Review of Barron's -- Dated 16 July 2012":

TruthInSunshine's picture



Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.


When you won, you divided the profits amongst you, and when you lost, you charged it to the bank.


You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!


You are a den of vipers and thieves.



— Andrew Jackson (7th US President, when forcing the closure of the Second Bank of the US in 1836 by revoking its charter)

francis_sawyer's picture

+ 1^

That gets the francis_sawyer vote as quote post of the year...

Jay Gould Esq.'s picture

Outstanding quote.

One wonders what Old Hickory would think of the notion that his portrait is now prominently affixed to a circulating note -- backed by neither gold nor silver -- issued by a central bank with a far greater capacity for ruin than the entity he dissolved over one and one half centuries ago.

A bitter irony indeed.

Raymond K Hessel's picture

He would make Jesus and the money changers look like a hug-a-thon

blunderdog's picture

An abstracted token for social power.

If you can get hordes people who don't care about you personally to do what you want, you're rich.

If no one out there's going to do anything for you ever, you're poor.

Tom Green Swedish's picture

Rome failed because of Concern with displaying affluence instead of building wealth. Which basically means, stop keeping up with the Jones'.  You are not cool if you have better stuff.  Buy what you can afford.  If we can't make it we don't need it.  I am probably guilty of this just as much as you probably are, but I am trying real damn hard to change. 


Look what happened in Greece.  Everybody was driving around in expensive German cars not giving a damn about anything on top of the World until Bam.  The wolf comes knocking on the door.


The reason why America prospered after the Great Depression was people went through so many problems and afterwards they became total savers. The innovation and winning a war helped, but it was going through that difficult time that helped the most.  There was never any question the people of this generation had enough for retirement. With this new crisis we were treated like babies who need the government.   I think another depression would have been helpful.  Embarrass those people a little.  Don't give them a free check and free food.  Make them think and know they are supposed to be working and saving not taking from others hard work.  Help them but, don't give them a free ride.  They will feel better about it.


When I go to work all I see is a bunch of lazy people, who are walking on cloud nine because the USA has never experienced hardly any blip.  They work like fools because of this.  I work like a fiend everyday. They take advantage of me, instead of taking advantage of the lesson of my work ethic and integrity.

MillionDollarBoner_'s picture

There it goes again!



THX 1178's picture

Richard Nixon, understanding the recognizability and test-of-time standing ability of acronyms like JFK, FDR, and LBJ, once asked people to start calling him "RN".


"I'm an RN"   --Richard Milhouse Nixon

WTFx10's picture

A well thought out plan?

disabledvet's picture

Government DO create wealth...but not for you and me. What Government's DON'T do is "pay for themselves" which is why Banking IS Government...and vice versa it would seem. What the USA is not lacking is money. What it IS lacking is "a way to pay for things." In other words since 9/11 it has been the policy of the Federal Government to go hog wild on projects that simply provide no benefit to the American people as a whole...or even in part. The total opposite of the Cold War (as you can see in the chart--what a wonderful economy that was relative to what came before it)--which has massive construction projects "all war related" on the homeland. When the Cold War ended very "discreet interests" (to put it mildly) began pushing the State away from "the Cold War mentality" of trying to solve the problems of "the folks" and towards solving FAR more abstract problems..."over there." The War with Iraq has been the jumping off point and it's been total insanity ever since. I think we've reached the point of "actual reality" right now. Good luck making it all seem "political." From where i'm sitting an EPIC battle between DHS and the Pentagon is underway "on the home front"...the outcome of which will be determined by House Committee's investigating "anti American activities" and total war in the Middle East. This is NOT for the popcorn set folks!

Debugas's picture

i can conclude that during cold war US government was helping people to prove capitalism is better than socialism

As soon as socialism died the need for that was gone and here we are today

Sparkey's picture

I've said the same thing myself Debugas, the worst thing which happened to America was "Winning" the cold war, the contest to see who had the best system lost it's reason to exist. The cold war "Enemy", who, I think, never fired a shot in anger, changed their tactics, retreated to their secure base and watched to see what would happen after they left the stage, Gorbachev offered his hand to Pres. Regan and offered to cooperate on environmental and population problems, but he was rebuffed.

