The New American Radicals

Lessons from another era

The populists who scapegoat intellectuals and trash civil liberties are Jacobins, not conservatives

By PETER VIERECK

During the Jacobin Revolution of 1793, in those quaint days when the lower classes still thought of themselves as the lower classes, it was for upper-class sympathies and for notreading “subversive leftist literature” that aristocrats got in trouble.

Note the reversal in America. Here the lower classes seem to be the upper classes–they have automobiles, lace curtains, and votes. Here, in consequence, it is for alleged lower-class sympathies–for “leftist” sympathies–that the aristocrats are purged by the lower class.

In reality those lower-class sympathies are microscopic in most of that social register (Lodge, Bohlen, Acheson, Stevenson, and Harvard presidents) which McCarthy is trying to purge; even so leftist sympathies are the pretext given for the purge. Why is it necessary to allege those lower-class sympathies as pretext? Why the pretext in the first place? Because in America the suddenly enthroned lower classes cannot prove to themselves psychologically that they are now upper-class unless they can indict for pro-proletariat subversion those whom they know in their hearts to be America’s real intellectual and social aristocracy.

On Milton Friedman's 100th Birthday

He's Needed More Than Ever

By THOMAS SOWELL

If Milton Friedman were alive today — and there was never a time when he was more needed — he would be 100 years old. He was born on July 31, 1912. But Professor Friedman's death at age 94 deprived the nation of one of those rare thinkers who had both genius and common sense.

Most people would not be able to understand the complex economic analysis that won him a Nobel Prize, but people with no knowledge of economics had no trouble understanding his popular books like "Free to Choose" or the TV series of the same name.

In being able to express himself at both the highest level of his profession and also at a level that the average person could readily understand, Milton Friedman was like the economist whose theories and persona were most different from his own — John Maynard Keynes.

Like many, if not most, people who became prominent as opponents of the left, Professor Friedman began on the left. Decades later, looking back at a statement of his own from his early years, he said: "The most striking feature of this statement is how thoroughly Keynesian it is."

Shame Is Going the Way of the Dinosaur

How Times Have Changed

by Walter E. Williams

Having been born in 1936 has allowed me to witness both societal progress and retrogression. High on the list of things made better in our society are the great gains in civil liberties and economic opportunities, especially for racial minorities and women. People who are now deemed poor have a level of material wealth that would have been a pipe dream to yesteryear's poor. But despite the fact that today's Americans have achieved an unprecedented level of prosperity, we have become spiritually and morally impoverished compared with our ancestors.

Years ago, spending beyond one's means was considered a character defect. Today not only do people spend beyond their means but also there are companies that advertise on radio and TV to eliminate or reduce your credit card and mortgage debt. Students saddled with college loans have called for student loan forgiveness. Yesterday's Americans would have viewed it as morally corrupt and reprehensible to accumulate debt and then seek to avoid paying it. It's nothing less than theft. What's worse is there's little condemnation of it by the rest of us.

Earlier this year, as a result of a budget crunch, the Philadelphia School District had to lay off 91 school police officers. During the 1940s and '50s, I attended Philadelphia schools in poor neighborhoods. The only time we saw a policeman in school was during an assembly period when we had to listen to a boring lecture about safety. Because teacher assaults are tolerated – 4,000 over the past five years in Philadelphia – school police are needed. Prior to the '60s, few students would have thought of talking back to a teacher, and no one would have cursed, much less assaulted, a teacher.

Feds Want to Help You

Whether You Want Help or Not

The FDA is trying to give food stamps to people who do not want or need them

By A. Barton Hinkle 

There are two powerful reasons for giving government aid to the poor, one good and one bad. It alleviates human suffering, which is good. And it increases dependence on government, which is bad.

Or at least it is bad if you believe in virtues such as personal responsibility and self-reliance. On the other hand, if you are (let us say) a Democratic congressman or a bureaucrat in the Department of Health and Human Services, then swelling the rolls of those who need your help could be a very good thing indeed. At least for you.

