The Revolution (17 page)
All kinds of easy options were available to just about anyone with any creditworthiness, including tiny or no down payments and adjustable-rate or interest-only mortgages. People who wanted to follow a more traditional path to homeownership, such as a fixed-rate mortgage and a 20 percent down payment, were completely shut out of this housing market, yet another perverse effect of the bubble.
So what should be done?
First of all, it’s long past time to put the monetary issue back on the table as a subject for genuine discussion, and then to start asking some forbidden questions. For over a hundred years, the money issue has been absent from our political process. No political campaign has focused on it or even said much of anything about it. For most people, in fact, the Fed is a complete mystery, its operations incomprehensible. That seems to be just the way the Fed likes it. We are supposed to be bored by it. We are supposed to treat it as a given, like the air we breathe. We are supposed to have confidence in it—surely the experts who run our monetary system for us (and who of course have a vested interest in perpetuating the system we now have) couldn’t be giving us bad advice! But point to it as the source of our eroding standard of living, the ravages of the boom-bust business cycle, and the financial bubbles that have ruined countless Americans? That is simply not to be found anywhere along the spectrum of allowable opinion in America.
It’s time for some fresh thinking for a change—an unbiased, rational reappraisal of a monetary system that is presented to us as the best of all possible worlds, but whose dangers grow clearer and more urgent with each passing day.
The first practical measure that should be taken is to legalize competition. Restore to Americans their right to use precious metals as a medium of exchange—a simple and reasonable initial step if we believe in freedom. It is essential that Americans be given the chance to escape from this system and protect themselves from possible financial ruin, by being able to use gold and silver if they so desire. If anyone would rather continue to transact in the depreciating dollar, he would be free to do so. But anyone who prefers a currency that holds its value and won’t become worthless before his eyes just because his government ran the printing press one too many times would have real options.
Right now, various disabilities make it difficult for gold to be used in market transactions. Sales and capital gains taxes on precious metals should be promptly repealed, and the enforceability of gold clauses in private contracts definitively reaffirmed.
What other policy for sheltering Americans from the collapse of the dollar is being advanced? Is there any, apart from comforting delusions that the Federal Reserve, which is itself responsible for our financial mess, can be trusted to put everything right? For one thing, how can we be expected to place so much trust in a Federal Reserve System we’re not even allowed to audit? And even if the Fed chairman really possessed the singular genius our media and politicians regularly ascribe to him (no matter who he is), what if things have reached a point at which the Fed simply cannot stop the collapse? What if economic law, which the Fed can no more defy than it can repeal the law of gravity, is about to hit the Fed and the American people like a tidal wave, before which little rate cuts here and there are like the tiny umbrella Wile E. Coyote puts over his head to protect himself from falling boulders?
In other words, what if I and other sound-money advocates are right?
If we’re wrong, then all we’ve done is eliminate some taxes on gold and silver. No harm done. But if we’re right, we’ve given the American people a crucial safety net against financial collapse.
Tinkering here and there is not the solution, but as I’ve said, it is the only proposal Americans are permitted to hear. It is long past time that we begin asking fundamental questions rather than trivial ones, that we educate the people rather than distract or confuse them. Simply trying to patch up monetary problems after they’ve occurred, whether it is the NASDAQ bubble or the housing bubble, neglects to treat the root of the problem and must therefore fail. We cannot solve the problems of inflation with more inflation. We need to ask:
How did we get here?
What causes these bubbles? Financial bubbles simply happen, the political establishment tells us; these bubbles are an unfortunate but inevitable side effect of a market economy. That is nonsense. But it is convenient nonsense for some people, and that’s why it gets repeated so often. It gives the perpetrators of the financial debacle that now confronts us a chance to get off the hook. We shouldn’t let them.
The Revolution
I
have heard it said that mankind does not want freedom, that people are happy to be slaves as long as they are entertained and well fed. I have likewise heard it said that most Americans have bought into the version of events they are given in the mainstream media and are perfectly content to be told what to think—what is good, what is bad, who is politically acceptable, who is politically unacceptable.
I don’t believe this for a second. For one thing, our own American Revolution would have been impossible if this mentality had prevailed. Contrary to what many Americans have been taught, a majority, not a minority, of the colonists supported the fight for liberty against Great Britain.
*
The fact is, liberty is not given a fair chance in our society, neither in the media, nor in politics, nor (especially) in education. I have spoken to many young people during my career, some of whom had never heard my ideas before. But as soon as I explained the philosophy of liberty and told them a little American history in light of that philosophy, their eyes lit up. Here was something they’d never heard before, but something that was compelling and moving, and which appealed to their sense of idealism. Liberty had simply never been presented to them as a choice.
We are engaged in a great battle of ideas, and the choices before us could not be clearer. I urge those who agree with this important message to educate themselves in the scholarship of liberty. Read some of the books I recommend in my reading list. Learn from the Mises Institute and Mises.org, the most heavily trafficked economics Web site in the world. Visit LewRockwell.com, an outstanding and crucially important Web site I visit every day.