Perhaps the former "Enemies" are better psychologists than we are and may have reasoned that the huberistic nature of the nation would eventually lead us into a dark alley where we will not be precieved as representing that "City on the Hill, but something else again, the nations which "Win" wars are those who offer their help to the victims, we are looking like victimizers now, when the rubicon is crossed the former enimiest will offer their assistance to those who precieve themself's as victims. ~ No one can win of course, many have the power to start everything on the downward slide, no one has the power to vanquish the enemy without suffering a fatal blow himself, what will happen next? We wont have long to wait before we find out!

Tom Green Swedish's picture

The USA didn't even need to do anything to win the Cold War or any war against Communism.  It is an old failed idea, and Communism is always doomed to fail.  It is slowly failing in China. It will fail everywhere else, except in places like North Korea.  We wasted so much time and money on this failed project of defending Capitalism.  The only reason why I presume we turned into a military superpower was because we believe Communists are nutcases, but the simple fact of the matter is they need inputs to survive.  Even if they attack us with Mililtary power it would do no good. They cannot survive on their own.  Look at China, they are taking things from other countries everywhere.  They are taking resources from other countries because they do not have their own.  They are taking jobs because they do not have their own.  They are taking technology and ideas because they do not have their own.  And they are doing this without Military right now.  This is what scares me, they are trying to make it look like they are your friend.  There is no reason to fear China, it will collapse on its own and it has already started to.  Their entire GDP is based upon building infrastructure and taking labor away from other countries.   The people will most likely revolt.


But we cannot just sit back and wait for it to collapse we need new policies now. We need a new government.  We need one that thinks in terms of what is going to happen to be on top in the future, not what has worked in the past.  We need radicals.

deflator's picture

 The government picks winners and losers based on race, creed, color, gender, national origin and sexual orientation.  This methodology results in many unintended consequences although the intended consequence of divide and conquer is a successful strategy.



radicall's picture

Governments are like guns. Neither "Create" Wealth. But we need both to stay civilized

NidStyles's picture

Civlization means peaceful cooperation. There is nothing peaceful or cooperative about Government. 

LetThemEatRand's picture

Articles like this are such good red meat to the Rand crowd, but such complete and utter bullshit. In a society where we have interstate highways, a space program (which created GPS and myriad other technologies that we all use), a military (that developed nuclear energy among other things), and many other examples, it takes either willful ignorance or intentional deception to claim that government creates nothing.  Government creates by pooling resources.  One can disagree about how much is too much (I for one believe there is WAY too much government), but to simply close your eyes and spout ideology about government creating no value is simply preaching to a friendly choir.

akak's picture

And how many resources were misallocated, and potentially valuable PRIVATE wealth-creating businesses destroyed or killed before they were even born, as a result of those beloved government programs of yours?

As usual for a statist, you refuse to, or are incapable of, seeing the complete picture.

LetThemEatRand's picture

You speak in pure hypotheticals.  I speak of facts and of things that actually exist that were created by the government that this author says creates nothing.  Ergo, this author at the very least is wrong and more likely he is deliberately stating falsehoods in order to support his ideological view.  Show me some facts to support your theory that private enterprise would have created that which government created if government "got out of the way."  Surely there is a country somewhere in the world where this happened and it is not pure fantasy.  So, where would that be?  

Pure Evil's picture

How much wealth was created with Solyndra, minus the executive bonuses.

LetThemEatRand's picture

So if I list every failed private business that had no government funding would that make free enterprise a failure as a whole, or would it mean that sometimes ventures fail?   You should change your icon to "pure ideology."

Pure Evil's picture

With over 46 million US Citizenisms using SNAP and EBT, is the government creating wealth or is it creating government dependence?

LetThemEatRand's picture

You simply jump to the conclusion that this is a 100% government problem and not part of the plan of the bankers.  But I digress.  You are I are discussing two different things.  As I said in my post above, I have a lot of criticism about how our government is run.  But to say that government itself as a concept is the problem is to assume a solution that is no solution at all (letting oligarchs run the place).  Government does create things.  This author and many ideologues in politics right now claim otherwise.  Let's discuss facts and real solutions rather than blind ideology.

