It Is Dangerous to Be Right When the Government Is Wrong (37 page)

This inflationary system robs people of their savings. Every time the Federal Reserve expands the money supply through this system, all money that was already in circulation loses purchasing power, and the people who get their hands on the money first gain that lost purchasing power. Normally, the banks loan money to the government by purchasing treasury bills. Treasury bills have been one of the safest investments in the past since the federal government's debt is guaranteed to be repaid with interest, by you and me, the taxpayers. The government can now decide what to do with this money, say, funding any one of its special interest projects, or even our collective welfare, if it feels so ambitious.

As you can see, it is the banks, the government, and the corporations the government favors that benefit from this system, while everyone else is robbed of their purchasing power in order to fund it. This is exactly what Jefferson predicted in a quote attributed to him: “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent [of] their fathers.”

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There is no difference between the Federal Reserve's system of fractional reserve banking that inflates the currency to transfer your purchasing power to the special banking interests, government, and corporate interests and a thief who hacks into your bank account and removes funds from it. This inflationary system of theft that causes the boom-and-bust cycle makes it impossible for the average American to save for his own retirement (unless he converts his savings into gold and hopes the ghost of FDR in the White House at this writing doesn't confiscate it). Prior to the abandonment of the gold standard, Americans could work and earn gold as their income, store it in a bank vault, and it would appreciate in value all on its own, serving as their retirement safety net. Fed inflationism depreciates people's savings over time, and the busts the Fed creates wipe out the retirement investments people make in the stock market. The Fed, stated simply, is an abomination to the Natural Law and the Constitution.

When I Was Your Age!

Surely, any young person today can think of stories told by their parents that sound something like “when I was your age, I could buy a movie ticket for twenty-five cents, a round-trip subway ticket for ten cents, a bag of chips for five cents, and a soda for ten cents!” Now it costs over sixteen dollars to go to the movies—ten dollars for a ticket, two dollars for the chips, and four dollars for the soda, and that's before transportation costs and the tax! This exorbitant increase in price occurred only within a time span of about fifty years; that is a 3,100 percent increase in price! For some reason, people just take price increases for granted as a normal occurrence that happens with the passage of time or blame it on the businesses that charge the higher price and call them evil and greedy.

Let us take a look at the money supply—literally the cash in circulation and in bank accounts in the United States—over this same fifty-year period.
⁸

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The increase in the monetary base is the reason for such absurd occurrences as the 3,100 percent increase in the cost of attending a movie. The money supply really started to increase drastically in the mid-1960s, and once Nixon took America off the gold standard in 1971; money creation grew out of control. Nixon broke away from the quasi-gold standard of the Bretton Woods agreement because there was no other way to pay for the debt racked up by Lyndon B. Johnson's Vietnam War and Great Society, which provided “guns and butter” for all of America, according to Johnson.

“Guns and butter” is just another way of describing LBJ's warfare agenda abroad in Vietnam—ultimately financed by the Fed—as well as his massive increase in domestic spending. He spent money the government did not have; and he spent wildly on programs such as these: The Economic Opportunity Act of 1964, which created an Office of Economic Opportunity (OEO) to oversee a variety of community-based anti-poverty programs; his War on Poverty, which began with a $1 billion appropriation in 1964 and spent another $2 billion in the following two years; the Elementary and Secondary Education Act of 1965, which was initially allotted more than $1 billion for inner-city schools; the Higher Education Act of 1965, which gave federal money to universities, as well as created scholarships and low-interest loans for students; and LBJ's Great Society, which created the bottomless pits of Medicare and Medicaid. The two medical programs have been complete disasters that are not only broke, but are unfunded to the tune of $76 trillion and counting.

Moreover, the debt is not just a financial issue. Admiral Michael Mullen, at this writing chairman of the Joint Chiefs of Staff and thus America's highest-ranking military official, proclaimed that “our national debt is our biggest national security threat.” Can you imagine that, from a military man!
His greatest fear is not terrorists, but government debt!
Secretary of State Hillary Clinton further explained the nature of this threat: “It undermines our capacity to act in our own interest, and it does constrain us where constraint may be undesirable. And it also sends a message of weakness internationally.” There is no chance this debt monster could have grown so out of control if the United States operated on a full gold standard.

Every day the federal budget grows, every person loses more and more freedom. The bigger the government, the smaller the amount of individual liberty; the bigger the government, the more it can regulate every aspect of our lives which strips us of our rights and liberties. Each day the Federal Reserve System exists is one more day that the government can fund its growing budget, increase its size, and deplete our savings and pass them along to its friends. Each day of Big Government is one more day of assaults on our liberties.

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Conclusion

It should be pretty self-evident that neither Alan Greenspan nor Ben Bernanke, or any Fed chairman, can be trusted to achieve full employment and currency stabilization. Throughout the life of the Federal Reserve, we have seen American production diminished, debt rise, inflation wreck people's savings, the boom-and-bust cycle wreck the economy, a widening gap between the rich and the poor, and the value of the dollar drop by 93 percent.

Fed supporters have all sorts of explanations and reasons for these occurrences; but it is no coincidence that from 1870 to 1913, while on a strict gold standard and without a central bank, the American economy grew larger and more rapidly than any other economy in the history of the world, and from 1913 to the present, we have seen our economy fight through years of booms and busts, our living standards decline, and our cost of living increase. This should make it pretty clear that Alan Greenspan's NYU education, as well as Ben Bernanke's Harvard and MIT education, is not worth its weight in gold. When economic growth, prosperity, wealth, safety, and happiness are the goals, nothing can replace the gold standard.

