RECESSION! – Brought to You by Your Government!

By Gary Alder – 3/4/2009

 There has been a lot of talk about the recession (or maybe depression) that we are in and a lot of blame being placed by various individuals and groups on one another.  While I am opposed to placing blame for the purpose of ducking responsibility, I must say that this recession is brought to us compliments of our very own government.   After making this bold statement, let me say that WE are totally responsible for the government we have.  None of them were born to power and authority as were the members of the aristocracies of years gone by and located in places far away.  They are in positions of authority because we put them there either by our vote or by our failure to vote for only statesmen and patriots. 

This is meant to sound like an indictment.  But it is not just an indictment of others.  I include myself.  I was among those that voted and take personal responsibility for that.  In making this statement, I take responsibility for more than just my votes which were cast at the polling places.  I also take full responsibility for the votes that I have cast with each dollar I have spent and invested as well as each dollar that I have received.  These are the real votes cast as we are going about our daily activities, which I like to call practicing freedom.  You see practicing freedom is done mostly (almost exclusively) in the economic realm of our lives.

 Now, if (as I claim) the government is responsible for this recession, one might ask “What have they done to be responsible and what could have been done to avert the problem?”  Smugly I reply, “They have done just what we asked them to do.”  They presented a gift list of bribes in their campaigns and we went along with their proposals by casting our votes for people who wanted the government involved in the economic realm.  Before you jump up to deny this, can you name any politician at any level that did not promise an improvement in our economic circumstance if we would vote for him or her?  The only way that the government can help us in the economic realm is to stay as an impartial referee to administer the law and the systems of measurement.  Next time you go to a basketball game put your imagination to work on this one.  If the referee notices that one team is down a few points how would you feel if he threw a few baskets just to even the score?  What if he just instructed the score keeper to add some points, would that make it better?

 The way to build wealth is to exchange value.  This takes place in a context of value creation which is called production.  We therefore must create something of value for someone or add to the value created by someone else.  The government is on the other hand in the restraint business.  It only exists to protect our rights of life, liberty, and property which we use to pursue happiness.  When the government redefines its role from that designated in the Constitution and starts dealing with outcome in the name of opportunity, it turns from a free government to a socialist one. (see my article Opportunity vs Outcome on our website ). 

 To be a little more direct, when a thief steals from an individual we can see that his bottom line increases while the bottom line of his victim is decreased by a corresponding number of dollars.  The balance sheet of a society doesn’t seem to be affected.  On the other hand when any of the “programs” (which are characterized by Frederic Bastiat as based on legal plunder) are implemented, we think how wonderful and compassionate of a government we have.  But where do the dollars come from to fund the programs?  They come from increased taxes.  Where do the taxes come from?  From the people.  Specifically they come from what is produced by the people.  Even income taxes which are levied initially on incomes (in an attempt to “soak the rich”) end up back in the prices of goods and services which we all have to pay when we purchase those goods and services.

 These programs which consist of people receiving dollars without creating corresponding value cause a decrease of productivity and an increase in poverty. At some point it is no longer politically palatable to increase taxes and we resort to a more subtle method of taxation.  We call it inflation.  More accurately it is the devaluation of the money.  This is the damage which is done by counterfeiters.  It is most to be dreaded when it is perpetrated by the entity that generates the nation’s money.  Constitutionally this responsibility belongs to Congress.  In practice it is done by a non-governmental organization (NGO) called the Federal Reserve.  Lest I still be misunderstood let me restate it this way:  The debauching of our currency called inflation is to be blamed on our own GOVERNMENT!  Inflation destroys our ability to accurately use money as the means of measurement.  (See my article You Can’t Steal Your Way to Prosperity on our website for more details.) 

 In my opinion the worst part of the whole scenario is the refusal of the government to take responsibility for the inflation that we experience.  Instead of taking this responsibility, we find more and more government intrusion into every aspect of our lives both in a personal and business setting.  There are continual increases of monitoring, regulating, and legislating at every level of our existence.  Each of which only adds to the inflation.

 Inflation makes saving money unprofitable.  Inflation is a debtor’s best friend because he can pay for today’s obligations with dollars that are perceived to be easier to get in the future.  It generates such things as cost-of-living raises, bracket creep in the income tax system and speculation that something will be of more value tomorrow because prices are rising.  In short we have planned on inflation and attempted to protect our selves from it and/or sought to gain from it. 

 The Constitution in Article I Section 8 Clause 5 delegates establishing certain standards as congressional prerogatives:

coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

 The same clause that describes the standard of weights and measures describes the standard of measuring value (which is money).  Money is meant to measure value.

 We have gone into a major economic crisis in the housing industry with regard to the plunge in home “values.”   What caused that crisis?  Was it the price of the lumber, bricks, glass or other building material that goes into the construction of a home?  Was it that the labor that goes into building the house.  I maintain that it was none of these.  Was it the greed of the builders or the speculation of investors?  Was it the rising cost of land followed by a bust?  Was it the negative amortization loan rates that banks allowed with stated income loans?  These all were part of the problem.  But why would anyone get involved in any of those things?  I claim that it was because the government is in the habit of bailing out people when they get in trouble.  It is also because we were all counting on inflation.  We have learned to accept it as a way of life.  

 We can’t continue to have a government which will cause a problem then solve it by creating a worse situation.  My conclusion is that the only reasonable approach will be to get the federal government out of the economy except for its constitutionally mandated responsibility of maintaining a reliable standard of measurement for value—the monetary system.  When the government ceases to be a player on one team or another it can do a better job of being an unbiased referee.

 We need to get back on a gold and silver standard.  We need a government with the courage to admit that employers create jobs, not the government.  We need a government that will have the courage to follow the Founders of the nation and the Framers of the Constitution rather than following the doctrine of Karl Marx with their social programs.

 In short we need a government that will not plunder the people neither allow the people to plunder each other but allow all to practice freedom.