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Source link: http://archive.mises.org/5451/bring-back-fiscal-corruption/

Bring Back Fiscal Corruption

August 10, 2006 by

Nostalgia for a lost but better world is what one feels when following the growing state-pension scandal. It’s all so delightfully 19th century, those days of yore when governments had to collect real money from our pockets in order to meet their obligations. The Federal Government faces no such pressure. FULL ARTICLE

{ 14 comments }

Dave Weilacher August 10, 2006 at 9:03 am

Just how does the fed go about printing all the money it needs?

Dan Coleman August 10, 2006 at 9:32 am

Dave Weilacher,

If you are interested in the answer to your question, I’d recommend what the Mises institute called “The best book on money ever written” at:

http://mises.org/money.asp

And, specifically for what you are looking for:

http://mises.org/money/3s8.asp

Hope that these resources help an inquiring mind. Cheers.

Philip Dimon August 10, 2006 at 9:52 am

Here here. That book will change the way you look at the Fed. It make the whole concept of money so simple. After you read that the read “The law” by Frederic Bastiat

http://www.fee.org/pdf/books/The_Law.pdf

Bill August 10, 2006 at 10:26 am

Excellent and poignant articulaion of what is being done to the private sector. Fiat currency compounded by unbridled borrowing by all levels of government has placed us in a position of liability the enormity of same can NEVER be retired.

What is left for us to do but brace for the ravages of a fourth world standard of living and the incumberances of DEBTS we will never be able to endure.

The good news is in the anticipation of how this agony will unfold: Good God, we can only imagine the outcome of this mess.

Why is there not a single person/organization demanding ther answer to one simple question: How the hell are you going to protect me from the mess you have created?

Brad Dexter August 10, 2006 at 10:48 am

While not defending Enron, it is demoralizing that those in private industry burden themselves with debt, use slight of hand to hide the extent of the burden to hoodwink future creditors, it blows up, and people go to prison and companies are ruined.

Governments make all sorts of promises, incurring heavy debts and obligations, resorts to slight of hand and financial opacity, creating a financial crisis, and it is sound public policy to the very same people who want executives tied to a catherine wheel.

Isn’t doing the same thing and expecting different results the operant definition of insanity?

Curt Howland August 10, 2006 at 10:53 am

Bill, no one is going to protect you. Certainly not the “government” who is creating the mess in the first place.

At this point, when they go down we all go down. Our only defense is to cut them loose so that when they crash they cannot hurt everyone else.

We’re back to square one. The Kings in Washington DC have abused these colonies, Independence is the only thing that will suffice.

David Spellman August 10, 2006 at 11:00 am

It will all work out in the end

Facing the growing fiscal crisis is like facing a major surgery: you dread the anticipated pain, but you know it is going to have to happen. But it has happened before and the world did not end. Many nations have suffered triple digit inflation and worse. Look at Germany in the 20′s. Well, good example, but bad outcome…so maybe you should worry.

I used to be concerned about saving for retirement. Then I woke up and figured out what was happening to our economy. I sold all my stock (before the dot com crash thankfully) and now I only invest in real property. That’s just my personal predilection, but I figure I can always live on the royalties of real property. The fed can manufacture money, but they can’t create more land. So I view it as a hedge against inflation. Just my personal approach, and there are other schemes that can also work.

The key to my enlightenment was to find out how the scam, er, system works. Then I could make informed decisions based upon accurate knowledge. I feel sorry for all the suckers being bled to death by believing the lies they are fed about their investments and financial futures. But its a free market, and a fool and his gold must be parted. I am glad that I am not depending on one of those under or un funded pensions or social programs.

TGGP August 10, 2006 at 11:27 am

Fourth world? What the heck is that?

I think the doom’n'gloomers should put their money with their mouth is at Tradesports or somewhere like it, with the bet clarifying what objective standard constitutes a collapse/disaster and by what date it should occur. You could even make the wager in terms of gold!

adi August 10, 2006 at 12:54 pm

I dont believe we have a Great Crash; most probable future is kind of slow stagnation of our economies and social structures. This can be so slow process that most people do not perceive great changes.

Even if you could correctly predict what future will bring will it help you so much in this world ? Individual man is pretty powerless against omnipotent government; measures man can take to avoid some disaster can be undone by the govt. One writer told that he invests only to real property; what he thinks govt will do if they need more revenues…

Etatism is a kind of religion which always and everywhere has more followers than libertarism. Collectivist economic policy, culture policy, health policy and education policy are strong weapons and when you are speaking about voluntary ways to organize same you are categorized as a dangerous fanatic.

J D August 10, 2006 at 2:38 pm

“The fed can manufacture money, but they can’t create more land.”

Right, and the government can’t make gold either. But remember, one of the very early acts of the “New Deal” was to require everyone’s gold be taken to the FED for $20/ounce. It would be difficult to take real property to the FED but deeds are fairly easy to carry.

Lew says “There is no restraint on the federal government.” and he is correct.

Restraint on the federal government will happen when those who finance national political campaigns in a large way also finance, in an equally large way, the the activities of the politicians for whom they purchase office — or when the evil one can enjoy ice scating in his backyard.

Anyone have any ideas on how to make the former happen happen?

Paul Edwards August 10, 2006 at 3:12 pm

Dave Weilacher,

“Just how does the fed go about printing all the money it needs?”

Hold on to your hat, because it’s simpler than you might imagine: it writes a check against itself. That’s it. It doesn’t write the check against an account with money in it, it just writes the check.

The asset the fed buys with this check ends up on its assets column. And the check will eventually go on the liabilities column when commercial banks increase their reserve account with the fed from this check:

1. the fed writes the check to a private seller of treasury securities
2. the seller then deposits the check in its account in a commercial bank.
2. the commercial bank deposits these new funds in a reserve account with the fed.
so
3. this reserve deposit checking account at the fed ends up on the liability column of the fed.

And finally, the bank has brand new reserves with which to further expand credit with. Cool huh?

DAP August 10, 2006 at 4:21 pm

Lew offers the assertion:
“The Social Security system is perhaps $11 trillion in the red.”

How, exactly, was this figure obtained?

Brent August 10, 2006 at 11:48 pm

TGGP,

Asking for an exact date of some sort of crash is not reasonable. For instance, I could ask what was the exact date that the Soviet Union “crashed”? It is silly to think that the whole thing came crashing down in one day, because it is obviously a slow process of ruin. On the same note, what if more and more Americans soon realized what a scam goverment has become and forced the government to reform its ways (at least for the near future)? This would obviously have the effect of a “crash”, but not in the same sense as it would if the current policies continue unabated into the next few decades.

TGGP August 11, 2006 at 10:17 am

Hey, Brent, appreciate your response. The exact date would, of course, be a guess. The farther off you put it, the higher the likelihood that a crash will occur at or before that date, which would change the odds you could get with your bet. To determine whether or not a crash had occurred, some signifier (like GDP, or Reisman’s GNR) could be checked that both wagerers would agree on. Simply wagering on an undefined “crash” would of course result in all parties involved disputing whether the result counts. It would have been tough wagering in a similar way with the Soviet Union, as the government controlled the economy and reliable data was hard to come by, which is why there is some to dispute as to how far the Russian economy fell after the demise of the Soviet Union (which is an objective political fact that could have been wagered on, although it doesn’t seem as many here are predicting a political collapse as an economic one). You are of course right that if people act to avert the crash, it might not occur. But if that is likely, you don’t have to worry so much, right?

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