In Ten Years Your Life Will Probably Be Terrible (Without Ron Paul, that is)

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That's right,
you read the title of this article correctly, I am indeed predicting
that your life ten years from now will be extremely awful. "How
on Earth," you are probably wondering to yourself, "could
Crovelli, whom I've never met or even heard of, know what my life
will be like tomorrow, let alone ten years from now?" If you
will indulge me for a few minutes, however, I think I will be able
to furnish an argument that will convince you that your life ten
years from now will indeed probably be miserable.

My argument
about how awful your life will be in ten years takes as its starting
point the fact that the American economy is in seriously dire straits
right now, and will continue to deteriorate over the next few years.
I hope I don't need to convince you that the American economy is
at present suffering from a serious credit malaise (which, I might
add, I
a full eight months before the housing market began
to deteriorate in earnest) but I probably do need to convince you
that this serious economic problem will persist over the next few
years. How, then, can we know that the American economy will continue
to deteriorate?

We can confidently
predict that the American economy will continue to deteriorate over
the next few years because we know that this credit problem can
only be addressed by the Federal Reserve in one of two ways:
1) continuing to lower interest rates to appease Wall Street and
bail out ailing banks, or 2) leave interest rates where they are
(or even increase them) and let banks and investors suffer the consequences
of their malinvestments. The fact that there are only two options
available to the Fed is important because both of these courses
of action will result in continuing economic deterioration in the
United States for at least the next few years. In other words, no
matter what the Fed tries to do to combat this credit problem, the
American economy will continue to deteriorate.

This last statement
might surprise you, especially if you listen to economic commentators
like Jim Cramer who view the first of these alternatives as a panacea
for the current credit crisis. Just lower interest rates, according
to this line of argument, and everything will reverse itself, sending
the credit, equity and bond markets through the roof. This is not,
however, what will happen if the Fed continues to lower interest
rates in order to try to combat the credit crisis. On the contrary,
if the Fed decides to lower interest rates (i.e., pump more paper
money into the economy) this will only serve to temporarily bail
out ailing investors and banks, and it will certainly decrease the
value of the U.S. dollar vis-à-vis goods and services. In
other words, since a decrease in interest rates by the Fed is
simply another name for increasing the money supply by injecting
newly created cash into the banking sector out of thin air,
this new money will necessarily serve to decrease the value of the
dollar. What is more, this decrease in the value of the dollar vis-à-vis
goods and services (i.e., price inflation) will eventually force
an increase in interest rates on its own, because banks and
other lending institutions will be forced to add an inflation premium
to their loans in order to make their credit transactions profitable
as the dollar loses even more value as a result of the new money.
(For example, if you were going to lend five dollars to your friend
for one year, but you knew in advance that the dollar was going
to lose 25% in value over the course of that year, you would tack
on an additional 25% premium to the loan, in addition to interest,
in order to recoup the value of the loaned money you originally
lent out.)

What all this
means, in other words, is that the Fed will ultimately be impotent
to keep interest rates low over the next few years. If the Fed refuses
to bow to Wall Street whining and bank pressure, then the credit
crisis will continue to spread as the housing bubble continues to
deflate (driving many people, like myself, out of work in the housing
sectors), credit continues to dry up for businesses and consumers,
and consumer spending (especially credit-financed consumer spending)
consequently dwindles causing even more trouble for ailing businesses.
If, on the other hand, the Fed tries to combat these serious credit
woes by lowering interest rates (again, by pumping more money into
the credit markets) this new money will eventually percolate through
the economy, raising prices for goods and services in the U.S.,
decrease the purchasing power of the dollar abroad, and eventually
make its way into the credit markets as an inflation premium on
loans. In short, the unsustainable economic boom of the 1990's will
inexorably cause an economic bust that cannot be combated by the
Federal Reserve — no matter what pundits like Jim Cramer say. The
continuing credit crisis, however, is just one reason why your life
in ten years will probably be extremely awful.

The next reason
why your life will be awful in ten years stems from the fact that
politicians and central bankers tend to respond in similar ways
to economic crises like the one we are only beginning to pass through.
Politicians and central bankers tend, quite simply, to try to spend
their way out of credit crises. It is thus quite predictable that
the Fed will indeed try to combat this credit crisis by lowering
interest rates over the next few years in an attempt (albeit futile,
as we've just seen) to "stimulate" the economy. This attempt
to spur the economy with more cheap credit (rather like trying to
heal a boil by injecting more pus into it) will only serve to make
your life extremely miserable in ten years when you face a dollar
that won't purchase even a fraction of what it will purchase today.
If you are a baby boomer on a fixed income, living off the savings
you thought was sufficient to last for years, you will find your
hard-won savings account buying less and less and less. If in ten
years you are unfortunate enough to have to work for a living (while
simultaneously trying to shoulder the enormous national debt, the
debt from this war, Social Security for the baby boomers, Medicare,
Medicaid, et cetera) you will find the need to renegotiate
your wages or salary almost monthly in order to keep pace with inflation
to afford your daily bread. You will also find it extremely difficult
to save for your own retirement (and you can absolutely forget about
ever getting any Social Security) because any cash you stash away
in a savings account or under your mattress will rapidly lose value
against the goods you want to buy, in addition to the momentous
fact that taxes will need to be increased dramatically to fund Social
Security and Medicare for the then-dwindling baby boomer generation.