This might sound just the teeniest bit paranoid and nutty. But that does not make it wrong; even paranoids can have enemies. And the past few weeks have produced a passel of evidence that government and its principal cheerleaders would like very much to render Americans more rather than less dependent on them. Consider:

A few days ago the Department of Health and Human Services adopted a change in policy that “ends welfare reform as we know it,” according to Rep. Dave Camp, chairman of the House Ways and Means Committee. HHS has decided to grant waivers to states that will knock out the keystone of the welfare-reform arch: the work requirement. That requirement helped cut welfare rolls in half. But now states will be able to “test alternative and innovative strategies,” including “multi-year career pathways” and “a comprehensive universal engagement system,” whatever that is. Neoliberal Mickey Kaus calls it, probably correctly, a “stay-on-the-dole-while-we-keep-you-busy-with-anything-other-than-actual-work” system.

The Department of Agriculture also has been doing its part for the welfare state: It has been producing Spanish-language radio novelas dramatizing the desirability of signing up for food stamps, or whatWashington calls the Supplemental Nutrition Assistance Program (SNAP). “Will Claudia convince Ramon to apply for SNAP? Don’t miss our next episode of Hope Park!” concluded a typical spot. (Once word of the campaign spread, the department deep-sixed it.)

Corruption and Nepotism Haunt Southern Europe

The Origins of Crisis

Jobs for your friends, contracts for your relatives, cash handouts for everyone: that's how politics works in Sicily. Now the island is on the verge of bankruptcy. It's an example of the underlying problem plaguing many parts of the southern European countries now struggling to contain the euro crisis.

By Hans-Jürgen Schlamp

Marcello Bartolotta, a surgeon from the Sicilian town of Messina, has hit the jackpot. He has just been granted a seat in the regional parliament as a replacement for a parliamentarian from his party who recently died. The assembly will be dissolved in October ahead of regional elections. That, though, is hardly a problem for Bartoletta. After all, for the three or four remaining sessions he will attend until then, he will get some €40,000 ($49,000), in addition to expenses.

That, though, is if Sicily doesn't go bankrupt first. And there is a chance it may.

Bartolotta's 89 fellow lawmakers and their 400 assistants have already been told that their July salaries won't be paid out punctually. The "Onorevoli," the "Honorables," as Italian parliamentarians call themselves, are up in arms at the announcement and the Palazzo Reale, where the assembly has its seat, echoed with shouts of "We want our money!" Yet the parliamentarians themselves have contributed significantly to Sicily's financial misery.

The problem isn't just that they receive a monthly net salary of €10,000 to €15,000 -- more than members of the national assembly in Rome get -- without working terribly hard. The assembly rarely convenes and the turnout is usually quite low. Even the fact that almost a third of the Honorables have a criminal record, are being sued or are under investigation is a cosmetic blemish at most. The true problem lies in what they have been doing: The political class in semi-autonomous Sicily has been doling out jobs and cash so lavishly over the years that the region is at risk of financial collapse.

Too Many Public Sector Jobs

The politicians have proven particularly adept at finding public service jobs for their friends. Today, some 144,000 Sicilians get their salary from the state, and one in eight of them is the head of something or other. Many administrative offices are full of people who have no idea what they're supposed to be doing.

The Monetization of Everything

What the Federal Reserve System can do and what it will do are two different things

By Gary North

The Federal Reserve System can monetize anything. It can create digital money and buy any asset it chooses to buy. There are no legal restrictions on what it is allowed to monetize.

If it were to do this, and it continued to do this, the dollar would fall to zero value. This would produce hyperinflation. The result would be the destruction of all dollar-based creditors. Debtors could pay off their loans with the sale of an egg or a pack of cigarettes. This is what farmers did in 1923 in Germany and Austria.

The economists who advise the Federal Reserve System know this. The bankers who run the banks that own the shares of the 12 regional FED banks know this. Bernanke knows this.

The day will come when the decision-makers on the Federal Open Market Committee will have to fish or cut bait. They will have to decide: mass inflation (20%) or hyperinflation (QEx). They will have to decide: recession or hyperinflation.

Will they see that it’s really Great Depression 2 (not just mass inflation) vs. hyperinflation? I don’t think so. They have been able to manipulate the economy for over 90 years between recessions and booms. Only once did it become a depression: 1930-40. That depression became deflationary, 1931-34, because the Federal Deposit Insurance Corporation (1934) did not exist. Depositors took their money out and did not redeposit it. That created monetary deflation through the bankruptcy of banks. The fractional reserve process imploded.

A Cloud of Doom

Don't Believe In The Central Banking Theater Of The Absurd

The astounding hubris of central bankers is comical, but the consequences of their actions are playing out as needless tragedy.

