Voting for economic suicide

By Sarason D. Liebler | May 17, 2012

The French and the Greeks have spoken. They have voted for economic suicide and they will not be denied. Spain, Portugal, Ireland, Holland, Italy and more are soon to be heard from.

In the weekend after Mayday, which was marked by ugly and violent demonstrations in many cities around the world, France and Greece made it clear they believe that the color of money should be red. Not necessarily representing socialism or communism, rather that the state should go fatally in the red and bankrupt itself by electing a government that offers a lifestyle the voters want, but are unable and unwilling to pay for.

Indeed, in the mid 1800’s the 26 year old Frenchman Alexis de Tocqueville, in his still valuable study of “Democracy in America,” pointed out that he had worries for the future of American style democracy once the elected officials found they could bribe the electorate with the electorates own money. We have reached that juncture in most of the world’s democracies.

The value of money was originally based upon its equivalent of a useful commodity, like food. An ancient shekel was worth a certain amount of barley. The value of money then came to be pegged against gold and silver. That changed in 1971 when then President Richard Nixon took this country off the gold standard and virtually all countries fell into line. All money became what is called “fiat” money. In other words, by government fiat, they said that money that we print or coin is what we say it is and what we say it is worth. It is the “legal tender” for settling all accounts. But, the intrinsic physical value of the money is nil.

A nation’s currency was then deemed to be either weak or strong based upon the overall wealth of the country, its growth rate, how much debt it carried versus its production output, its stability, its system of laws, its military power, etc. The United States was recognized as a coming strong power with strong currency, starting before the Revolutionary War and became the clear leader after World War I. Following World War II there was really no other nation in second place.

But nothing is forever. While the dollar remains the strong currency of the world because of the intrinsic imputed value of our economy and society we are no longer the inevitable source of stability.

We have a critical election coming this November and in a sense we will be given the same critical choices that Europe is having difficulty embracing. Do we plan our future based upon the assets we can produce and support or do we over extend ourselves beyond our means? Will we reignite the engine of growth or slide backwards as we dream of a future that rests on a fictional foundation of “fiat” strength?

Our decision is going to be tougher to achieve if only because neither party nor their likely candidates have been willing or even capable of stating the hard realities much less being able to convincingly run on their past records.

Each of the likely candidates is burdened by large groups of core supporters called their respective bases. Tea Party fanatics see the constitution as a rigid virtually dead document rather than a living organism that can and should be a foundational guide to our future. The Progressives go the other way, they see a constitution that can be molded and grossly extended into a form that does not come close to supporting the balanced guide that it really has to be.

The United States, indeed the whole world, does not resemble what it was in the 1770’s. Unlimited resources for growing populations are no longer the case. Competition for a share of what is left is of a different kind and more intense. Today giant economic entities are born in a flash while old stable companies collapse just as fast. Understanding the exploding power and imputed value of Facebook, while witnessing the disintegration of Kodak, is difficult.

So where are we? In my youth I was confident, now I am uneasy. In truth there is no clear answer, but I am still comfortable with reality. Reality means we have to be able to afford our choices. Reality means we do not live in yesterday and there is no clear road map to the future. When a nation or an entire civilization debases its sense of values why accept anything it claims by fiat?

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