If in ten years,
moreover, you are a business owner trying to make a living, you
will be in an equally unenviable position. You will be forced, on
the one hand, to pay continuously increasing prices for the factors
of production that go into your products as the dollar continuously
falls in value against those factors, while at the same time you
will find it difficult to obtain credit to finance these increasing
costs, because banks will be forced to heap the previously discussed
inflation premium on your business loans. At the same time, your
workers will harass you continuously for wage and salary increases
to keep pace with inflation. If your workers are like those of previous
generations, moreover, they will probably ignorantly blame you alone
for their miserable lot, variously calling you a "capitalist
exploiter," and a "profiteer." These misdirected
insults directed toward you simply for trying to make a living will
undoubtedly provoke Congress, ever opportunistic to reap political
rewards for "rescuing labor," into passing increasingly
draconian economic restrictions, and price and wage controls. You
will probably be forced to pay arbitrarily high legislatively-enacted
minimum wages, while you are simultaneously prohibited from charging
increasing prices to keep pace with inflation. The end result of
this predictable farce will probably mean bankruptcy for you, unemployment
for your workers, and credit being taken for the whole episode by
the wretches in Congress who will proclaim that they succeeded in
"protecting labor," but really they will only have succeeded
in crippling the economy still further.

Enough about
the economy for now, because there's still more that that will make
your life miserable ten years from now. While we know that the U.S.
economy will continue to deteriorate over the next few years no
matter how hard the Fed tries to avoid it, we can know with similar
certainty that the world ten years from now will not be devoid of
"terror." Consequently, we can predict with a great deal
of confidence that between now and then our government will find
no shortage of nations to invade and people to kill in its futile
attempt to stamp out "terror." We can look forward to
potential conflicts with Iran, Pakistan, North Korea, Venezuela,
and maybe even Russia and China over the next ten years if our government
resolves to seriously tramp around the world stomping out "terror."
You will not be surprised to learn that any and all military adventures
between now and 2017 will have to be financed somehow, either by
increasing the tax burden on you or by increasing the money supply
with more freshly printed dollars (which, of course, will still
further depress the economy and the value of the dollar ten years
from now).

Have I succeeded
in convincing you that your life will be absolutely awful in ten
years? Your dollars will by then be increasingly worthless shreds
of green paper, and your tax burden will probably have increased
dramatically. Your wages will need to be renegotiated constantly
in order to avoid constant pay cuts, and the economy will probably
be stifled by more and more legislatively-enacted price and wage
controls. Your savings accounts and cash reserves will get smaller
and smaller as inflation increases, and credit will become increasingly
expensive with inflation premiums tacked onto loans, and the supply
of real loanable funds will have shrank dramatically by then as
more people find it impossible and unprofitable to save and loan
their money. You may, moreover, find yourself living under a government
embroiled in costly and pointless wars with a score of other nations,
passing the costs of those wars onto the future you. Is there no
hope that this spiraling into economic backwardness and socialized
barbarism can be averted?

There is indeed
hope, and it lies with the political fortunes of Dr. Ron Paul. Dr.
Paul is virtually the only politician in the last half century to
understand the two most important economic and moral truths for
a political leader to grasp: 1) war is extremely costly in both
blood and treasure, and thus ought to be undertaken only in self-defense
against an imminent aggressor (and only against the aggressor
himself), and 2) money is the lifeblood of human commerce,
and thus must be backed by something more than green paper and government
promises. If elected, Ron Paul would return this nation to the gold
standard, thereby removing from the government the unrestrained
capacity to depreciate the U.S. dollar through the printing of green
paper, and the related insidious capacity to fund wars at our expense
simply by printing billions in crisp new green paper. Ron Paul further
understands that the ultimate source of our current economic woe
lies precisely in this capacity to issue credit un-backed by any
commodities whatsoever. There is thus hope for both you and the
United States as a whole in 2017, and that hope depends upon you
and I backing the only man and the only money that can reverse the
tide of economic depression and war. These are, respectively, Dr.
Ron Paul, and gold.

13, 2007

Mark R.
Crovelli [send him mail]
writes from Denver, Colorado.

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