By Charles Hugh Smith

Central bankers present themselves as Masters of the Universe. They are, but only in their own little Theater of the Absurd. In the real world, they are as clueless as any other mortals about the unintended consequences of their actions and the speed with which the corrupted, unsustainable financial Status Quo will decay and die. 

The only attribute they possess in abundance is hubris. Their claims to godhood are comical when viewed in their little Theater of the Absurd, but they become tragic when the consequences of their actions play out in the real world.

Their job, such as it is, is to deflate a tottering system based on phantom assets slowly enough that it doesn't implode. Stripped of mumbo-jumbo, their strategy to accomplish this is to inflate other phantom assets to replace the phantom assets that are falling to zero.

All their promises, preening and posturing boil down to patting their breast pocketand speaking vaguely about a "secret plan" to end the crisis without bringing down the system that spawned the crisis as a consequence of its very nature.

There is no secret plan, of course, and no secret financial weapons; all they really have is artifice and the hubris to present artifice as reality.

To admit the usustainable is not sustainable would bring the entire rotten edifice crashing down, so the central bankers invite us into their little Theater of the Absurd and evince a phantom confidence in their phantom solutions that depend on phantom assets.

A swollen cloud of doom hangs over the central banker's little Theater of the Absurd; all their chest-pounding hubris and empty confidence is artifice, as phantom as the assets they claim will replace the phantom assets that have been destroyed by exposure to reality.

On their absurd little stage, they claim the Emperor's robes are thick and fine; and we laugh, bitterly, for these threadbare lies are all they have to "save" a parasitic, predatory, anti-democratic financial Status Quo.

Greece: the Washington v Berlin poker game returns…to Athens’ advantage

Mid Summer Greek Dreams

By John Ward

A few airy vapours emerged in the way of rationales for US Federal Treasury Secretary Tim Geithner’s session with German finance minister Wolfgang Schäuble today. The two men ‘expressed confidence in euro-area member states’ efforts to reform and move towards greater integration’, ‘welcomed the Irish example of placing successfully longer-term bonds last week and Portugal’s continued success in meeting program commitments andzzzzzzzzzzzzzzz…..’

Bazooka Geithner was scheduled to travel on to Frankfurt Monday afternoon for a session with European Central Bank President Mario Draghi, and no doubt at that time they will talk about Borussia Dortmund’s women’s soccer friendly against Inter-Milan’s mixed-sex 2nd XI next Thursday. It promises to be a storming game, but most people watching ClubMed developments (especially those in Athens) could be forgiven for suggesting that Greece’s future location as a sphere of vital influence was the main reason Mr Geithner was talking to two of the most powerful financial players in Europe.

The eurozone has been a pimple on the backside of global money for two years now, but while the buttock-blemish just keeps on getting bigger, nothing seems to bring it to a head. My theory is that the problem is now so big, it has expanded far beyond the fiscal arse, and is about to launch an assault on the head: but whether I’m right or wrong, there’ve been so many jigsaw bits, clues and signs falling into place of late, you’d have to be Mr Magoo in a tank not to notice them.

What’s going on here is a high-stakes poker game between Washington and Berlin. And once again, we are talking Greek default into the welcoming arms (in every sense) of America v Merkel’s FiskalUnion vision wherein Greece stays in the eurotent…along with its strategic, mineral, and energy importance to Brussels.

Here are some examples of what I mean.

The cultural melange was an authentic display of what ‘Britishness’ means today

Nothing much at all

by Mick Hume 

London 2012’s opening ceremony was entitled ‘Isles of Wonder’. Watching it left me to wonder: what on earth was that all about? What did Danny Boyle’s five-ring circus and the rave reception say about how these UK isles see ourselves today?

Let’s be clear. To say that you didn’t like (or in my case, hated almost every toe-curling moment of) the opening ceremony does not make you an ‘anti-Olympics cynic’. The Games and the preceding song-and-dance act are entirely separate. As argued on spiked last week, the true spirit and legacy of the Olympics are about sporting excellence and the human struggle to be the best. Opening ceremonies have nothing to do with any of that. They are political-cultural vehicles which, since Hitler’s Germany created the template at the 1936 Berlin Games, have been about the host nation projecting a national self-image.

