WHATEVER ELSE may be said for or against it, the boom
period of an inflation is marked by extensive waste of scarce and
valuable resources. This is not to say that the user knows at the time
that he is ,wasting resources. Only in retrospect, during the depression
that necessarily follows such a boom, is there clear evidence that the
prior practices were wasteful. The painful message the depression brings
is: "Curb the waste!"
Waste is the child of excess. The boom period generates
an illusion of abundance of goods and services -the reality being a lot
of bad money. The more bad money people acquire, the faster they'll try
to spend it. This explains the wasteful spending habits that develop in
the boom phase of inflation. Scarce resources are malinvested and used
recklessly-as seen more soberly in retrospect. A plethora of cheap money
and credit, like any form of subsidy, makes scarce resources appear to
be more plentiful and less costly than they really are. We consume too
much too fast of those things we think "someone else" is paying for. Bad
money plays tricks on us -until the depression comes. Then we're sorry.
We barely get started with all sorts of boom-time
schemes to clean the air and the water and the slilms, to rid the world
of illiteracy and starvation and disease, to preserve or restore the
state of Nature, provide an abundance of housing, medication,
transportation, recreation - the satisfaction of every form of human
need or aspiration-when suddenly and apparently without warning we face
a meat shortage, a grain shortage, a lumber shortage, a sugar shortage,
a fuel shortagein fact, a serious shortage of every scarce resource in
the world.
If we're now serious about stopping waste, the first
step will be to learn to recognize what is wasteful before the waste
occurs. And that won't be easy.
Oh, sure, you know very well when I'm wasting
something; and I can see clearly how wasteful you are. Perhaps we could
even agree to talk it over, and try to take each other's advice. But,
that isn't really the problem. I'm content to have you use your own
resources as you please. If you want to waste some of them, you'll get
no criticism or complaint from me so long as your waste isn't injuring
me or damaging my property.
I believe that you do not run about consciously trying
to waste your time or energy or property. With more wisdom and will
power, perhaps you could multiply your productive efficiency. But you
try to 'do your best with what you have. You act to serve the most
urgent need of each moment, as you then see it. Why do I believe you'll
act in such a manner? Because, that is bow I act. So, I respect your use
of your resources, and would hope you'll respect my choices.
Without The Owner's Consent
The problem - the waste I deplore - is the action of
any person or group to use my resources, my property, my life for
purposes I can't approve. So I object to theft, fraud, coercive acts of
any kind against me, especially coercive governmental actions that go
beyond what I believe are the limited, proper functions of government.
And it appears that such governmental waste is most flagrant during the
printing-press financing of an inflationary boom.
True, the size and scope of government is always a
compromise. Some persons want more government regulation and control;
some want less. So we get about as much governing as the prevailing
majority will tolerate in taxes' And the minority, plus a number of
those of the majority, will see in the resultant compromise many items
of waste. At least, this is the situation during "normal times," when it
is reasonably clear to the electorate what the government has in mind
doing and who will be taxed how much to pay for it.
Let us return now to the real problem: the excessive
waste during an inflationary boom. Such waste is backed by all sorts of
plausible arguments and good intentions, but the key to the excessive
waste lies in the method used to finance it -the arbitrary government
expansion of money and credit. The government simply prints the money it
spends to withdraw goods and services from the market. It doesn't reduce
the quantity of money remaining in the pockets of civilians - it just
diminishes the supplies of goods and services. This is what makes it so
difficult to see the costs - to identify the wasteful spending at the
time it happens. But the waste does occur, the spending increases, the
supply of irredeemable paper money expands, goods become scarce,
controls are applied in multiple phases, businesses fail, unemployment
rises, producers and consumers become depressed.
Our depression is justified. We have been tricked with
bad money. The government has wasted our resources. The message that
somehow must be learned by the citizenry before it will be conveyed to
Congress is to stop that waste; stop squandering and start protecting
our savings; let us serve ourselves and one another through honest
production and trade; let us choose a money we can trust so we earl
know, at the time, the cost of our actions; let us own gold. Why gold'?
Because governments have no power to arbitrarily increase the supply. It
can't be counterfeited. It is honest money.
That could be the message of the current depression if
we will learn it; but it most certainly will never be delivered to
Congress unless and until we do learn it thoroughly.
Meanwhile, instead of stopping the waste, irresponsible
governments will try to stop the depression - by further deficit
spending, and printing more money. Producers will be maligned for what
they have brought to market rather than encouraged to produce and offer
more. Consumers will be asked to voluntarily shiver and starve rather
than spend their cash holdings to draw goods from the market. The usual
premise of those whom we elect to govern us is that they know better how
to use our resources than we do. And the longer we allow that premise to
go unchallenged, the more of our precious resources will be wasted.
Those resources are drawn from the market for purposes we do not
understand or approve, with unlimited issue of fiat money that the
government forces upon us as legal tender even though producers and
trailers have every reason to mistrust it as a medium of exchange.
International Consequences of Political Intervention
The domestic consequences of these political
interventions are serious enough. Citizens are regulated and controlled
and taxed, producers are punished, businesses are driven into bankruptcy
and then nationalized, to be governmentally operated with "post-office
efficiency." As welfare programs proliferate, the "clients" sink into
the ever-declining level of living characteristic of socialized
societies. Waste is the order of the day, and the economy is weakened as
more and more government control displaces the functioning of the
market. But the disaster does not stop at the national borders.
A weakened nation can neither compete successfully in
world markets nor can it command international respect by reason of its
military might. It simply tends to waste away. And such a weakened
economic and political machine is in no position to cope with an energy
crisis. Attempts to throw the blame on the Arabs or other producers of
oil some mysterious international cartel - have a hollow ring. How
stepped-up waste of resources can make the United States self-sufficient
by 1985 is never explained. How further self-imposed tariffs and
embargoes will help us get the oil we need is far from clear. How more
paper money, which already is unacceptable in international trade, will
buy us friends abroad or keep us warm at home is a puzzle. Have we not
had sufficient experience with the bad money government provides, and
the excessive waste of resources tinder government control, to get the
message and relay it to Congress: "Stop the waste and leave us to our
own choices in the world market. Let us buy and sell on our own terms in
the money of our choice."
It might be very interesting and instructive to see
what a few pieces of gold thrown into the international oil cartel would
do to it. Who knows how many gallons of oil some producer might release
for one ounce of the precious metal? Or how many other producers or
potential producers of oil might rise to the bait and offer fuel at
bargain rates for that kind of money?
Once American citizens are properly depressed over
government waste through monetary manipulation, they may then get the
message to Congress to let money be whatever the market says it is.
Then, if government has need for resources, let them be taken directly
and openly from owners not through a mystifying monetary procedure.
Citizens then might still condone some wasteful
government spending. Men do make mistakes. But the tendency is to
correct such mistakes most rapidly when the costs are instantly and
clearly revealed. The dreadful cost of letting the government prescribe
and manage our money is now becoming clear. If that mistake is
corrected, it would go far to curb numerous other wasteful practices and
our depression will not have been in vain.
Reprinted with permission from The
Freeman, a publication of The Foundation for Economic Education, Inc.,
April, 1975, Vol. 25, No. 4.
Yourname@libertyhaven.com
