Social Decay and the Federal Reserve

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When
reading the news, sometimes I can't help but to feel that the United
States is being gripped by a grinding cancer causing a slow yet
certain social decay (which may lead to America's ultimate demise).
For example, the June 12, 2002 Seattle News Fax contained
an article headlined "Youth Gangs Spreading Everywhere in America."
This article pointed out that there are about 24,500 youth gangs
with a combined membership in excess of 750,000. Such a proliferation
of gangs indicates an ongoing breakdown of the American family,
and therefore, society itself. A headline in the June 20, 2002,
Seattle News Fax reads as follows: "1 of 6 Rural Kids
Live in Poverty."

How
can the proliferation of gangs and poverty happen in such a wealthy
country? Left-wing academicians and members of the predominately
socialist press typically lay the blame on capitalism. As they see
it, capitalists exploit laborers and grow wealthy off of the surplus
value (i.e. profits) generated by laborers. As time passes, the
capitalists grow wealthier whilst the laborers become poorer. Thus,
laborers experience ever-increasing difficulty in making ends meet
and lose the means to hold a family together (which I argue is actually
caused by the Federal Reserve itself). Naturally, the left's solution,
to any social problem, is more government central planning. It is
my intention to show you that monetary central planning (via the
Federal Reserve) is a root cause of social decay. In turn, abolishing
the Federal Reserve would be an important step in reversing this
slow and grinding social-decay process.

In
the historian Carroll Quigley's fabulous book, The
Evolution of Civilizations
, Dr. Quigley looks at the factors
behind the rise and fall of civilizations. Through his research,
he identified seven stages (of historical change) that all civilizations
experience. They are as follows:

  1. Mixture
  2. Gestation
  3. Expansion
  4. Conflict
  5. Universal
    empire
  6. Decay
  7. Invasion

In
this book, Dr. Quigley defines a civilization as "a producing
society with an instrument of expansion." However, according
to Carroll Quigley, when a society's instrument of expansion is
transformed into an institution that serves its own needs (regardless
of the negative impact on society itself), it is inevitable the
civilization will decay.

Indeed,
Carroll Quigley did identify capitalism as an instrument of expansion.
Where I differ from Dr. Quigley is that he believed central banking
was a necessary ingredient for a capitalist society to prosper and
grow. In fact, the opposite is true in that a central bank is an
institution that usurps a free-market's money supply (such as gold
and silver), and destabilizes a capitalist society via boom-bust
cycles created by the central bank's manipulation of money and credit.
Adherents to Austrian economics know this (for more details, please
refer to Murray Rothbard's book The
Case Against the Fed
). To go one step further, I intend
to demonstrate that a central bank is an institution antithetical
to capitalism (which is the opposite of Carroll Quigley's conclusion).
Therefore, a central bank (i.e. the Federal Reserve) is an institution
that does not bring about sustainable expansion; instead, it is
an institution directly responsible for social decay in a capitalist
society.

Few
would argue against the premise that poverty and social decay go
hand in hand. As any adherent to Austrian economics knows, inflation
is a hidden, pernicious, and redistributive tax. Moreover, it is
a central bank that causes inflation. When a central bank can create
money out of thin air, the power to depreciate money is frightening
and eventually socially devastating. Let's look at the United States'
Federal Reserve and its long-term destruction of the dollar's purchasing
power. Since the Federal Reserve's founding in 1913, the dollar's
purchasing power has depreciated by over 94% (go to the Bureau of
Labor Statistics' web site www.bls.gov
and you can confirm this horrific destruction of the dollar by using
this site's inflation calculator).

If
having the government create money out of thin air leads to prosperity,
then Argentina and Brazil should have become the world's wealthiest
countries by the end of the 1980s. Instead, the ravages of inflation
lead to greater poverty and massive social unrest in both of these
countries (and history is repeating itself in the new millennium).
It is simply amazing that the left-wing intelligentsia hasn't figured
this out yet. Families in America are having more difficulty making
ends meet because, in general, the prices of goods and services
have been rising over time (directly due to the dollar's depreciation
brought on by the Federal Reserve). Using a little bit of logic
here, doesn't it stand to reason that it will be more difficult
to climb out of poverty if the prices of goods and services are
rising continuously?

