by James R. Cook
Investment Rarities ( www.investmentrarities.com )
July 3, 2008 ( http://www.investmentrarities.com/bestofjimcook07-03-08.html )
Without inflating, social programs can't expand. Thus the creation of new money becomes an indispensable ingredient to the goals of populist politicians. Easy money aids the spread of the liberal agenda. Inflating and big government go hand in hand - you can't have one without the other.
We learned in the last century that 100% socialism (collectivism) was an economic and social disaster. Russia and China had to abandon this failed experiment. Nevertheless, in America, Europe and South America varying degrees of socialism persist and expand. For the past 80 years the U.S. has steadily increased the influence of socialism (the liberal agenda) and enabled it to grow and flourish.
Socialism and big government are birds of a feather. It takes high taxes to feed the government bureaucracy and increase its inroads. When all taxes are considered, government takes about half of what we earn. Thus, we can argue that the nation is 50% socialistic. Half socialistic means our country is doing half as good as it otherwise would.
For over thirty years I've been warning about the consequences of socialistic schemes like runaway government spending, unsound money, inflating, entitlements, subsidies, trade and budget deficits, high taxes and the cancerous nature of a monolithic state. For the first time, the impact of this government interventionism has led to a series of watershed events that appear terminal for the golden age that we have lived through since World War II. Today's events could easily be the beginning of the decline and fall of a great nation. You will know this to be true if we experience a continuous, never-ending series of crises and emergencies. Most of these crises will be economic in nature, but there will also be others, mostly social.
You can't have big government without big problems. For example, the energy crisis starts with a weak dollar. The government has lost any semblance of fiscal and monetary sanity. Jim Sinclair writes, "The Fed cannot continue issuing U.S. treasuries in exchange for something worse than junk and becoming the last counter-party to the world. But they will..." The Fed is creating too much money and credit and the dollar is losing value. This translates into higher prices and inflation, especially in energy. To make matters worse, the government put the kibosh on drilling for oil where the oil is, derailed refinery construction and terminated nuclear plants. Throwing taxpayer money at alternative energy has been tried and found wanting twice before.
The housing crisis evolved from the aforementioned loose money policies. The direct cause was artificially low interest rates. Government mortgage guarantees and regulations that forced lenders to make loans in bad neighborhoods to people with impossible credit histories are prime examples of ruinous socialist schemes. Our congress legislates and spends recklessly and then papers it over with new money. The interest on our national debt is $500 billion alone. That eats up all the taxes collected from individual taxpayers. (The war costs about $150 billion a year.) The spreading credit problems, the excessive leverage on Wall Street and the examples of outlandish executive compensation are linked to easy money. The erosion of a nation's currency foretells the decline of that nation.
Last week a group of 17 teenage girls were in the news in Massachusetts because they made a pact in high school to get pregnant. Does anybody think that these girls would have made this life-altering decision if the government wasn't going to support them? A huge chunk of our tax dollars go to subsidize a growing percentage of our populace whose behavior is anti-social, irresponsible and bizarre. The impact of this swelling class of flawed citizens on the future should be a matter of the gravest concern. But it's neglected because the socialists (liberals) refuse to see the consequences of their damaging government social programs.
Somehow, the left has escaped the socialist label in this country. We call them progressives. It certainly improves their chances at election time. What makes them so damaging is that they tend to treat the mess created by government subsidies and social programs with even more government programs. Thus, we slide into mediocrity and crisis. The problems created by government confront us every day in the news. We are currently harvesting the first pervasive bounty of socialism in America. We are replacing the unsurpassed efficiency of capitalism and the market economy with the half-baked whims of populists and economic know-nothings. Socialism opens Pandora's box, unleashes the plagues of Egypt and orders up new holocausts. Economic ruin may be the least of our worries. Since all we hear from the politicians are more socialistic schemes, a multitude of worsening crises must soon be forthcoming.