The Link Between a The Link Between a Degenerating Currency Degenerating Currency

and a Degenerating and a Degenerating CultureCulture

Austrian Scholars Conference 2009Austrian Scholars Conference 2009Ludwig von Mises InstituteLudwig von Mises Institute

Auburn, ALAuburn, ALMarch 14, 2009March 14, 2009

Paul T. Prentice, Ph.D.Paul T. Prentice, Ph.D.pprentice@farmsector.com

AxiomAxiom: Man Acts: Man Acts

PostulatePostulate: Human action involves moral : Human action involves moral choices. Man can act morally (voluntarily) choices. Man can act morally (voluntarily) or immorally (coercively).or immorally (coercively).

In a natural state of liberty, government is In a natural state of liberty, government is by definition limited to securing man’s by definition limited to securing man’s natural rights to life, liberty, and property.natural rights to life, liberty, and property.

Free societies choose moral voluntary Free societies choose moral voluntary behavior.behavior.

Immoral coercive behavior is by and large Immoral coercive behavior is by and large shunned.shunned.

""The Principle of spending money to be paid The Principle of spending money to be paid by posterity, under the name of funding, is by posterity, under the name of funding, is

but swindling futurity on a large scalebut swindling futurity on a large scale.. – – Thomas JeffersonThomas Jefferson

From America’s founding until WWI, total From America’s founding until WWI, total government commandeered 5-10% of the government commandeered 5-10% of the economy.economy.

This means that 90-95% of human This means that 90-95% of human economic action was voluntary (moral).economic action was voluntary (moral).

There was little net accumulation of There was little net accumulation of government debt. Deficits in one time government debt. Deficits in one time period were by and large offset by period were by and large offset by surpluses in a later time period. surpluses in a later time period.

The moral basis of American The moral basis of American society started to change in 1913society started to change in 1913

The 16The 16thth Amendment was the beginning of the Amendment was the beginning of the end of formal property rights (the right to the fruit end of formal property rights (the right to the fruit of one’s labor).of one’s labor).

The simultaneous founding of the Federal The simultaneous founding of the Federal Reserve System was the beginning of the end to Reserve System was the beginning of the end to another right – the right to a hard currency.another right – the right to a hard currency.

"Sound money was devised as an instrument for "Sound money was devised as an instrument for the protection of civil liberties against despotic the protection of civil liberties against despotic inroads on the part of governments. Ideologically inroads on the part of governments. Ideologically it belongs in the same class with political it belongs in the same class with political constitutions and bills of rights."constitutions and bills of rights." - - Ludwig von Ludwig von MisesMises

TheoremTheorem: A degenerating : A degenerating currency contributes to a currency contributes to a

degenerating society.degenerating society.

With a fractional-reserve fiat With a fractional-reserve fiat currency, government no longer currency, government no longer needed to tax or borrow in order needed to tax or borrow in order to spend. Now it could just print to spend. Now it could just print

and spend.and spend.

The true tax rate is the percentage of The true tax rate is the percentage of resources commandeered by government.resources commandeered by government.

Measured by calculating government Measured by calculating government spending as a percent of total spending.spending as a percent of total spending.

Commandeering of resources could now Commandeering of resources could now be accomplished through the printing be accomplished through the printing press. Even Keynes acknowledged this.press. Even Keynes acknowledged this.

Within one generation of the Within one generation of the creation of the Fed, the Great creation of the Fed, the Great Depression ensued and the Depression ensued and the

Welfare State became Welfare State became institutionalized -- the New Deal.institutionalized -- the New Deal.

Constitutional restraints were gradually eroded.Constitutional restraints were gradually eroded. No longer restrained by the necessity to tax No longer restrained by the necessity to tax

before it can spend, government is set free to before it can spend, government is set free to engage in unlimited “free lunch” promises. engage in unlimited “free lunch” promises.

These promises have misled a mal-educated body These promises have misled a mal-educated body public into substituting the philosophy of public into substituting the philosophy of individual responsibility with a philosophy of state individual responsibility with a philosophy of state “security”. “security”.

A cultural-political-economic A cultural-political-economic death spiral beginsdeath spiral begins

Society then demands more free Society then demands more free lunches, leading to more fiat lunches, leading to more fiat currency, etc. currency, etc.

The State crowds-out the moral The State crowds-out the moral behavior of the individual. behavior of the individual.

The State becomes both The The State becomes both The Parent and The SpouseParent and The Spouse

Eventually, young women and men Eventually, young women and men begin to have children without the begin to have children without the means to support them. means to support them.

Out-of-wedlock births skyrocket. Out-of-wedlock births skyrocket. The family degenerates. The family degenerates.

Behaviors are disconnected Behaviors are disconnected from consequencesfrom consequences

The social safety net grows along with the The social safety net grows along with the government printing presses. government printing presses.

