Some Thoughts On Government And "Wealth Creation"
All courtesy of The Privateer author Bill Buckler
“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.
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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.