So, what message did the London opening ceremony send about the meaning of Britishness today? Almost everybody felt able to claim a piece of it – from radicals claiming that it had been a ‘celebration of freedom and dissent’ because it included a snatch of the Sex Pistols and descendants of the Suffragette Pankhursts (though the BBC lauded the pro-imperialist Emmeline and ignored the revolutionary Sylvia), to the Tory Daily Telegraph claiming that it had ‘captured the spirit, history, humour and patriotism’ of the nation because it included ‘Jerusalem’ and all that.

It seemed to say that Britishness means whatever you want it to mean – and therefore, nothing distinct at all.

Celebrate or be forever cast out!

The hatred heaped onthose who criticised the ceremony suggests this New Britain isn’t as diverse as we’re told

by Brendan O’Neill 

We might be only two years into the 2010s, but already the Irony of the Decade has occurred.

For the past 48 hours we have been told that Danny Boyle’s opening ceremony was a brilliant and bonkers celebration of the diversity and disjointedness of modern Britain, a glorification of the‘inclusiveness’ and ‘freedom’ that are the core values of our society.

Yet it seems we are not so inclusive that we can include in the national story any criticism of Boyle’s ceremony itself. We are not so free that we can have an MP slag off the ceremony without the commentariat calling for him to be sacked on the basis that he is ‘incompatible with modern Britain’. We are not so diverse that we can tolerate amidst the glowing frontpage paeans to the ceremony just a tiny smidgen of anti-ceremony sentiment.

The award-winning irony is that the feverish denouncing of any criticism of the opening ceremony disproves the message it was allegedly trying to send: that Britain is open and free and super-chilled about everything.

Consider the opprobrium heaped on Tory MP Aidan Burley for having the temerity to tweet that the ceremony was ‘leftie multicultural crap’.

Now, it doesn’t matter what kind of person you think Burley is (an MP who has previously been sacked for attending a Nazi-themed stag party? I’m going with ‘arsehole’). You should still be concerned about the fact that he was so severely rounded on by the political and media classes for ‘making the ill-advised move of publishing his thoughts’, as the Independent put it. Yes, in this zanily diverse Britain of ours, it is still ‘ill-advised’ for certain people to express their views in public.

Mythical past, elusive future

A spectacular piece of living theatre, revealing our discomfort with our past and fear of the future

by Frank Furedi

Ceremonies are not only celebrations – they are also cultural declarations about where we come from, who we are, and where we are going. As well as being an exciting and powerful example of living theatre, Danny Boyle’s opening ceremony of the 2012 London Olympic Games was also a Spirit of the Age statement.

Many observers have argued over what the ceremony reveals about twenty-first-century Britain. But just as interesting is what the ceremony said about Britain’s relationship with its past. Boyle’s production was certainly dominated by the past. Reminding ourselves of history is, of course, no bad thing. But there is history and there is history. Often, history is used as a medium for projecting backwards our present-day concerns and rediscovering them in the past. So it was with the opening ceremony.

The Spanish daily El Pais took the view that the ceremony symbolised a nation that is more comfortable with its past than its future. It said Britain offered the world an image of ‘what it is: a country with more past than future’. Outwardly, El Pais seems to have a point; indeed, many foreign reviewers have treated the opening ceremony as a wonderful and technically superb history lesson.

However, what we saw at the opening ceremony was not just a history lesson, but also the portrayal of a nation that is not quite at ease with its past. As someone whose child has recently studied history and geography in secondary school, I was not surprised by the scene in the opening ceremony which depicted a destructive transition from the rural idyll of a harmonious pastoral England to the horrors of the Industrial Revolution. When, a few years ago, I asked a group of schoolboys what was accomplished by the Industrial Revolution, they all replied: ‘Polluted urban centres.’ What these children learned was that, yes, the steam engine was invented through the Industrial Revolution, but at the price of great environmental destruction.

The Tired, The Poor, and The Huddled Masses

A Beacon of Liberty

BY BRIAN PHILLIPS 

Since 1886, the Statue of Liberty has stood in New York Harbor as a beacon to individuals from around the world seeking the freedom to live their lives as they choose. On the pedestal of the statue is a plaque with the sonnet “The New Colossus”:

Not like the brazen giant of Greek fame, With conquering limbs astride from land to land; Here at our sea-washed, sunset gates shall stand A mighty woman with a torch, whose flame Is the imprisoned lightning, and her name Mother of Exiles. From her beacon-hand Glows world-wide welcome; her mild eyes command The air-bridged harbor that twin cities frame. “Keep, ancient lands, your storied pomp!” cries she With silent lips. “Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door!”

