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Collectivism's Last Stand
by L. Neil Smith
lneil@netzero.com

Distribute and Attribute to The Libertarian Enterprise

I am not an economist, nor—unlike a half-vast majority of the hairsprayheaded newsies who have somehow lately, miraculously, become overnight experts on all matters economic—do I pretend to be one on TV.

What I am is an individual who has worked hard for forty years in a difficult, exacting, and not terribly rewarding profession, which has nevertheless offered me the opportunity—an expensive one, but worth it—of telling the truth, exactly as I see it, without having to worry about what interests, corporate or otherwise, I might offend. And it seems to me that this is the moment—the very moment—when whatever I have sacrificed for that opportunity will now begin to pay off.

About halfway through those forty years, I made the acquaintance of Robert LeFevre, that great libertarian storyteller and teacher, who showed me (although I had already had suspicions in that direction) that what my generation had been indoctrinated to call the "Business Cyle" of boom and bust throughout American history was actually a government cycle of interference with the economy, followed by disaster, followed—usually—by government's backing off until prosperity restored itself, whereupon the idiotic cycle started over again.

In the 19th century, economic turndowns were called "panics", and from 1776 until 1929, two facts about them were incontrovertible. First, each and every one of them can easily be shown to have been the direct result of some particular stupidity on the part of the federal government. And second, as soon as government withdrew from the part of the economy it had damaged, the economy began to heal itself. Until 1929, no panic had ever lasted longer than about eighteen months. When the big Crash came in '29, and the Franklin Roosevelt regime decided to interfere even more, the resulting Great Depression lasted twelve years.

It didn't really end, even then. It's just that the Japanese attack on Pearl Harbor—which Roosevelt labored hard for years to achieve—tended to distract everybody and gave him all the excuse he needed to flood the economy with counterfeit paper money and baseless credit.

Sound familiar?

The Depression didn't really end until millions of G.I.s, many of them returning with ideas for new enterprises or a hunger for new toys—Bill Ruger, with his partner Alex Sturm, comes to mind, as does the brainchild of Albert Dremel—rebuilt the American Productive Class after it had been beaten half to death and hijacked by the Roosevelt government.

But wait—there's a third fact about panics and depressions you need to know, one only libertarians (not Republicans) will tell you about: every instance of catastrophic government interference with the economy was carried out by bought-and-paid-for politicians, at the behest of some corrupt corporate interest they felt they needed to please.

These corporate interests didn't aspire to compete for your dollars by producing the best goods and services they could at the lowest possible prices (a quaint little system called "capitalism"), but used the government as a bludgeon in the marketplace to preclude or destroy competition and force you to buy their products whether you want to or not. This system is called "mercantilism" and it's exactly what Adam Smith wrote his Wealth of Nations to complain about in 1776.

A panic or depression starts years before most people notice, when government creates money out of thin air, either by printing it—one of the 19th century's worst turndowns was brought on by phony dollars whipped up to pay for the War Between the States—or by generating credit.

Today's mess began when the Carter Administration forced lending institutions to offer people loans for homes they couldn't actually afford. (This seems to be an obsession with Jimmy the Peanut, whose "habitats for humanity" are currently in the process of derezzing, but this isn't an article on psychopathology, so we'll leave the subject for another day.) The Clinton gang took Carter's program and expanded it.

To make things worse—but to win over the lending institutions—government gives them the magical power of "fractional reserve banking". That is, they're allowed—encouraged—to commit fraud, by lending out many times the money they actually have. Non-existent currency is transferred to would-be homeowners, who bestow it upon whoever they're buying their house from, who transfers it to another,—or even the same—bank. It's all on paper; nothing real ever changes hands, and it's all based on a fervent hope that not everyone on the job will be like the cranky old framing carpenter who takes his paycheck to the bank at the end of every week and swaps it out for cash.

Of course if they do, the government will just print more. Paper currency is worth even less than imaginary capital: I think it was Ludwig von Mises who said only government can take two valuable commodities, paper and ink, and combine them to make something utterly worthless.

While it lasts, everybody seems to benefit. Idiots go on electing Jimmy Carter clones—"He gave me my home!"—bankers get obscenely wealthy and powerful. If any of them realize that some of them will be made the scapegoats when the party's over, they don't seem to show it.

