For Richer or Poorer
by Doug French by Doug French
The writing side of the Liberty Watch crew recently convened for dinner and, of course, politics was the conversation of choice. Ron Paul supporters dominated the table. In fact, the expectant father is lobbying at home to name his newest after Ron. However his wife, the UNLV professor with child, announced that she is a John Edwards fan, and she seemed annoyed that her husband hadn’t “grown out of” his Ron Paul phase.
The pregnant professor believed Edwards was presidential, because “he cares about the gap between the rich and poor in this country, something no other candidate has talked about.” My guess is that John Edwards couldn’t care less about the gap between rich people (he is one from trial lawyering) and poor people. But, being a good host, I held my tongue concerning Mr. Edwards, and made the point that only Ron Paul talks at all about actually doing something that would close the gap between rich and poor: eliminating the Federal Reserve.
John Edwards, when he was still in the race, never had anything to say about the central bank. His shtick was higher minimum wages, more unionization and maybe some price controls. Essentially he was for government force. So while he’d be all for the Fed to print money to its heart’s content, he would combat the effects with the ham hand of government intervention — in a caring way, of course.
But only Ron Paul understands that while central bankers have increased the M-2 money supply (they don’t even keep track of M-3 anymore) from just short of $290 billion in January 1959 to nearly $7.5 trillion in December 2007, the poor and middle class have not benefited. But there are people who do benefit by this constant inflation: the government itself, big banks, government contractors and anyone associated with the federal government.
The people who get the money first through the banking system are the beneficiaries. They spend the money first, driving up prices for those who get the money last. Borrowers are benefited at the expense of savers. Those with little bargaining power like low-skilled workers and retirees are punished by inflation. Trial lawyers like Edwards, who can dictate what their fees will be, aren’t harmed by inflation. But the middle class suffers because it now takes two incomes to make ends meet.
Inflation is a silent tax, levied by governments so they don’t have to impose overt taxes that would be politically unpopular to pay for their misadventures at home and abroad.
Under its current leadership, the Federal Reserve is looking more and more like a Banana Republic central bank. The result will be a cruel world for the child of our Edwards’ supporter. Imagine lunch costing $6 million? In a blog post on 4xforum.com from Zimbabwe, it was asked: “What does Z$6 million look like?”
A regular 4xforum visitor wrote in and sent a picture of the stack of Z$1,000 bills required to pay for a lunch for eight with beer.
“Hi, Guys. We thought you would like to see what 6 million looks like in 1,000 Zimbabwe Dollar notes! This was the manager taking the money away after 8 of us had lunch at Mama Mia’s on 10 August: 2 courses each, eating the last fillet steak left in the restaurant, and even getting some beers — also running out!”
Of course, the Zimbabwe government has responded to the hyperinflation by blaming businesses for raising prices and thus instituting price controls. The result is shortages and misery for a country that was once considered the breadbasket of Africa.
At least our expectant father is doing the right thing. He’s shopping for gold dealers.
Doug French [send him mail] is executive vice president of a Nevada bank and associate editor for Liberty Watch Magazine. He received the Murray N. Rothbard Award from the Center for Libertarian Studies.