CO2 Emissions are Decreasing in the U.S.

Subscribe to David Kretzmanns YouTube channel.

Intervention Leads to Larger Government!

Subscribe to David Kretzmanns YouTube channel.

Child Labor Laws Build Reliance on Government

Subscribe to David Kretzmanns YouTube channel.

“Stimulus Packages” or “Economic Nightmares”?

It’s hard to not go gaga over the ideas and intentions of “stimulus packages” and ramped up government programs. After all, won’t it create a lot of jobs, boost the economy, and lift us out of a rough spot? This is what we’ve constantly heard from politicians and the media especially over the past couple years. “Government needs to do something.”

Never forget how government gets its money. It does not earn it. It does not work for it. Every penny that goes to government must come forcefully from a productive area of the economy. Government can’t take money from a failing business or struggling individual, it must forcefully take money from wealthier (i.e. productive) businesses and individuals.

This brings us to the first problem with “stimulus projects” in the form of increased government programs, public works, and public spending in general. The only way any government can afford to spend billions and trillions of dollars “stimulating” the economy is to either tax, borrow, or print that money. In other words, people will either directly lose more money to government through taxes, the effect may be felt in the longer-term through debt and borrowing, or the currency will depreciate and prices will rise through the process of monetary inflation. Pick your poison; all three options for government to increase spending will inevitably pinch people the most either directly or indirectly.

“Stimulus packages” aim to boost the economy in the short-term. If government can provide jobs to build public entities (such as transportation options, buildings, etc.) the economy will correct quicker than if the market could work, right? The problem with this theory is people always ignore where that money comes from. Taking money from productive sources in the economy and throwing it to unproductive and expensive projects does not set the economy on a sustainable foundation.

Strong economies are not build on artificial spending. The more that government takes from productive sources in the economy and pumps it into unproductive government projects, the longer the correction and recession will be. Consider some of the projects being funded under Obama’s massive spending plan. One is building a light rail track. This is all well and good, but how is spending billions of dollars on a train track and system going to increase long-term productivity? Few people use government-operated trains as it is (witness Amtrak and its black hole of wasted money), it will simply require more funds sucked out of productive sources to survive.

People buy into the illusion that as long as people have jobs, regardless of productivity, it is good for the economy. Unproductive jobs do no good for the economy and will not expand sustainability and prosperity. Napoleon tried to create jobs and work just by paying people to dig up ditches and fill them back in. It’s a nice idea, but it won’t do a thing to improve the economic picture. It is when labor is efficiently and sustainably used that an economy will expand on a strong foundation.

Today we are seeing government promote and prop up unproductive entities like nothing else. First, we bail out companies who lived beyond their means, made terrible business decisions, and recklessly spent money. These companies were unproductive and hurting the economy. Second, we have the ongoing “stimulus package” pumping money into pork projects that will not be productive in the least. It may sound great to build roads and infrastructure to stimulate the economy, but it won’t create wealth and expand productivity. It is not beneficial to use productivity to fund nonproductive goals. It is a bogus and failed theory that we continue to follow. It will not help the long-term economic picture.

One does not need to look very hard to see how terribly these government shenanigans have failed in the past. The Great Depression is the first obvious example. Hoover and Roosevelt both increased taxes, public projects, and expanded government with hopes of curing economic ills. Subsidies, public works projects, and many other government programs were created and expanded in the 1930s. Roads were built, prices were propped up, and government would not let the market organize labor and money on its own. Despite the intervention and spending efforts from government, unemployment was higher in 1939 than in 1931. The New Deal cost billions of dollars and expanded the federal government like never before, but unemployment and productivity still did not improve.

Let’s take a brief detour to the recession of 1921. Few people have heard of this recession because government actually decreased its size, spending, and taxes during the rough economic period. The government and Federal Reserve did next to nothing as the economy began to correct after the government’s market intervention during World War 1. The government (to the disappointment of some interventionist politicians), rather than increase its role as it would do disastrously just eight years later, ended up sitting this recession out. Prices fell, unproductive businesses failed and reorganized, and the economy was back on its feet after no more than 18 months. The pain was brief, the correction and reorganization was quick, and it all happened largely because government reduced its size and let the market shift money and labor to productive areas of the economy.