Tinky's picture

I suspect that you are misinterpreting Buckler, and/or he didn't express that point well enough. I believe that he is referring to a more limited definition of "production", and I doubt very much that he is arguing that it would be sensible to abolish government.

He is, of all of those writing publicly or privately (whom I have read), among the very best observers of the economy and its historical underpinnings.

LetThemEatRand's picture

So let's take one example -- the interstate highway system.  Government created the interstate higihway system by taxing private individuals and corporations, and pooling the money to fund a project of such vast expense and make it possible.  It also used its power of eminent domain to take the land (landowners were paid, again with money generated by taxes) where the roadways were built.  American commerce exploded due to the highway system that made transportation of goods and services much easier.  Not only new private commerce but real wealth were created.   Show me how anyone could read the article above and conclude that the author accepts that premise.  Here is a quote from the article to the contrary:  "government investment is a contradiction in terms. Since a government produces no real wealth but merely expropriates it from those who do, it has nothing to invest. To buy the concept that government spending is “investment” you must also buy the concepts that taxes are “contributions” and that money created by edict out of thin air is “wealth”.

Tinky's picture

There's a lot to unpack there. As some might reasonably argue, cherrypicking an example such as the highway system misrepresents the overall result of government "investment". If one were to include the funding for military misadventures, the picture would look quite different.

While Buckler may be conflating issues in your quote above, it's also hard to argue that he is wrong on taxes or money creation in their current forms.

LetThemEatRand's picture

I happen to agree quite strongly that the truth is somewhere in the middle.   The current police state government that is destroying our nation's wealth through inflation, cronyism, and endless wars must be stopped.  But I also strongly believe that the answer is not to eliminate the public/private model that made the U.S. a roaring success.   I would like to see the American system fixed, not thrown on the junk pile of history in favor of an ideology that the free markets can do no wrong.

lizzy36's picture

Couldn't agree more with every single one of your comments.

If one doesn't want any government, no taxation and to worship at the alter of the "free market", one should look to Somalia for inspiration.

NidStyles's picture

Yay! Another ignorant person that worships the word of the Media. SOmalia was peaceful before the UN and the US got involved.

Dburn's picture

"Yay! Another ignorant person that worships the word of the Media. Somalia was peaceful before the UN and the US got involved."

Lets talk about blind ignorance. People were starving to death over there. Genocide was being committed.There was nothing peaceful about that place. Go ahead asshole, look  at the 1991 civil war that broke out. No one here wanted to go over there until it got so fucking bad it looked like Rwanda on Steroids and that happened 3 years later because no one wanted to get involved after Somalia.

There are just as many idiots on the left and on the right who only listen to people who agree with their world view. You assholes are a special breed though. Screaming about govt letting private industry have a free hand to exploit slave labor in foreign countries while telling us how great it would be without govt is just a fucking hoot if people weren't suffering from the very private industry you worship. Go find a banker to blow. They love drooling douchebags like you.

Anusocracy's picture

You're full of shit. Somalia's a victim of Western Powers interfering with them.

Somalia's problem is the same as other countries in the region: they are resisting hegemony. The colonial powers screwed them over, and, as usual, the US is screwing them over now. They want to be left alone. They don't want the same shit system we have. They're not stupid like you are.


Xeer, pronounced [?e?r], is the polycentric legal system of Somalia. Under this system, elders serve as judges and help mediate cases using precedents.[1] It is an example of how customary law works within a stateless society and closely resembles the natural law principle.[2] Several scholars have noted that even though Xeer may be centuries old, it has the potential to serve as the legal system of a modern, well-functioning economy.[3][4][5]

According to one report, the Somali nation did not begin with the common use of the Somali language by the clans, but rather with the collective observance of Xeer. Xeer is thus referred to as being both the father and child of the Somali nation. An analogous phenomenon is said to have occurred among the neighboring Oromo nation, which is now under Ethiopian rule.[4]

