Dear Friends,
It seems to me, we all know the end result of monetizing debt, run away inflation, we all know why debt is monetized, to finance wars and welfare, and we all know the pain it eventually causes… but yet we race down the path to full debt monetization anyway? History is unambiguous on this fact being rife with horrible examples. Not only of economic tribulations but of cultural implosion and even outright chaos. From Wiemar Germany to modern day Argentina and Venezuela, the end, path and beginning is the same. Our economics courses teach it, our history books report it and our intellectuals ignore it, teaching that it could work… this time. The only conclusion a reasoning person can come up with, is that a large portion of our society and especially government, are clinically insane.
It always starts with the noble idea to provide for the poor. Some people who claim to be more enlightened, caring and well, gosh darn it, they are just better than average, stand up for the downtrodden. Inevitably it is not the plight of the poor that motivate them but vengeance on the rich. Fist held high to proclaim their willingness to use violence to meet their aims, they demand access to money other people have worked for, to give away. Of course it is the politician who gives away other people’s money that gets the credit. This scheme however, used by Caesar himself, (except Caesar used his own money), always draws the poor to your cause… today. Who cares about tomorrow when you have won the day, tomorrow can be repaired, as long as one has the power to do it.
The debt slide accelerates as more people become poor and drop onto the safety net. More and more people realize they are working for nothing… when others live the same or better standard of living, who do not have to get up at a certain time, punch a clock, knuckle under to a boss, listen to boring classes on how to safely lift, or even leave their house, and who can blame them? It is only a self interested thing to do, in the immediate sense, which is what many people do. More and more people ride the cart, as fewer and fewer pull, until the cart gets mired and cannot be pulled by the remaining workers. When that happens, the government fills the gap with printed money. The longer the gap remains in need of filling, and the wider it gets, the faster the economy deteriorates.
Eventually the demand exceeds the nations ability to pay and that nation begins printing money to buy it’s own debt. That always spirals into run away inflation, or hyper inflation, and that inflationary rocket always explodes at apogee. There are only two options for debt for government elites, take the government into bankruptcy or inflate away the debt. Bankruptcy is an obvious tarnish to the reputations of the elite, but even though, the end result of inflation is far far worse, the reputation damage is much more spinnable. Inflation like we see today in Venezuela must happen to get rid of the unpayable debt. So, off to the printers every government with a welfare state economy must go, to inflate away the debt they created, to buy votes, to fuel their agenda.
Today the entire Western nations and our satellites are printing money to buy our own debt. Many eggheads believe that socialism, along with unlimited money printing can work in an industrialized country, and they argue debt is a good thing, like Krugman. Many of them are brilliant people, able to twist a Gordian knot of logic, to make poverty wealth, and slavery freedom, most not even admitting to themselves their own logical inconsistencies. I suppose you could say they are falling into the trap of cognitive dissonance. We know what they are doing, they know what they are doing, and we all know where it will end, yet we allow them to do it?!?!!? We don’t miss a sip of coffee, when we see the unfunded liabilities for the US are upwards of ten times our GDP, and growing, but shouldn’t we?
Sincerely,
John Pepin
