Wednesday, September 30, 2009
Oops...No Saving Allowed!
I’ve always been a bit of a peculiar creature. I save my money, try to be responsible in my purchases, and I do not believe in putting oneself into debt. This of course means two things for me in our country today.
First, I am one of the causes of the current economic mess in which we find ourselves. Haven’t you heard about us reluctant consumers? Never mind that such a claim is a complete fallacy. And never mind that a policy encouraging saving, rather than massive spending based on artificial interest rates and misguided signals to the market, would have actually saved us from such a mess and would help us to quickly get out of said mess.
Second, I am being punished. Punished? Yes, punished. Punished for saving, punished for keeping myself debt free, and punished for being a responsible member of society. For doing these things, I apologize.
Surely, I should have recklessly spent, piled up mounds of debt, and let that money burn a hole in my pocket. Certainly, there must be something downright evil about my behavior in order to experience what is happening to those like me today.
What do I mean? I mean that those who save have to pay. We are taxed of the very fruits of our labor as the dollar continues on its noise-dive into failure. As our government rallies to “just do something,” I have to witness the Federal Reserve print more any more of our fiat currency. And just like in any marketplace, as the supply becomes saturated the value goes down.
Let me back up for a moment.
I am no great economic scholar, though I do know more than the “Average Joe” on the street because of my interest in the subject. My study of the founders, however, has led me to some study of sound money and why it is important. Furthermore, over the last few years, I have become quite interested in the Austrian School of free market economics. In it, I have found many great new insights as well as evidence of what I already suspected about human nature, economic value, liberty, and market intervention.
But before even reading a single word of economic theory…before I ever thought of cracking a textbook, I already understood certain things about the market and about monetary policy. This wasn’t because I had a key to some hidden knowledge or because I was some sort of secret genius (Oh, what a well-kept secret that would be!) It was based on simple reasoning. It didn’t take much to figure out. Any child knows that the more of something there is in the marketplace, the less value it retains. The kid with the cool new shoes really was the coolest until everyone else got a pair the next week. (Everyone but the poor kids like me, but I digress.)
I remember another time when I was in high school talking about monetary policy, again before I had read or heard a thing on the subject. I was discussing with my father the dangers of counterfeiting. I said something along the lines of how the crime hurt everyone as it decreased the purchasing power of the dollar as a whole. Of course, I didn’t use those words, but the point was the same. (Funny, it wasn’t until a number of years later that I found out exactly who the real counterfeiters were—the FED.)
By looking at the effects on purchasing power when money is increased, we can easily see how more money really does lead to more problems as the great economic scholar Sean “Puffy Daddy” Combs alerted us to long before the economic collapse.
My goal in this post is not to explain monetary policy. I will not seek to do so any more than is necessary to make my greater point, but some things must be understood.
Since the creation of the FED in 1913, the dollar has lost 96% of its value. Moreover, since we removed ourselves completely from gold backing in the early 1970s, we have seen the dollar’s value really plummet. We have been loose with our money, and this has led to nothing but a series economic mistakes and a false sense of economic might. The policies promoted by the United States government and the Federal Reserve have ruined the dollar and our economic standing.
So we must ask, “Who is left to pay the price?” The answer: those who can least afford it.
First, it is prudent to note the poor suffer the most. The policies of loose money actually do have benefits, but the benefits are short-term and are truly felt by only the wealthiest as their coffers are filled with newly-created cash. By the time the money trickles down to the masses, it has already been robbed of it purchasing power as the market catches up to the monetary reality.
Second, savers are punished, while reckless behavior is subsidized. Those who save continue to be taxed of the fruits of their labor, while those who put themselves into debt are seen as economic heroes. The bank ledger may still say one has “x” amount of dollars, but I assure you every time the FED fires up the printing press, your money can buy a lot less than it could when deposited. The money is in effect taken from you before a single dollar is even lifted from the account.
If we continue to punish those who save, we will continue to promote the irresponsible spending that is at the root of the problem. Until there is an incentive to save, we will continue this vicious cycle. That is until the dollar finally hits its bottom, the system crumbles, and we are left to start over. With only 4 cents to go until the dollar is completely worthless, that may not be too far off.
As for me, I am living with the consequences of saving in a culture enslaved to borrowing and spending. Don’t worry; I’ll be fine. Besides, I have no faith in Mammon—especially if it is not backed by gold.