A Condensed Version of: Ex America by Garet Garrett.
Compiled and Edited by Dr. Jimmy T. (Gunny) LaBaume
Ex America, Part VII. 1951
New Deal inflation was certain to be popular because it enriched many while impoverishing only a few. Furthermore, if it could be arranged so that the enriched could assist the few, then it could possibly go on forever. This was the logic of inflation. But it is seriously flawed.
The theory of perpetual inflation and perpetual boom goes something like this. If creditors are hurt by rising prices, it would be better to aid them from the public treasury than to deflate wages and prices because that would hurt too many others. Thus, immunity from the ill effects of inflation could be provided for everybody by more inflation.
But the logic of this leads to an economy that is like a rocket. It must go ever higher and faster because deceleration would be fatal—it will crash. Deficit spending is the rocket fuel. If it cannot go to infinity and it cannot stop or decelerate without crashing, what will happen?
If you say we need to cut government back to its limited functions, they say that we can’t do that because it is not politically feasible. But, they add, it must stop growing. Then you ask them what new function of government they would stop. The answers you get will be “vague, desultory and irrelevant” because each new function has its own powerful clients and beneficiaries.
Many say the dragon must be overcome but they do not want to slay it. They only want to chain it down. If you ask them how much depression and unemployment they are willing to face, they answer that it is not deflation they are talking about. They are saying that it is “inflation” that must stop.
So at what level do we do that? Do we stabilize inflation at the top of the largest inflationary boom that has ever occurred? They will answer that it is better to gradually absorb the consequences of past inflation than to have deflation.
Then you point out that inflation has a momentum–it feeds upon itself. To stop it suddenly might cause a depression and unemployment. They will reply that is no longer true because it is possible to stop inflation without having deflation, falling prices, and unemployment. Why or how? Government will intervene to keep the economy in a “state of equilibrium.” That is the fatal answer—government intervention; government responsibility.
The new responsibilities of government are:
- To keep an ever-expanding economy in a state of equilibrium.
- To maintain full employment
- To insure the people have all the buying power they need.
- To maintain the national income at the optimum level and make sure it is “equitably” distributed.
- To provide for the poor, the old, and the unemployed.
- To prevent deflation—e.g. to insure that the price of the boom never has to be paid.
So now, what will the government do at the first sign of trouble? How will it discharge these new responsibilities? It will take complete control of the economy—just like the New Deal tried to do. What the New Deal tried was strange and sudden. What the government will do in the next crisis is pre-determined.
Garrett says it too well to paraphrase: “And when this end has come to pass not only will we be through with the fiction of free prices, free markets, free contracts, and free enterprise; we shall probably be through also with inflation. A government that has arrived at the ultimate goal of total power may dispense with inflation. The power to command obedience enables it to achieve directly what formerly it could only achieve indirectly by inflation.”
There is a delusion that this can not happen because of what America used to be. But, “by a long lure of planned grass a society of bison may be decoyed to captivity in the Valley of Security.” The question is, will the herders be good to us? The answer: “Nature was sometimes cruel.”
To be continued
The Essence of Liberty Volume I: Liberty and History chronicles the rise and fall of the noble experiment with constitutionally limited government. It features the ideas and opinions of some of the world’s foremost contemporary constitutional scholars. This is history that you were not taught at the mandatory government propaganda camps otherwise known as “public schools.” You will gain a clear understanding of how America’s decline and decay is really nothing new and how it began almost immediately with the constitution. Available in both paperback and Kindle versions.
You might be interested in the other two volumes of this three volume set: The Essence of Liberty Volume II: The Economics of Liberty and The Essence of Liberty Volume III: Liberty: A Universal Political Ethic.