In more modern times, Japan’s “Lost Decade” can be another example of the botched intervention of government and the central bank. Some believe that Japan did too little to “stimulate” the economy, when the government and central bank actually took a nearly identical road to the U.S. today. Failed businesses were propped up by government, the central bank lowered interest rates to 0% for a time and pumped cheap money and credit into the economy, and huge amounts of Yen were spent on unproductive and essentially worthless public projects. All of this did nothing but lead to huge government debt and a devastated economy.

It’s hard to understand how much money Keynesians want to spend on “stimulating” the economy. Paul Krugman, the front-runner of the Keynesian crowd, is calling for a second and larger stimulus package. The trillions of dollars already pumped into unproductive businesses and projects wasn’t enough? How much do these guys think we need to spend to bring about their Keynesian Utopia? Rather than realize that government intervention and central manipulation have done more to agitate the economy than help, people are crying for more of the same that historically has done more damage than good.

Government is great at managing the time, labor, and money of other people. It also guarantees that politicians won’t manage that time, labor, and money more efficiently than the people who own that time, labor, and money. The very concept that by taking from productive parts of the economy and spreading it to various unproductive jobs and projects is downright silly. The worst recessions and depressions have come in many countries when government prevents the market from reallocating funds from unproductive businesses and sectors to the strong and productive areas of the economy.

Preventing the failure of a large corporation because jobs would be lost is the equivalent of saying that government should have propped up horse and buggies and the many jobs in the industry regardless of its uselessness to society. The natural order of a free market is to shift funds to the strongest, smartest, and most productive businesses and industries. When government gets in the way with bailouts, “stimulus plans,” and countless other intervention methods, it only guarantees inefficiency, unsustainable activities, and prolonged suffering.

The answer to our economic problems does not lie in government spending as Paul Krugman and many other Keynesians would like, but in more freedom for the market and people to reallocate money and labor to the productive and sustainable portions of the economy.

Tea Party Patriots Must Discuss the Fed and Monetary Policy

Subscribe to David Kretzmanns YouTube channel.

Sanctions Hurt People, Not Government

Subscribe to David Kretzmanns YouTube channel.

Failure of Bailouts, Stimulus Packages, and Government Economic Planning

Subscribe to David Kretzmanns YouTube channel.

Government Coercion Won’t Fix Health Care

Subscribe to David Kretzmanns YouTube channel.

Government’s Role in a Free Market and Free Society

Subscribe to David Kretzmanns YouTube channel.

Money and Currency in a Free Society

We live in times when government and central banks monopolize money and make it next to impossible for viable competing currencies to arise, which can make it difficult to see the possibility of other currency alternatives.

Picture a new village, untouched by current monetary laws. People begin exchanging goods through the process of bartering. This makes it difficult to know what you can buy, because the milkman will only need so many of the pouches that you manufacture. Because bartering can be inefficient, unpredictable, and unreliable, the people decide to represent their goods with something of value. They find copper, silver, and gold nearby, all unique, relatively limited (therefore they hold more value than, say, granite), and quite durable. Thus, they can represent their goods with these valuable metals (and to make it more convenient, paper guarantees to those metals).

Money does not get its value through “force” as some believe. When the people in the village were looking for a more effective way to exchange goods, they were not trying to represent force. They were aiming to represent value through metals that were limited enough to have value, had durability, and could not easily be counterfeit (or inflated).  Currency is never originally brought about by force or through government.

Historically government has gotten involved in currency for one reason: greed. Kings would debase the metals that the market freely used and valued. Kings would inflate and devalue the currency that was once stable when the market was in control. Government could not debase metals, clip coins, and print unsound paper money and expect people to voluntarily accept it, thus force was necessary to make it happen. Legal tender laws forced devalued government money on the people and markets.

