While stationed in Korea as an Army officer, I remember being paid in Military Payment Certificates (MPCs), not U.S. dollars.
MPCs looked like Monopoly game money that we all used to buy Boardwalk or Park Place and became extortionate landlords.
Who says there is no free lunch?
Nor did the government have to redeem the play money, as that task actually fell to the vendors who accepted MPCs as payment for services. Pretty slick.
The government would regularly compound its gain by abruptly announcing that anyone in possession of green MPC’s had 48 hours to exchange greens for, say, pink ones.
They ostensibly did this because the MPCs were easily counterfeited, but there was also the happy windfall of the unredeemed.
In short, the government hired an entire Army and paid it with worthless paper. We all accepted the MPCs on faith, just as we now accept dollars here at home. Sadly, they have the same value.
How different was the MPC scam from what Fed Chair Janet Yellen is doing when she affirmed on July 2 that her agency will do what is illegal everywhere else: pump and dump.
Every time she issues yet another surplus dollar, she is chiseling down the value of the dollar already in your wallet.
Dollars are like any other commodity. The more there are in circulation, the lower their value.
Want to know how bad it is?
Google up the Dollar Inflation Calculator.
I compared a dollar from the year of my birth (last century) to a 2014 bill.
It would take $14.60 to replace my birth dollar, an inflation rate of 1,359.5 percent.
With that inflation rate, it is time to abandon all coins, as they are not worth the cost of printing or accounting for.
Without the slightest backing for it, the Fed will continue to undo years of work by her predecessors who sought to keep the currency stable so that holders were not robbed of their value by government chicanery.
Bloviating Yellen said: “I do not presently see a need for monetary policy to deviate from the primary focus of achieving price stability and maximum employment in order to address financial stability concerns.”
“Price stability?” The next day, the stock market broke 17,000. That is not price stability; that is an asset bubble of stunning magnitude, which, if allowed to continue, will rival the dot.com bust.
In addition to the equities market surging upward, the housing stock is beginning to “recover.”
“Recover” is a code word for inflate, an inflation all of us homeowners unrepentantly welcome because it makes us feel better, just as does the rising value of equities.
In reality, housing inflation is socially dysfunctional: depriving millions of young people of the stability of home ownership through federal tax policy (subsidy) with each uptick of the price index.
What is the possible good of subsidizing inflation in equities or the housing stock? Oops, I forgot. It’s good politics.
“Maximum employment?” For the first time ever, 90 million healthy, working-age Americans are unemployed and worse, not looking for work.
The unemployment number would be higher except that the government opened the spigots to generous disability findings in the latest raid on the Social Security Trust Fund.
Observers could not find a gray hair in a Social Security Office as it was so crowded with young people seeking the new dole, thereby permanently removing them from the employment pool as they would lose their disability if they took a job.
Even the portents for employment are falling. There are fewer small businesses being formed than going out of business.
Worse, the employment rate of recent startups averages nearly three employees fewer than before and they are predominantly low-skill, low-pay positions.
The usual hope of technical innovations to create whole new fields of employment is no longer promising, as the patent rate has fallen also.
In other words, the fake economy of stock markets and housing are rising, thanks to Yellen, while the real economy is sinking into a quagmire unremarked on by Yellen or the feckless, even dysfunctional, President Barack Obama.
The reality is Yellen is protecting the debt-buying power of the federal government.
Our national debt is larger than the rest of the world put together, a stupendous blunder from which there is no safe haven.
All China, Russia and the Islamists have to do is wait for our economic collapse.
They have been around for 2,000 years. They are patient while we wallow in debt.
If interest rates rise, the government could not afford to service its debt and worse incur more debt to finance the Obamacare fiasco.
This comes at the expense of savers, retirees and the lost earnings of retirement funds making it difficult to dig out of the abyss that massive, unfunded benefit increases recently caused.
We can’t blame all this on founding genius Alexander Hamilton. His financing notion included the federal government accruing a liability for every dollar it issued.
That is why the revolutionary leaders were so remarkable. Dozens of them pledged their personal assets and suffered ruination to help finance the American Revolution.
Can you envision any member of Congress doing something similar?
When Abe Lincoln faced this same problem, his treasurer Salmon Chase invented the American poison pill, the “fiat dollar” by saying: “Mr. President, just print them.”
Economics was not a recognized discipline until Europe got to wondering why Germany started a new war to escape the petrifying terms of the Versailles Treaty.
Unfortunately for the world, the first into the knowledge breach was the Karl Marx and his factually baseless “Das Kapital” that misinformed the world about economics.
The Keynesians cannot really be blamed because their notion was that the government should deficit spend only during recessions. During the good years, the government would pay off its debts to regain solvency.
Sadly, the Keynesians were clueless about people. Once the spending starts, it cannot be stopped, as people inevitably come to rely on the subsidy.
Today, we have legions that are dependent on the government to send them its latest version of MPCs that are worth about as much.
So who is to blame for the financial abyss?
We are. We elected all those nitwits in Congress and our affirmative action president.
What will we tell our grandkids about the mess we left them?