I have devoted this book to ideas that I consider important, if typically neglected, if our country is to restore its former self. How much of my program could be accomplished in a presidential term, or in a decade or two, I do not know. But a bare minimum of what the successor to George W. Bush should seek to achieve? I suggest the following.
First, we need to rethink what the role of government ought to be, and fast. If we continue to think of our government as the policeman of the world and as the Great Provider from cradle to grave, our problems will grow worse and worse and our downward economic spiral, the first signs of which we are now witnessing, will only accelerate. The role of world policeman has made our country poorer and less safe. The welfare state likewise threatens our financial solvency and has caused the once-robust institutions of civil society—which are no longer needed when government performs all functions—to atrophy.
Right now our government is borrowing $2.2 billion every day, mainly from China and Japan, to pay for our overseas empire. As our dollar continues to decline, thanks to Federal Reserve inflation, the American debt instruments that these countries are holding lose their value. We cannot expect these and other countries to hold on to them forever. And when they decide that they no longer wish to, our fantasy world comes crashing down on us. No more empire, no more pledging ever more trillions in new entitlements. Reality will set in, and it will be severe.
Our present course, in short, is not sustainable. Recall the statistics: in order to meet our long-term entitlement obligations we would need double-digit growth rates for 75 consecutive years. When was the last time we had double-digit growth for even one year? Our spendthrift ways are going to come to an end one way or another. Politicians won’t even mention the issue, much less face up to it, since the collapse is likely to occur sometime beyond their typical two-to-four-year time horizon. They hope and believe that the American people are too foolish, uninformed, and shortsighted to be concerned, and that they can be soothed with pleasant slogans and empty promises of more and more loot.
To the contrary, more and more intelligent Americans are waking up to the reality of our situation every day. Now we can face the problem like adults and transition our way out of a financially impossible situation gradually and with foresight, with due care for those who have been taught to rely on government assistance. In the short run, this approach would continue the major federal programs on which Americans have been taught to be dependent, but in accordance with our Constitution it would eventually leave states, localities, and extended families to devise workable solutions for themselves. Or we can wait for the inevitable collapse and try to sort things out in the midst of unprecedented economic chaos. I know which option I prefer.
No one who has learned to be dependent on these programs needs to be thrown into the street. But in the long run these programs are insolvent. If we do not begin a transition process funded by savings from our bloated overseas presence, everyone will be out in the street because the programs will simply collapse.
Americans were given an implied contract when they began paying into Social Security, so we should not want to strip away from them the resources they understandably anticipated receiving upon retirement. Contrary to popular belief, right now money for Social Security recipients comes not from some “trust fund” into which people have paid over the course of their working lives. If congressmen had voted the way I consistently have—I have never voted to spend a single penny out of Social Security—then we would not face nearly so serious a problem. The fact is, there is no money in any trust fund. The government spent it on other things. The money that retirees receive comes directly from current workers. Current workers are not building up a Social Security nest egg for themselves; they are giving their money to current recipients and hoping there will be enough workers to support
them
when
they
reach retirement age. But no part of the system involves paying money to the government and receiving that money with interest after a certain age. The government feeds into that illusion, but it is an illusion all the same.
I have long favored giving young people the right to opt out of Social Security, since such an option follows naturally from my belief in individual liberty. But since current Social Security recipients are being supported by tax receipts from current workers, how would those people be cared for if young people began opting out? The transition period should be funded by curtailing our overseas expenditures, which are not only out of control but have also compromised our real security interests by spreading our forces so thin. If we really oppose Big Government, we cannot make an artificial exception for bloated military bureaucracies, which traditional budget-minded conservatives never hesitated to look at seriously as a source of potential savings. As many empires throughout history have learned too late, more is not always better. In this way we can phase in the ideas of responsibility and self-reliance, commonsense ideas to which young people respond very favorably when I mention them.
In addition, the budgets of every federal cabinet department should at the very least be immediately frozen, a policy that all responsible people can surely embrace. Everyone should be forced to live within his or her means—all the more so when we are speaking of federal agencies for which the Constitution makes no provision. Most departments, with the exception of State, Defense, and Justice, deal with matters that our Constitution properly leaves to the states or to the people, and the people should no longer be exploited to support them. For too long, swarms of Washington bureaucrats have grown fat with wealth and power—all in the name of the “common good,” they assure us—at the expense of the beleaguered American people. That must come to an end.
Forget all the protests we’ll hear about how indispensable these departments are—departments Americans got by very well without for more than 80 percent of our history, I might add. We do not have the resources for them. That is the point. And more forced labor to fund them is neither morally acceptable nor economically wise.
It is only our intellectual inertia and lack of imagination that make us think these departments necessary in the first place. A federal Department of Education, for example, is an insult to the American people, who are more than capable of running their own schools without being looted to support a national education bureaucracy. We would get by just fine without it, as indeed Americans did for most of the twentieth century, a period when—by just a coincidence?—the population was far better educated than it is now. In fact, given the Department of Education’s sorry record, if I truly opposed learning and knowledge I would propose tripling its budget.