The
very entity that Dr. Quigley felt was necessary for capitalism to
succeed (i.e. a central bank), is actually a destructive institution
that brings about poverty and social decay through the pernicious
tax of inflation. Nevertheless, Carroll Quigley is correct that
a civilization will decay once the society's instrument of expansion,
one way or another, is transformed into a self-serving institution.
Just look at the Federal Reserve.

In
Paul Cantor's piece "Hyperinflation
and Hyperreality: Thomas Mann in Light of Austrian Economics
"
(published in The Review of Austrian Economics vol. 7, No.
1; 1994), Dr. Cantor uses the tools provided by Austrian economics
to review Thomas Mann's book Disorder
and Early Sorrow
(which described the rapid social decay
of Weimar Germany during its bout of hyperinflation). In this masterful
piece, Dr. Cantor states the following about the social destructiveness
of central banking:

If
modernity is characterized by a loss of the sense of the real,
this fact is connected to what has happened to money in the twentieth
century. Everything threatens to become unreal once money ceases
to be real. I said that a strong sense of counterfeit reality
prevails in Disorder and Early Sorrow. That fact is ultimately
to be traced to the biggest counterfeiter of them all — the government
and its printing presses. Hyperinflation occurs when a government
starts printing all the money it wants, that is to say, when the
government becomes a counterfeiter. Inflation is that moment when
as a result of government action the distinction between real
money and fake money begins to dissolve. That is why inflation
has such a corrosive effect on society. Money is one of the primary
measures of value in any society, perhaps the primary one,
the principal repository of value. As such, money is a central
source of stability, continuity, and coherence in any community.
Hence to tamper with the basic money supply is to tamper with
a community's sense of value. By making money worthless, inflation
threatens to undermine and dissolve all sense of value in a society.

As
Dr. Cantor points out in his piece, hyperinflation detrimentally
alters the fabric of society. For example, it became impossible
for parents (in Weimar Germany) to teach their children the virtue
of saving when the currency was depreciating at breathtaking speed
(literally hour by hour). Instead, the typical profligacy of youth
became a virtue in a hyperinflationary environment. Dr. Cantor went
on to state: "In an inflationary environment, all the normal
virtues of the old suddenly start to work against them, while all
the normal vices of the young suddenly seem to look like wisdom."

Additionally,
as Germans were forced to economize on the products they purchased,
inferior substitute (ersatz) products emerged. Instead of purchasing
quality products, Germans found themselves purchasing watered down
beer, ersatz coffee, and shoes made of imitation leather. Standards,
values, and expectations all had to be lowered (or radically altered)
as a result of hyperinflation. German society rapidly decayed and
the seeds were sown for the irrational and nihilistic National Socialist
(Nazi) party to emerge as Germany's savior. Granted, there were
other factors involved in bringing the National Socialists to power,
nevertheless, hyperinflation had plunged German society to such
depths that even a madman (Hitler) appeared to have a rational plan
to restore Germany to its previous glory. Partially thanks to hyperinflation,
rational thinking had been supplanted by mass irrationality. At
the epicenter of this horrifying social decay was Weimar Germany's
central bank (the ultimate perpetrator of hyperinflation).

It
is my belief that the United States is experiencing the same social
decay, as did Weimar Germany, but over a longer period of time.
As a result of a much more gradual (yet still pernicious) process
of central-bank induced inflation, American families have found
it necessary for both the mother and the father to work in order
to make ends meet. With the stay-at-home mother now much more the
exception than the rule, so many American children have come to
rely on daycares and public schools for providing "structure"
in daily life. Unfortunately, with the left-wing orientation of
public educators, children are indoctrinated with corrosive ideas
such as "there is no right and wrong" and that it is a
sign of wisdom to be non-judgmental (maybe, in the near future,
even pedophilia will become an acceptable lifestyle "choice").
In order to make children feel good about such nonsense, we now
witness grade inflation to reward kids for actually learning nothing
(talk about irrationality). As these "products" of public
schools become parents, the parental duty of instilling morals and
values into children becomes a relic of the past. Without a doubt,
there is a direct link between the depreciation of our money and
the decay of the American family and, therefore, American society.

