The Link Between Degenerating Currency and Degenerating Culture

0:00You don't know me, so you don't know if that was worthwhile or not. As opposed to my esteemed colleagues here, this is not a scholarly paper in that sense. I'm much more of a street economist, as you will see. I'm a self-trained Austrian because I didn't learn any of this in graduate school, and I don't think anybody does, although these days it's becoming a little more popular. I was warned once by Thomas DiLorenzo to not let it be known that I was an Austrian I'm an Austrian at the University of Colorado until after I had achieved tenure, but I just teach a drive-by course in free market economics to the MBA students, so that will never happen. I have a fairly large family, I'm very vested in the future, many children, and I've noticed that the difference between when I raised my first sets of children, who are now in their thirties, and my youngest who are now teenagers, the culture has become so toxic

0:53This is increasingly difficult to raise children in a moral sense in today's society and it made me think what is going on what's going on policy-wise what's going on culturally what are all the indicators showing us and where does that come from so I kind of started thinking to myself when I started researching and analyzing and I came up with this idea and it's more of a hypothesis here I believe I've got some proof of it but I'm welcome to welcome your feedback in particular my email address is on the bottom of this front This is not original, is it? We start with an axiom. A self-evident truth that Thomas Jefferson would say. Something like, man acts. People engage in conscious human action.

1:53Human action involves moral choices. Man can act morally, and by definition of morally, I mean voluntarily, or immorally, and by definition of immorally, I mean coercively. Now in a natural state of liberty, government is by definition limited to securing man's natural rights to life, liberty and property. That is the central role or function of government. And as I read more and more of the anarcho-capitalist literature, the more I'm wondering if even that is true. Well, the fact is that free societies choose moral voluntary behavior. It's the natural choice of a free society, and in fact Tocqueville mentioned that you couldn't have a free society without the moral base.

2:42And this morality is degenerating around us, and I'm going to eventually draw the linkage between that degenerating culture and morality and the degenerating currency with which we use to trade our economic goods and services. The immoral course of behavior in this natural state of liberty is by and large shunned. It does occur occasionally, but the community frowns upon it. People are not rewarded for it, generally, and bad things end up happening to bad people, usually. I think of my wife's family. They're pioneers that came across the Northern Plains and settled and built cities out of the wilderness. Minneapolis, Sioux Falls, Fargo. People of Norwegian background. Very poor, very illiterate farm people. Tremendous, deep, rich culture morality. They would no sooner lie or cheat from each other than they would do anything.

3:31I mean, it's inconceivable to them, today's culture, where even lies are part of the jokes that are passed around on our modern media. Advertising, you see them in advertising, look at your advertisements these days for products, goods and services. It's become the norm to make a joke out of lying to somebody about some product. Something is happening here. Well, here's what Thomas Jefferson had to say. The principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale. It is the ultimate taxation without representation, is it not? Spending your grandchildren's money before they're even born. Spending the wealth that hasn't even been produced yet.

4:16How could this happen? Because from America's founding until World War I, Total government in the U.S. economy, and this is the best we can do with what little data we have going back, commandeered perhaps 5 to 10 percent of the economy. Total government, federal, state and local combined, 5 to 10 percent. With that, we defeated the greatest military power in the history of the world, established the nation, grew coast to coast and border to border, created the freest, most prosperous society in the history of man, on our own. What that means, if it was 5 to 10% of the economy was the coercive sector, 90 to 95% of human economic action was voluntary. It was the moral sector. There was no net accumulation of government debt. Deficits in one time period were offset by surpluses in a later time period. It was a matter of fundamental morality.

5:07But then, the moral basis of American society, and I'm proffering this, started to change about in 1913, a very interesting year, when two things occurred simultaneously. The 16th Amendment, the U.S. Constitution, was the beginning of the end of formal property rights, the idea that you had a right to the fruit of your labor. As is fundamental a property right as any other you can imagine. That was over, as of 1913, when it was decided the coercive sector could come and take the Until then, every Supreme Court decision had argued that you could not have a national federal income tax. It was against the concept of property rights. So something broke there. Then we had the simultaneous founding of the Federal Reserve System, which was the beginning to the end of another right, the right to a hard currency. Well, how can that be a right?

5:58Well, if we are to engage in voluntary trade and contract and engage in economic activity and action, We must have some sound unit of account, a hard currency. And here's what Ludwig von Mises, one of my favorite phrases, Sound money was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. You see, it was a constraint. A hard currency is a constraint on that coercive sector of the economy. Ideologically, it belongs in the same class with political constitutions and Bill of Rights. Right to a Hard Currency Which brings me from the axiom to the postulate to my theorem. So you see how I'm trying to be Aristotle here. And here it is.

6:44A degenerating currency contributes to a degenerating society. Now I'm not saying that a society will degenerate if and only if you have a degenerating currency. I'm just proffering that it contributes to it. Certainly we've had degenerate societies in the past with hard currency. We've had moral societies without it. How? With a fractional reserve fiat currency, government no longer needed to tax or borrow in order to spend. This was a founding disconnect from the role of government in securing rights to life, liberty and property. Now, it could just print and spend. But it didn't do too much of it at first, and it just kept ramping up. Keep in mind that the true tax is the percentage of resources that is commandeered by the government.