If we adopted a sensible policy like this, the very announcement would restore strength to the dollar. And the more we lived within our means, the less inflation we would have and the less the poor and middle class would suffer, since there would be less pressure on the Fed to monetize debt.
We also need to begin to restore monetary freedom, which means that Americans should be free, if they wish, to engage in transactions and contracts denominated in gold and silver. It is essential that Americans be able to protect themselves in this way against any coming monetary disaster that would leave them holding valueless dollar bills. No one in politics or the media even talks about the issue, so you know it must be important.
There is much that the president cannot do on his own and that requires the approval of Congress. He may earnestly recommend certain courses of action, and try to rally the public behind them, but the initiative rests with Congress. Everything we have described in this chapter thus far falls into this category. At the same time, in areas critical to the health of our republic the president holds tremendous power for good in his own hands.
For one thing, every president sets priorities in the enforcement of laws and how he directs the attorney general. Just because the federal government has been given a power does not mean it must be exercised. The president could simply declare that the executive branch will direct no resources to the prosecution of medical marijuana patients. He could refuse to violate habeas corpus. He could refuse to detain people forever without legal counsel and without even knowing the charges against them. He can take these and other sensible measures even if Congress should refuse to curtail runaway executive authority, since the president is nowhere obligated to exercise such authority. And he can not only refuse to issue any more unconstitutional executive orders, but he can even issue an executive order repealing those that previous presidents have issued.
In foreign policy, the president as commander in chief can order the troops brought home from Iraq in a matter of months, not years, a policy no top Democratic candidate in 2008 consistently committed to. (Again, so much for the opposition party.) We are told by the war propagandists that such a withdrawal will lead to chaos, as if chaos did not exist there already, but these are the same people who also assured us that the war would be a breeze and that the whole thing would be paid for out of oil revenues. Why should we take their predictions seriously ever again? In the case of Vietnam, which is now a trading partner and has a functioning stock market, we have accomplished much more in peace than we ever did in an enormously costly war.
Particularly in light of the National Intelligence Estimate that was released in December 2007, the president should order the navy to back off the shores of Iran, and make clear that we have no intention of attacking that country. The president should likewise declare that the United States is abandoning its isolationist posture of refusing major diplomatic contact with Iran and that he is willing to talk with Iranian leaders, just as American presidents talked to Soviet and Chinese leaders throughout the Cold War. The sanctions against Iran should also be removed, as a further indication of our country’s shift away from isolationism.
The price of oil would shoot downward and the dollar would move upward on the basis of these announcements. The United States would suddenly become diplomatically credible once again for the first time in years. The isolationism that our leaders have imposed on us would now be reversed, as our government once again observes basic norms of conduct to which all countries are expected to conform. No longer would the White House—which is now viewed throughout the world the way the free world once viewed
Pravda
, the old communist newspaper—bombard the international community with a ceaseless barrage of war-justifying propaganda that no one anywhere, apart from the gullible (and often complicit) American media, actually believes. And no longer would the patriotic sentiments of decent Americans be exploited on behalf of wars that have more to do with imperial ambition than with American security.
In other words, we need to keep our wits about us, and replace our bull-in-a-china-shop foreign policy with a statesmanlike approach that is appropriate to the real needs of American security. We also need to stand firmly against moral relativism, recalling that actions do not become moral just because our government performs them.
And if we really oppose isolationism, as all our politicians assure us they do, then sanctions against Cuba should be lifted as well. Sanctions hurt the target population but rarely do serious harm to the targeted regime. How well have our sanctions succeeded in getting rid of Fidel Castro, who has happily exploited the sanctions in order to posture as an anti-American martyr oppressed by Yankee wickedness? There is no reason that Americans should not be free to travel and trade with Cuba. When I said so in a Miami Republican debate, the response was not unexpected. Afterward, though, I spoke to a huge rally—with Cuban-Americans making up 70 percent of those in attendance—where everyone cheered the message of freedom. It seems to be a generational issue: younger people, not emotionally or politically attached to our failed policy, know the Cuban regime’s days are numbered no matter what, and that freedom, as usual, is the most morally attractive position for America to take starting right now.
It is also time to begin bringing American troops home from around the world—an absolute necessity if the budget is ever to be brought under control. We’re going broke and we still have 75,000 troops in Germany? Talk about being frozen in the past. The president should notify our allies of the policy, which no one ever told Americans was to be in effect indefinitely, and then begin a withdrawal. We have not had a foreign policy that is proper to a republic for many, many years, and it is long past time that we reestablished one. If we did, Americans would be safer, our military would be more efficient and effective, and we would make an excellent start toward restoring our international competitiveness—other countries, after all, are not burdened with the same self-imposed overseas expenditures with which the federal government has weighed down the American economy for so many years.