For the first 150 years of its history America actually lived by these words, welcoming the “wretched refuse” of other nations with open arms. With the exception of the Chinese Exclusion Act of 1882, American imposed virtually no restrictions on immigration. Until the 1920s, those who wanted to come to America were welcomed with open arms and open borders.

Two Wrongs and Rights

Chick-Fil-A, The Thought Police and Gay Civil Unions

BY BRIAN PHILLIPS 

In 1914, Henry Ford voluntarily raised the wages of his employees to the rate of five dollars per day—nearly doubling the prevailing wage. At the time, many thought that Ford was destined for financial ruin. But because he was free to act on his own judgment, Ford proved his critics wrong. His business flourished.

At one time, Ford had 60 percent of the market in automobiles. But he refused to innovate, declaring that customers could have a car in any color they wanted, as long as it was black. Chevrolet began offering consumers more color choices and substantially cut into Ford’s market share. Ford had to relent and began offering more color options. Even though Ford dominated the market, he could not prevent Chevrolet from acting on its judgment. Nor could he prevent consumers from acting on theirs.

The Founding Fathers and Democracy

Democracy means unlimited majority rule

By BRIAN PHILLIPS

Democracy means unlimited majority rule. The majority may do as it pleases simply because it is the majority. Under democracy the individual is subservient to the majority, that is, the collective. Democracy is a form of collectivism.

Collectivism holds that individuals exist only as a member of a group—whether a race, an economic class, or the State. Individuals per se do not possess rights, but only in their capacity as a member of a group. Under democracy an individual possesses rights only when he is a member of the majority. Even then those rights are limited and continually threatened, because if the individual finds himself in the minority on any issue, he is required to follow the dictates of the majority. He may be on the winning side on a vote regarding light rail, but be on the losing side on a vote regarding school bonds.

For the most part, the Founders were opposed to democracy. James Madison, for example, wrote “There is no maxim, in my opinion, which is more liable to be misapplied, and which, therefore, more needs elucidation, than the current one, that the interest of the majority is the political standard of right and wrong.” Thomas Jefferson stated that “a democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.” And perhaps my favorite is a quote often attributed to Benjamin Franklin: “Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!”

Aurora Beyond Us

No science can explain massacres like last week’s

by THEODORE DALRYMPLE

By a strange irony, alleged Aurora mass murderer James Holmes was a doctoral student of neuroscience—the discipline that will, according to its most ardent and enthusiastic advocates, finally explain Man to himself after millennia of mystery and self-questioning.

But what could count as an explanation of what James Holmes did? At what point would we be able to say, “Aha, now I understand why he dyed his hair like the Joker and went down to the local cinema and shot all those people?” When we have sifted through his biography, examined his relationships, listened to what he has to say, and put him through all the neuropsychological and neurological tests, will we really be much wiser?

"I, Pencil" Updated to 2012 Version "I, Smartphone"

The Magic of Free Market 

The "I, Smartphone" video above is a modernized 21st century version of the classic essay "I, Pencil," written in 1958 by Leonard Reed, founder of  the Foundation for Economic Education, and explained below by Milton Friedman in about 1980

The triumph of hope over experience

Reducing Real Output by Increasing Federal Spending

by Dwight R. Lee*

The belief that by spending more, the federal government can revive the economy by increasing aggregate demand is an example of the triumph of hope over experience. Many people excuse the recent failures of such stimulus spending with the claim that the spending simply wasn't large enough. This demand-side view is oblivious to the supply-side reality that demanding more does no good unless more has been, or will be, produced. The logic of this reality explains why trying to increase aggregate demand through increased federal spending is not the key to stimulating the economy. The problem is not that aggregate demand is unimportant—it is very important. The problem is that increased real aggregate demand is the result, not the cause, of an increasingly productive and prosperous economy.

The historical evidence clearly shows that very little government spending is necessary for growing prosperity. From the founding of the United States until the early 1930s, the federal government's budget averaged only around three percent of the nation's GDP, which was about half the spending of state and local governments. The federal budget was not balanced every year, but revenues and expenditures were closely balanced over the whole time period. Federal spending and budget deficits increased during wars, but the resulting debt was largely paid off with peacetime budget surpluses. For 28 straight years after the Civil War, for example, the federal budget was in surplus, with the Civil War debt greatly reduced, though not completely eliminated, by 1893.