Under Xeer, there is no authority that dictates what the law should be. The law is instead discovered by judges as they determine the best way to resolve a dispute. As such, the Somali nation by tradition is a stateless society; that is, Somalis have never accepted the authority of any central government, their own or any other.[4] Under Xeer law, Somalia forms a kritarchy and conforms in many respects to natural law. The lack of a central governing authority means that there is a slight variation in the interpretation of Xeer amongst different communities. The laws that are widely accepted are called xeer guud and those particular to a specific community are referred to as xeer tolnimo.[6]

As with law systems in Western states, the Xeer legal system also demands a certain amount of specialization of different functions within the legal framework. Thus, one can find odayal (judges), xeer boggeyaal (jurists), guurtiyaal (detectives), garxajiyaal (attorneys), murkhaatiyal (witnesses) and waranle (police officers) to enforce the law.[6]

Offthebeach's picture

You don't get to a police state overnight. You have to tend it and grow it in so many ways, and shape the character of the people. You ha e done your part. You shouldn't quibble over this or that of a authoritarian state. It loves you and is your shepherd and you are its lamb.

mjk0259's picture

Likewise vaccinations, communications satellites, nationwide network of gas and oil pipelines, cell phone standards, internet, electrical grid, standards for electrical power, Hoover Dam and many others generating cheap power for decades.

Anusocracy's picture

The freeways are responsible for the suburban cancer spreading acrossed the country.


By the way, the limited access road was a private invention.

Pure Evil's picture

What a douchebag, 46 million on government food assistance is considered blind ideology.

And for all the blowhard ideology you've been spewing since you've appeared on ZH, exactly what solutions have you been espousing?

Exactly what is the governments' plan on bringing back millions of middle class jobs when the government has been encouraging corporations to move jobs overseas through over regulation and the signing of Free Trade Agreements.

So, how much wealth was created when Obama shut down the Keystone pipeline or has been doing his best to kill the coal industry.

I guess we'll all have to hope that Obamacare will provide enough jobs through the systematic extermination of millions of baby boomers as they come before death panels. Like TSA agents someone will have to be hired to put bullets in the back of their heads or shove them into the crematoriums.

Offthebeach's picture

How's Slum Clearance, Model C_ities, Urban Renewal, Urban Development doing? I haven't been to Detroit,Gary, Albany, Newark, E SR. Lewis. They must be Paradise. Free concerts in the Parks, science centers everywhere, workers in bassinets homes .... You know, after trillions spent.

akak's picture

The never-ending parade of your failures of the intellect is an entertainment embarrassment of riches.

LetThemEatRand's picture

So basically you are rubber and I am glue?  When you have no merit left to discuss, simply insult the person who challenges your childish ideology.  Nicely done.

Pure Evil's picture

With the government signing Free Trade Agreements then sitting back and watching while US Citizenism jobs are outsourced to China, Mexico, India, Vietnam and other far flung corners of the globe, how exactly is this creating wealth for US Taxpaying Citizenism?

Exactly how does government create wealth for US Citizensim by allowing corporations to import workers under the H1B visa scam to replace US Citizenism taxpayer, now non-taxpayer, but now receiver of SNAP and EBT.

While Wall Street continues to receive bailouts from D.C. in the from of TARP, QE, Twist, and access to the Fed window, please explain exactly how this creates wealth for US Citizensim?

It looks more like the government is robbing current and future Peters (US Citizenism Taxpayer) to pay Paul (Wall Street scumbag insiders and Corporate douchbag CEO's that send American jobs overseas).

LetThemEatRand's picture

So now you are mad that the government isn't stopping private corporations from gutting our economy by off-shoring?  So you want more government?  Wow, you really don't even know what you believe in, do you?

NidStyles's picture

You are using numerous fallacie to prop up your worship of statism here. I find it amusing. Rand was a bitch BTW, and generally we don't like her either. I would take one of her disciples over a raging statist any day though. 

Overfed's picture

The government has set up a system that reward corp.'s offshoring efforts. What do you think NAFTA, GATT, and so on do?

What do you think has been the net result of the repeal of Glass-Steagal?

StychoKiller's picture

Your beloved Big Brother is supplying all the tax incentives that make off-shoring economical.  Check yer premises.