Print, Dupe And Transfer

 

Uncut 32-subject sheet of $2 Federal Reserve Notes. Source: Wikipedia.

Dear Diary,

Still in those lazy, not-so-hazy days of summer. August 15 marked the 43rd anniversary of that fateful decision by the Nixon administration to end the direct convertibility of the US dollar to gold.

It came and went without much fanfare. Nobody cares.

Thanks largely to this new easy-money regime, credit creation replaced capital accumulation as the main driver of economic growth. Credit in the US expanded 50 times between 1964 and 2007, far more than the economy that supports it.

Today, few people have any real money. But almost everyone has credit. At today’s ultra-low interest rates, they can own stuff they don’t need with money they don’t have.

That is why Janet Yellen tells the world not to expect “normalization” of interest rates anytime soon. She knows there will be hell to pay when people have to pay higher funding costs.

All of a sudden, all that “stuff you don’t really need” will be stacking up in warehouses and on retail shelves unsold. Then the people who make the “stuff you don’t really need” will find their hours cut back. And the economy will shrink.

The nation’s politicians know, too, that easy credit makes it possible for them to borrow cheaply… and use the money to buy votes.

A New Model of Government

That is another way to understand how modern government works. It has abandoned the old “invade, conquer, steal” model in favor of the “print, dupe, transfer” model.

Yes, dear reader, you want a quick description of human progress in the art of government?

Here is it: Chicanery and fraud have replaced larceny and brute force.

The feds tax as much as they can get away with – about 50% in the world’s most advanced democracies. Meanwhile, the Fed’s cheap credit boosts the total tax take by pumping up sales and profits. It also helps finance the rest of Washington’s transfer schemes.