If the U.S. federal government were on a strict gold standard, with a 100 percent reserve ratio, there would be absolutely no way to fund these assaults on the Natural Law, such as wars, welfare programs, and regulatory schemes. We would be forced into having a sensible foreign policy of peace, free trade, and a strong national defense that focused only on legitimate threats. The size of the government would be forced to shrink, allowing us all to keep more of our natural freedoms. People would be left to make the decisions that affect only their life, liberty, and property. We would have sound reasons why we shouldn't go to war, instead of making excuses to go to war, and our men and women in the military would not be needlessly risking their lives. Government would also have to stop making excuses to bail out “too big to fail” corporations, and stop the excuses for why we need this social program or that social program. The government would be forced to stop its assaults on our savings, our economy, our safety, and most importantly, our natural rights and liberties.

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This is why the government must stop abusing everyone's natural right to sound money.

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Chapter 13
Theft by Any Other Name:
The Right to Spend Your Own Money

Suppose someone with a gun approaches you as you are getting out of your car. “Your car or your life,” he demands. Of course, you give him the keys and walk away. Is this theft? Or is there something that makes it different from theft, that is, a justified violation of your inherent property rights? All of us would say that it is theft, and the person who did this should be punished by the full force of the criminal law.

Would you, however, change your answer if, instead of one, a gang of five men forcefully take your car? Now assume that ten approach you, all armed, but this time they put it to a vote, including you in the vote as well. You, however, are quickly outvoted ten to one, and only then do they take your car. Is this still theft?

What if, after taking your car, they give you a bicycle instead, and they give the car to a person who is particularly poor and needs it to get to work? What if they erected a street lamp in the parking lot, and claimed that they were justified in taking your car because you had enjoyed the benefit of the street lamp by parking there? What if there are one hundred men? Ten thousand? One or two million? What has to change before this
forceful
taking of your property is no longer theft?

Because taxation is compulsory, and therefore a forceful taking of your property, we may assume that it is a
malum in se—
an evil in itself. The question then becomes whether there is some valid justification for it. As we shall see, no such justification exists, and therefore taxation violates natural property rights. That taxes are all justified by some subjective public necessity is an outright lie, which we quite literally can no longer afford to believe. As we have just seen, the two other means government uses to finance itself—the issuance of public debt and printing of money—are simply theft by another name and are even more dangerous than taxation. Does the government exist to protect our freedoms, or do we exist to serve the government?

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The real tragedy of public finance is that it acts as the great enabler for all of government's most tyrannical actions. How could wars be fought without money? How could we give aid to corrupt regimes without a source of revenue? As Frank Chodorov, a well-respected critic of taxes, warns, “We cannot restore traditional American freedom unless we limit the government's power to tax. No tinkering with this, that, or the other law will stop the trend toward socialism.” If we are really, truly committed to the cause of liberty, then we must cut off tyranny at its source: Public finance.

The Evil of Taxation

The basic evil of taxation is that it degrades the individual by flouting his natural rights. Taxation in essence establishes a legal right on the part of the government to your property and the product of your labor, a right which precedes and trumps your own. The government's claim of right, however, extends to
all
of your property, not just what it actually takes; otherwise, it would not be able to raise taxes whenever it chooses. Consider in this regard the text of the Sixteenth Amendment, passed in 1913: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” It is clear from the text itself that there are no constitutional restrictions on what Congress may take (unlike the original Constitution). Thus, whatever portion of your own property it declines to take is simply whatever it, in all of its infinite professed wisdom and charity, decides you may keep. Our retained income has become not a right, but a privilege granted by government. This scheme is one of the fundamental legal precepts of socialism: The government decides what it will take from you and what you may keep from it.

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This is also the strictest application of Positivism: If the government can say when our natural rights protect us from aggression and when they do not, then there can be no such thing as natural rights. This tenuous, subjective nature of our rights is itself reflected in the distinction between taxation and theft.
Theft
does not mean a taking of your property, but whatever the government determines to be an unlawful taking of your property. Thus, the contemporary understanding of
theft
extends from lawmakers, and not the Natural Law or any ethical principle. Although natural rights and taxation could theoretically be reconciled if free choice was somehow involved, as we shall see, it is in the nature of Big Government that this will always be an unattainable ideal.

Because natural, inalienable rights are transgressed, the people become subhuman by losing free will. One of the most important property rights is the right to choose how your property is used. If the state is able to take property and allocate it to a different use than the individual would have chosen, then the will of the individual is servile to the will of the state. Even if the entire value of the labor you produced is returned to you in the form of governmental services, you have still lost the
freedom to choose
what should be done with that value. Although the economic consequences of enabling centrally planned investment and spending decisions are disastrous (not to mention the disincentive to labor caused by the reallocation of income), the real tragedy is the cost to human liberty.

Given this inextricable link between property and freedom, it should not be surprising that one of the major civil rights statutes during the Reconstruction era gave African Americans a right “to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens.” In other words, emancipated African Americans could never truly be free unless they had the same rights as whites to be free from interference with their property. Anything less would be a variant of slavery. Why should we now forget these lessons and expose all of our property, and our temporal welfare, to the government's voracious appetites?