Just
as Weimar Germany became a society accustomed to imitation products
and lower standards, American culture has, over time, become accustomed
to counterfeit intelligence (and, thus, lower standards as well).
For example, just look at the lowbrow, left-wing inspired movements
of political correctness and multiculturalism. On college campuses
throughout America, students are indoctrinated to be non-judgmental,
politically correct, multiculturalists except when it comes to judging
Western Civilization to be the scourge of the planet. In my opinion,
such anti-intellectual movements have hatched what appears to be
an ersatz culture in the United States.

For
instance, MTV, VH1, and the music industry have glorified gangs.
However, are not gangs simply imitation families? Moreover, the
hip hop music (aka: rap music) so popular today certainly glorifies
the aforementioned gangs and is wildly popular amongst today's youths.
It certainly does not take much talent to talk out (i.e. rap) some
nihilistic "lyrics" to background muzak generated by a
computer. And this passes for talent today. I would argue that this
is only imitation music. Now, the rage on television is "reality
TV." Anyone with half a brain must understand how contrived
these shows are and that such shows should be truthfully labeled
"ersatz-reality TV." However, if I was thoroughly indoctrinated
to be non-judgmental (and, once again this passes for a sign of
intelligence) then I would quite literally be a fool to judge anything
to be good or bad. I no longer wonder why so many of today's youths
and "twenty-somethings" are irrational and nihilistic.
Their brains are overloaded with counterfeit knowledge.

Another
sign of America's social decay can be seen by an alarming lack of
fear of debt (which translates to an utter lack of concern for future
generations in America). For example, the national debt is now over
$6 trillion. Moreover, Americans have record levels of mortgage
and credit card debt (to help make ends meet). Americans are literally
living on borrowed money and borrowed time. Just think of it, when
the Federal Reserve creates money out of thin air (i.e. imitation
money), we Americans can exchange these inherently worthless pieces
of paper for real goods produced in other countries (and we are
doing so at record levels: just look at the United States' mammoth
current account deficit of over $1 billion per day). For the time
being, America appears to still be prosperous and relatively strong
economically. However, this is an imitation prosperity conjured
up by the Federal Reserve and its irresponsibly aggressive monetary
creation. In other words, Americans are "getting ahead"
through political means (via the Federal Reserve) instead of by
real economic means. Therefore, the following quote from The
Evolution of Civilizations is appropriate as it deals with what
happens to a society when its people (wittingly or not) seek
to "get ahead" by any means other than economic expansion:

Unable
to get ahead by other means (such as economic means), they seek
to get ahead by political action, above all by taking wealth
from their political neighbors. At the same time they turn to
irrationality to compensate for the growing insecurity in life…for
the growing bitterness and dangers of class struggle, for the
growing social disruption and insecurity from imperialist wars.
This is generally a period of gambling, use of narcotics or
intoxicants, obsession with sex (frequently as perversion),
increasing crime, growing numbers of neurotics and psychotics,
growing obsession with death and with the Hereafter.

Does
it not stand to reason now that a central bank is an evil institution
capable of decimating a society in a matter of years (like Weimar
Germany) or over a period of decades (as is happening in the U.S.)?
Capitalism is a viable instrument of peaceful social expansion
and prosperity only when its lifeblood (money) is selected on the
marketplace itself (such as gold and silver). When a society's instrument
of expansion (capitalism) is transformed into an institution (i.e.
the Federal Reserve and its banking cartel), history has shown that
such a transformation leads to the decay of civilization. Paul Cantor
certainly knew what he was saying when he stated: "By making
money worthless, inflation threatens to undermine and dissolve all
sense of value in a society."

We
have seen this gradual decay process in the United States. Just
look all around you. In order to change the United States' course
for the better, it is mandatory that we abolish the Federal Reserve
and restore a 100% gold standard. Do not lose sight of the fact
that prices for goods and services would tend to decline over time
under a 100% gold standard. This would bode well for all families
and, thus, American society itself. It is time to excise the cancer
of fiat money from the United States.

August
22, 2002

Eric
Englund [send him
mail
], who has an MBA from Boise State University, is a surety
bond underwriter in Bellevue, WA.

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