by Thomas Luongo: The
FED's Real Monetary Problem
I have memories
of being aware that the society we were living within was unsustainable
that I place between 9 and 11 years old. They may be earlier than
that, but we studied Rome in either 5th or 6th
grade so that seems a reasonable assumption. I grew up during the
last depression of the 1970's in safe, suburban New York. Dad was
NYPD, mom was a nurse at a local psychiatric hospital and I was
the youngest of four in a house full of type-A, lower-middle class
pragmatics of Italian descent. The memories of note revolve around
holidays; driving into "The City" to visit the Luongo
family demesne in Brooklyn where my grandparents (who died nearly
a generation before I was born) raised 11 children, my mother's
parents in Little Neck and seemingly everyone else in between. These
trips, with the soundtrack of my parents discussing the financial
woes of a bankrupt NYC, opened my eyes to the enormity of the problems
facing my generation and beyond.
The West Side
Highway fell down in 1976, never to be rebuilt. I distinctly remember
the left lane of the East River Drive being closed as the sea wall
was being reclaimed by the river. The city was broke, there was
the Blackout, Son of Sam, the NYPD forking over some of their pensions
to fund City operations and the infrastructure was failing. Wages
were stagnant but price inflation was rampant. To a naïve 10-year-old
(who was very good at math) I kept thinking to myself, "If
they can't pay for these things now, how am I going to pay for them
later?" I grew up with a real fear of bridges and over-passes,
expecting them to fail at any moment. I would have silent panic
attacks whenever we crossed the Tappan Zee Bridge. This fear of
bridges persists, but I'm much better at controlling it, mostly
We still had
air-raid drills in school and I read a lot of Philip K. Dick, starting
at age 13. I learned a lot about the insanity of our culture and
bureaucracies in his books; the inherent schizophrenia of having
to be different people at different times in your day in order to
keep your position all the while being ground down by arbitrary
and capricious authorities either mundane or supernatural. As
T.S. Eliot observed, "Preparing a face to meet the faces
that you meet…until human voices wake us and we drown." I see
Penfield Mood Organs
Smiles everywhere. We call them Ritalin, Paxil, or Dr. Phil.
I bring these
things up to provide perspective. In a way, my whole life has been
leading up to these interesting times we are living through. I knew
that this was the end of the American Empire; the parallels to Rome
were unmistakable even to a pre-teen. So, the question is, knowing
this, what do you do about it? Well, for a long time I ignored it,
studying music and poetry intensely while earning a degree in chemistry
perfunctorily. I may have understood the macro-problem but I didn't
understand the causes, and besides, I had a lot of growing up to
do. Angry and obnoxious, I passionately misdirected my time and
energy. A natural-born iconoclast, I distrusted authority and institutions
but didn't have any clue of how to successfully avoid them. I absolutely
didn't vote. But, by gods, I was willing to give anyone an earful
of what I thought, no matter how idiotic or half-baked the opinion.
[Ask me sometime about my disastrous first impression on my wife's
family.] Thankfully, I had the family work-ethic and met my future
wife in college. A more religious man would consider her a gift
from on high.
it, I studied the law and politics through games, specifically games
that broke their own rules and learned the futility of controlling
complex systems. I know why chess is such a good game; it was simple
and had been beta-tested for 5000 years. I'm a miserable chess player,
but was one of the best Shadowfist
players in the world; king of the ant pile, I suppose.
libertarianism and Austrian economics, the acceptance of the ideas
came easily and without reservation. I won't bore you with the details.
Think eyes opening, falling into rabbit holes, touching the Monolith;
pick whatever metaphor suits you, but it happened to me and every
day I am thankful that it did. I would have gone insane or, more
likely, just continued down that fatalistic path of mild self-destruction
and wasted potential had it not. No longer did I feel like the protagonist
in one of Phil Dick's many books.
With this knowledge,
though, comes a price. There's always a price. It is an economic
is clarity. Before, I had a vague feeling that the inevitable collapse
was a natural, organic process, too big for me to either understand
or affect the outcome of and sweeping me along with the forces of
history. Now, I knew there was a causal link to specific systems,
namely the monetary one (and the problems inherent in the institutions
it subsidizes) and it focused my criticism. Moreover, as I devoured
knowledge of just how sick, corrupt and immoral the whole thing
was I also realized that what I thought was coming was a mild breeze
compared to the whirlwind we were actually creating.
So much for
mastering my fear.
that moment you realize just how unprepared physically you are for
what you see coming at you. For me, the intellectual process was
easy. I'd been living with it my entire life. But fear isn't an
intellectual response, it's a limbic one. It's why economics is
not a dry, dusty discipline, but rather a bloody and visceral one.
Time preference is linked with a fear of the future and the plans
you make to combat it. On 9/11, I'm not ashamed to admit that after
a conversation with a friend about what would happen if "they
nuked The Mouse (Disney)" that I ran out to Wal-Mart and bought
a water-filter, a 5 gallon water can and two 7 gallon gas cans in
case we had to pile our life into our two-seater beater and retreat
to my in-law's farm in Ohio. After that, my wife and I went car
shopping; it's what we had planned to do after work anyways. I horrified
the salesman at the Nissan dealership while watching the footage
for the first time by saying, "You know, I wouldn't be surprised
if our government didn't pull this off." He swallowed hard
(his salesman's face didn't drop) and tacitly agreed with me.
We didn't buy
a car from him, though we did buy a car.
I bought an
AK-47 the following Saturday and ordered 1000 rounds of 7.62×39
when I got to work on Monday. For Christmas that year, my wife bought
me my first 1/20th oz. Gold Canadian Maple Leaf (I'm
a huge hockey fan). If she had not done so I may never have pulled
that trigger, so to speak. Have I mentioned how unutterably fantastic
The point is
that during those early days of understanding a lot of my behavior
was driven by fear. It didn't help that there were plenty of people
out there stoking that fear and profiting from it. I remember making
completely unrealistic lists of guns that I wanted to own, where
to place the defensive positions on the property I hadn't bought
yet, and whether my house should have a cupola with a 360-degree
view and rifle slits. Temporary insanity? Maybe, but I didn't act
on any of them, thankfully. All of this on 35 grand a year! "Christ,
what an imagination I've got," (with apologies to John
the rub, while I imagined all of these catastrophic outcomes, preparations
for them are more mundane. We are governed by the law of Diminishing
Marginal Return so, as I took steps towards my goals, I satisfied
my biggest anxieties. Can we defend ourselves? Yes, a few years
of Tae Kwon Do took care of that. Can I defend my home? Yes, we
bought his and hers 9mm pistols, a couple of cheap but functional
rifles and already had a couple of dogs. Is my meager wealth protected?
Yes, I was acquiring gold and silver for the future. Most importantly,
for the first time in our marriage we were both gainfully employed
and cash-flow positive. I had a small house in Gainesville with
an even smaller mortgage (by today's standards), and our health
was improving from being early adopters of a low-carb lifestyle.
I was beginning to feel good about our prospects of riding things
out. It was an illusion, but, hey, baby steps.
work one evening, my wife uttered the words which, like any good
story, took the stakes to a different level, "I think it's
time we had a kid."
This was just
the beginning, I thought.1
- The last
sentence of Philip K. Dick's novel Ubik,
which, in essence, negates everything that had preceded it.
Luongo [send him email]
is a professional chemist, amateur economist and obstreperous recovering
Yankee residing in North Florida.