Why do government, its pet bankers, and their academic sock-puppets hate the idea of monetary standards based on gold, silver, platinum, or even bottlecaps and popsicle sticks? Because counting wealth in terms of tangible assets, anything with intrinsic value, would reduce their financial and political power by at least ten- or twelvefold.

Of course sooner or later, the bubble will eventually burst, an entire economy based on no real assets is bound to collapse. Enough homeowners fail to make their mortgage payments so that the bank, even given its magical lending powers, can't afford to pay the institutions it owes money to. Housing contractors don't get paid and they go out of business and lay off their workers, including our friend the cranky old framing carpenter, who not only can't make their own mortgage payments, but can't go out and buy plasma TVs and Twinkies. Circuit City and Hostess go out of business, putting even more people out of work.

The house of cards flattens.

The Great Depression and the Crash of '29 were caused directly by the Federal Reserve Act of 1913, which allowed the private (mostly foreign) banking system to control a phenomenon—the price of borrowed money, which we call "interest"—that formerly had been controlled by the "Invisible Hand" of the free market system. Cheap money is always popular, especially politically, and people borrowed and spent on things their common sense and better nature would have kept them from if the interest rate, kept artificially low, had been higher.

In earlier ages, the panic ends when someone thinks of something that can use old, overpriced assets, now being sold at a discount or given away, to make something that everybody wants and can buy for a nickel. Even during the badly-managed Great Depression, a guy took a homemade game invented to spread socialist propaganda and became a millionaire by turning it into the most successful boardgame in history. Nobody ever calculates how many formerly out-of-work people the manufacture and sale of Monopoly™ gave employment—and hope—to.

Multiply that a few thousand times and you'll get an idea how they begin to dig their way out of a hole dug for them by politicians and phony financiers—provided that the government stays out of their way.

When George Washington was an otherwise healthy and vigorous 67 years of age (and no, I am not changing the subject), the good general went horseback riding in a freezing rain and contracted pneumonia. Unfortunate enough to be rich, the poor fellow could afford a pack of quacks who drained him of his blood with leeches and fed him mercurous chlorate, certainly the opposite, in many respects, of what the man needed.

He died, of course.

That's more or less the same thing FDR did to the economy in the 30s—the opposite of what it needed—and Bobo the God-King and his acolytes plan doing now. Their dimly-conceived notion is to keep the bubble inflating, pumping it with "bailouts", more funny money, until Russia, Syria, or Pakistan can be persuaded to attack Pearl Harbor, this time at the risk of the entire world going up in radioactive flames.

Based on past experience, that's our future—violent and ugly—unless we do something to prevent it. If we can, it could be the end of government mercantilism—voracious, cannibalistic—as we know it.

Instead of a disaster, this could be their last stand.

Politicians must be taught, in no uncertain terms, that the only real way to economically "stimulate" the Productive Class is to stop stealing their fucking money! If the government announced a total tax amnesty, as well as a complete, permanent end to individual and corporate taxes—repealing all unconstitutional economic regulations would help, too—this depression would be over by the end of the week.

Businesses should shut up about "unfair competition" from the Japanese, the Chinese, and the Upper and Lower Slobbovians, and simply compete.

The trouble is, we'd soon see for whose sake we're suffering this mess, as life went on perfectly salubriously without our government keepers.

The way out—the only way out—is to tell them now what you want. The way out—the only way out—is to tell them that, unless they do what's really needed—which is for them to go away—you will never vote again for another incumbent, never vote again for another Republican or Democrat. The way out is to make them believe it.

Do it now, while the mail is still being delivered.

Four-time Prometheus Award-winner L. Neil Smith has been called one of the world's foremost authorities on the ethics of self-defense. He is the author of 25 books, including The American Zone, Forge of the Elders, Pallas, The Probability Broach, Hope (with Aaron Zelman), and his collected articles and speeches, Lever Action, all of which may be purchased through his website "The Webley Page" at lneilsmith.org.

Ceres, an exciting sequel to Neil's 1993 Ngu family novel Pallas was recently completed and is presently looking for a literary home.

Neil is presently working on Ares, the middle volume of the epic Ngu Family Cycle, and on Roswell, Texas, with Rex F. "Baloo" May.

The stunning 185-page full-color graphic-novelized version of The Probability Broach, which features the art of Scott Bieser and was published by BigHead Press www.bigheadpress.com has recently won a Special Prometheus Award. It may be had through the publisher, or at www.Amazon.com.

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