It is difficult for government to grow when people demand that the money be backed by hard goods (such as metals). It is difficult for government to expand its presence when the money supply is stable and in the hands of the people. History clearly shows us that when government wants to expand its state or military presence beyond its usual bounds, it cannot do so without control over the nation’s money supply. Without the control of money, government would have to take every cent it needed directly from the people and businesses, an approach that would become very unpopular in a very short amount of time.

This is why governments have always tried to take control and monopolize money. If people are forced to use government money and cannot create a competing currency, they must use the money the government gives them. Government can then indirectly “tax” the people through inflation and devaluation of the currency. This allows government to grow its boundaries and influence without directly feeling the repercussions of a people who see their property forcefully go out the door to the government in the form of taxes. Monetary inflation is a very indirect and gradual process for government to take money from the people. And it can only work if people are forced to accept the debased and often worthless money. As the money supply grows without solid commodity backing, prices begin to rise, impacting poorer citizens the most.

This brings us to the U.S. Some have argued that the Constitution allows the government to pass legal tender laws and control many aspects of monetary policy. However, on close inspection, this power has been greatly abused and misinterpreted. The Constitution states:

Article I, Section 8: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Article I, Section 10: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Congress has the power to coin money, regulate its value, but nowhere does it have the authority to force people to accept that money. Congress can create and regulate its money, but it cannot mandate that people use it through legal tender laws. The states are prohibited from coining money and are required to make only “gold and silver Coin a Tender in Payment of Debt.”

Neither the powers delegated to Congress or the states give them the authority to shove a currency onto the people. “Legal tender” means tender in the payment of debt. The states are given the duty to be sure that only gold and silver can be legal tender. For legal and juristic purposes, only gold and silver are legally acceptable in the payments of debt. But this does not give the state the power to dictate the forms of other monetary commodities or economic exchanges that the people and market might come up with. In other words, the state controls the legal use of money in the payment of debt, but neither the state or Congress has authority over the economic exchanges of money in the marketplace.

The Founders did not give the federal government the ability to monopolize currency and force it on the people. There is no power in the Constitution given to the government to restrict currency production and choice of the people and marketplace. In fact, many competing and private currencies functioned efficiently for a good part of the 1800s. Today, however, we accept legal tender laws as a legitimate role of Congress, when in reality they do nothing but unconstitutionally force a worthless currency on the people.

Consider the basic principles of modern legal tender laws. No government force or mandates would be necessary to encourage people to use a widespread, valuable, and sustainable currency. Legal tender laws and government coercion over money are always used to force a currency that would otherwise be worthless onto the people and marketplace. Imagine if the legal tender laws enacted in the 1960s, forcing people to accept Federal Reserve Notes, were repealed today. Who in their right minds would continue using a currency whose value consistently decreases, is in the control of seven central bankers, and in reality is worth nothing more than the paper on which it is printed?

People will often reply that repealing legal tender laws would lead to the creation of hundreds of private currencies and economic chaos. But remember something. Especially in today’s digital, national, and even global economy, a currency would have to be simple, recognizable, valuable, and widespread to have a chance of surviving in the market. People will naturally encourage and use the currency that holds the most value and brings the greatest amount of ease to transactions. If that is the currency produced by Congress, so be it.

Monetary freedom simply gives people the option of throwing off the restrictive chains of a centrally manipulated, inflated, and drastically devalued currency, the symptoms of a government out of control. Competition in money would force government to stay in line, live within its means (both domestically and overseas), and maintain high levels of sensibility and responsibility. History has visibly painted the picture that without control over money, government’s long-term abilities are only as able as those that the people directly delegate to it. Freedom of money plays a major role in ensuring freedom and representation in government.

“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” — F.A. Hayek

“Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” — George Washington

“All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.” — John Adams

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.” — James A. Garfield

“We are in danger of being overwhelmed with irredeemable paper, mere paper, representing not gold nor silver; no sir, representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.” — Daniel Webster