During most of these 28 years, the economy was expanding, unemployment was low, and real wages were increasing and, by the early 1900s, America had become the world's richest nation. There were economic downturns beginning in 1873 and 1893, but the federal government did little to respond to them. The 1893 downturn caused a federal budget deficit, but the deficit was caused almost entirely by decreased tax revenues rather than increased federal spending. The recovery from these downturns occurred in response to market forces, with neither downturn lasting nearly as long as the Great Depression of the 1930s. This shows that while market economies experience occasional recessions, they can recover—and have recovered and continued growing—without the Keynesian prescription of increased government spending and budget deficits.

How Property Rights Solve Problems

Getting the government out of private cooperation and choice 

By David R. Henderson

Should restaurants allow smoking or not? Should schools teach evolution or intelligent design or both? Should insurance companies cover contraception? Should I be able to take off my shoes in your living room?

You might think that that last question doesn't belong with the first three. After all, the first three questions are momentous ones about "public policy." The last one is only about the rules you have for my behavior in your living room—a "private-policy" question. And your answer to that question will depend on how you want to use your property.

But think about what you just read: Your answer to whether I should be able to remove my shoes in your living room depends on how you want to use your property. What is implicit here, but obvious to all, is that the choice is yours. I have no say in the matter. That doesn't mean you won't take account of my thoughts and feelings. You will. Let's assume that you find it distasteful for me to take off my shoes, but that you like my company. Let's further assume that telling me that I can't get comfortable by taking off my shoes will mean that I won't want to visit you. Then you will trade off your distaste at having me shoeless with the pleasure you take from my company. If one outweighs the other, in your subjective estimation, then you'll choose accordingly.

Notice how property rights solve the problem. It's your living room and so you get to choose. How your living room gets used is not a public-policy problem.

And here's the kicker. If property rights are respected, none of the other three questions is a public-policy problem either. Consider each in turn.

Euro zone crisis heads for September crunch

To Print or Not to Print?

By Jan Strupczewski

Over the past couple of years, Europe has muddled through a long series of crunch moments in its debt crisis, but this September is shaping up as a "make-or-break" month as policymakers run desperately short of options to save the common currency.

Crisis or no crisis, many European policymakers will take their summer holidays in August. When they return, a number of crucial events, decisions and deadlines will be waiting.

"September will undoubtedly be the crunch time," one senior euro zone policymaker said.

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy- or what do if one or both were to topple.

"In nearly 20 years of dealing with EU issues, I've never known a state of affairs like we are in now," one euro zone diplomat said this week. "It really is a very, very difficult fix and it's far from certain that we'll be able to find the right way out of it."

Since the crisis erupted in January 2010, the euro zone has had to rescue relative minnows in Greece, Ireland and Portugal as they lost the ability to fund their budget deficits and debt obligations by borrowing commercially at affordable rates.

Now two much larger economies are in the firing line and policymakers must consider ever more radical solutions.

The Triumph of Politics

Nothing is more dangerous to your personal liberty than desperate politicians

By Detlev Schlichter

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term ‘Nixon closed the gold window’ that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?)

What Nixon did was cut the last remaining official link between the world’s leading reserve currency and gold and thus remove the last constraint on fiat money creation.

Was this a big deal? – It was very big deal. In fact, we are only now beginning to realize the full consequences of it. In fact, the present crisis is nothing but the endgame of this system, or non-system, of this, mankind’s latest and so far most ambitious, experiment with unrestricted fiat money. The first truly global paper standard.

Nixon knew that it was big. On TV that day he felt compelled to reassure the American public that this was only temporary and that the purchasing power of the dollar was secure. Forty-one years later we are still on the same system (or non-system), and the dollar has lost 80% of its purchasing power.

This wasn’t really a “system”, however. No one designed it. It was merely the result of political opportunism. But, the mainstream economists, who weren’t even involved in designing this system (or non-system) today tell us that this system is great and that it is to our advantage. We should be grateful for it.

The 80% drop in purchasing power quoted above isn’t the whole story. That is only the consumer price index. For the past thirty years, a lot of the newly created money was channeled predominantly not into the markets for consumer goods but into the stock market, the bond market, the real estate market, and again the bond market. This created illusions of wealth. It also created a lot of debt, overstretched banks, a gigantic financial industry, various bubbles, and yet more debt. It did so around the world. And whenever this house of cards looks like it could come crashing down on us – we print more money!

Simple. What could go wrong?