7:29Government. That's the tax rate. It's simply measured by calculating government spending as a percent of total spending. It does not matter. It does not matter whether you say the tax rate is 10% or 20% and I collect it here and there. You just take the total spending. That's the resources commandeered out of the private sector as a percent of the total resource base. So you can say, oh, you know, we only have a 20% tax rate here. We'll take a look This commandeering of resources can now be accomplished through the printing press. Even Keynes acknowledged this, that inflation is the most stealthy of all taxes, that not one man in a thousand even recognizes its occurrence.

8:15So within one generation of this 1913 event, we have the Great Depression, where the welfare A Cultural-Political-Economic Death Spiral Begins Society then demands more free lunches, leading to more fiat currency. Over generations and generations and generations, the moral basis, the very foundational principles of voluntary trade are eroded.

9:03The state crowds out the moral behavior of the individual. The state becomes both the parent and the spouse. Eventually, young women and men begin to have children without the means to support them. Does anybody know the out-of-wedlock birth rate as of 1962? Somebody would care to guess it here in the audience. It was the 6%. And that was true amongst all ethnic groups, black as well as white, Hispanic in America. 5 to 6% is now up to around 35 or 40 and some subcultures 70 or 80%. Out of wedlock birth sky rock, the family degenerates. Behaviors are disconnected from consequences. The social safety net grows along with the government printing presses. People are empowered to internalize benefits but externalize the costs of their behavior.

9:51Moral hazard becomes the norm for society. How many people would engage in this cultural behavior if they did not believe that somebody else was going to pay for the consequences of their behavior? This used to be a self-regulating culture. So, going back to the idea of the state, crowds out the moral behavior of the individual. A nation birthed in liberty slowly transforms into a fascist state. And by a fascist state, I mean a classic definition of fascism, the complete conjoining of business and government. Sound familiar? Government choosing, picking winners and losers. Some investment banks are more worthy than others. Some manufacturing companies are more worthy than others. Business is not immune. Take a look at the current financial meltdown and bailout. Fiat currency allows profits to be privatized while losses are socialized. It allows the federal government to start controlling the economy like that.

10:45Rothbard recognized this certainly in the Great Depression, America's Great Depression. He has a section in Chapter 10 called The Spread of Collectivist Ideas in the Business World. I teach in the MBA program at the University of Colorado. You would think, at Colorado Springs, one of the most pro-free market libertarian capitalist cities in the nation, of the most pro-free market capitalist nation in the world perhaps at one time, You would think this would be normal, but I have to be very quiet in that business school, okay? Murray pointed out that, sorry Mr. Rothbard, Dr. Rothbard, the Swope Plan to compulsively cartelize American business, brought to us by General Electric in the 1930s, was endorsed by the U.S. Chamber of Commerce.

11:37In Colorado Springs we call them the U.S. Chamber of Communists. More and more businessmen become political entrepreneurs rather than market entrepreneurs. And this is a reference to Thomas D. Lorenzo's work in How Capitalism Saved America. Liberty is lost. Since political liberty cannot be disconnected from economic liberty, even my least favorite founder Alexander Hamilton understood this, power over a man's substance is power over his will. Hayek simply restated that to be controlled in our economic pursuits means to be controlled in everything, because man acts, man faces trade-offs, opportunity costs, economics is our lives, it's what we do, the scarcest of all resources is not land, labor, and capital, it is our time on earth, and what we do with that time, and everything we do is something we can't do, so we must economize on that time, and Hayek pointed out the ultimate sanction of a planned economy is the hangman, Wyatt eventually, no matter how much of a big grin and Happy Filing Smith's face that comes to us with, it ends up with the guns pointed at our heads.

12:45Now even atheists can be prophets. Here's today's headlines from 1957, Ayn Rand Atlas Shrugged. I'm going to read it because this is powerful. When you see that trading is done not by consent but by compulsion. When you see that in order to produce you need to obtain permission from men who produce nothing. When you see that money is flowing to those who deal not in goods but in favors. When you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you. When you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed. There's my theorem. A degenerating culture contributes to a degenerating society. I believe I've proved my point.

13:32I have some final thoughts here. Norman Thomas, six-time U.S. presidential candidate for the Socialist Party of America, quote, the American people will never knowingly adopt socialism, but under the name of quote liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without knowing how it happened. Now he and Gus Hall, Gus Hall was to the left of him, of the U.S. Communist Party, they both quit American politics, Agreeing that the Republican and Democrat parties by 1970 had adopted every plank of the Socialist party platform and they no longer had an alternative platform on which to run. Their mission was accomplished. And now let's go back to Frederic Nietzsche because he says something that's very interesting.

14:19The state is the coldest of all cold monsters. Coldly it lies too. And this lie creeps from its mouth. I, the state, am the people. Everything about it is false. It bites with stolen teeth.