People are empowered to internalize People are empowered to internalize benefits but externalize costs. benefits but externalize costs.

Moral hazard becomes the norm for Moral hazard becomes the norm for society.society.

A nation birthed in liberty slowly A nation birthed in liberty slowly transforms into a fascist state.transforms into a fascist state.

Generation after generation becomes Generation after generation becomes increasingly corrupted. increasingly corrupted.

Business is not immune, as can be seen in Business is not immune, as can be seen in the current financial meltdown and the current financial meltdown and bailout. bailout.

Fiat currency allows profit to be privatized Fiat currency allows profit to be privatized while losses are socialized.while losses are socialized.

““The spread of collectivist ideas in The spread of collectivist ideas in the business worldthe business world” – ” – Murray Murray RothbardRothbard ( (America’s Great America’s Great

DepressionDepression, Ch. 10), Ch. 10)

The “Swope Plan” to compulsively cartelize The “Swope Plan” to compulsively cartelize American business. (General Electric).American business. (General Electric).

Endorsed by the U.S. Chamber of Commerce.Endorsed by the U.S. Chamber of Commerce. More and more businessmen become “political More and more businessmen become “political

entrepreneurs” rather than “market entrepreneurs” rather than “market entrepreneurs”. (entrepreneurs”. (Thomas DiLorenzoThomas DiLorenzo, , How How Capitalism Saved AmericaCapitalism Saved America))

Liberty is lost, since political Liberty is lost, since political liberty cannot be disconnected liberty cannot be disconnected

from economic libertyfrom economic liberty

““Power over a man’s subsistence is power Power over a man’s subsistence is power over his will.”over his will.” – Alexander Hamilton – Alexander Hamilton

""To be controlled in our economic pursuits To be controlled in our economic pursuits means to be controlled in everythingmeans to be controlled in everything." –." – F.A. HayekF.A. Hayek

“ “The ultimate sanction of a planned The ultimate sanction of a planned economy is the hangmaneconomy is the hangman.”.” – F.A. Hayek – F.A. Hayek

Even Atheists Can Be ProphetsEven Atheists Can Be Prophets(Today’s headlines written in 1957)(Today’s headlines written in 1957)"When you see that trading is done, not by consent, "When you see that trading is done, not by consent,

but by compulsion - when you see that in order to but by compulsion - when you see that in order to produce, you need to obtain permission from men produce, you need to obtain permission from men who produce nothing - when you see that money who produce nothing - when you see that money is flowing to those who deal, not in goods, but in is flowing to those who deal, not in goods, but in favors - when you see that men get richer by favors - when you see that men get richer by graft and by pull than by work, and your laws graft and by pull than by work, and your laws don't protect you against them, but protect them don't protect you against them, but protect them against you - when you see corruption being against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed." - you may know that your society is doomed." - Ayn Rand. Ayn Rand. Source: Source: Atlas ShruggedAtlas Shrugged, Francisco's , Francisco's "Money Speech""Money Speech"

In God We TrustIn God We Trust

Becomes: In Gov We TrustBecomes: In Gov We Trust But when it comes to money, it should be:But when it comes to money, it should be: In Gold We TrustIn Gold We Trust

TheoremTheorem: A degenerating currency : A degenerating currency contributes to a degenerating contributes to a degenerating

society.society.

QEDQED

Final ThoughtsFinal Thoughts ""The American people will never knowingly adopt Socialism. But The American people will never knowingly adopt Socialism. But

under the name of 'liberalism' they will adopt every fragment of under the name of 'liberalism' they will adopt every fragment of the Socialist program, until one day America will be a Socialist the Socialist program, until one day America will be a Socialist nation, without knowing how it happenednation, without knowing how it happened." -- ." -- Norman Thomas. Norman Thomas. Six-time U.S. Presidential candidate for the Socialist Party of Six-time U.S. Presidential candidate for the Socialist Party of America America

Norman Thomas and Gus Hall, the U.S. Communist Party Norman Thomas and Gus Hall, the U.S. Communist Party Candidate, both quit American politics, agreeing that the Candidate, both quit American politics, agreeing that the Republican and Democratic parties by 1970 had adopted every Republican and Democratic parties by 1970 had adopted every plank of the Socialist Party and they no longer had an alternate plank of the Socialist Party and they no longer had an alternate party platform on which to run.party platform on which to run.

""The state is the coldest of all cold monsters. Coldly it lies, too; The state is the coldest of all cold monsters. Coldly it lies, too; and this lie creeps from its mouth: `I, the state, am the people.'... and this lie creeps from its mouth: `I, the state, am the people.'... Everything about it is false; it bites with stolen teethEverything about it is false; it bites with stolen teeth. " -- . " -- Friedrich Nietzsche. Friedrich Nietzsche. Source: Source: Thus Spake ZarathustraThus Spake Zarathustra