LETTER TO MY MOTHER-IN-LAW (PART TWO)

I sure hope that my mother-in-law has lots of time on her hands

Cheap Money, Manipulation and the End of the Free Market

...every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

Adam Smith
“An Inquiry into the Nature and Cause of the Wealth of Nations”

The individual will be most productive when allowed to work in a manner that promotes his own interest. This is about as common sense of an idea as one could find; unless you are on academic or a politician.

One of the ideas that this country was founded upon was that we have the absolute, God given right to our own property. Our property is ours because of our labor, or the labor of another, who through an act of free will passed it on to us. As a matter of fact, property becomes property and is taken out of the public domain through an act of labor. An example of this would be mining rights. After it was staked a miner was required to work his claim. It was through this labor that the claim to possession of the mine became valid in the eyes of the law.

Our labor belongs solely to us as individuals and it has value. No one has a claim to our labor without just compensation. This is one of the reasons that slavery is wrong.

We can decide to trade our labor for something that we believe is of equal worth. It could be gold, silver, a chicken or cow, maybe a loaf of bread. It doesn’t matter. As long as we agree that the item is equal in value to the labor we are trading for it. This item, through our labor, now belongs to us. No one has a right to it or any part of it without just compensation. This item is in effect now representing our labor.

The unjust and immoral usurpation of our labor, without just compensation through the income tax is at the very core of the financial problems faced by our country.

Until 1913 the majority of taxes collected by the Federal Government came in the form of excise or sales taxes. Sales and excise taxes are more burdensome on lower level wage earners than they are on the wealthy. This was one of the reasons that an income tax was established by the ratification of the 16th Amendment to the Constitution. The other reason, I believe, was control. It is difficult for the government to influence the market through a sales tax. It can be done but not as readily as with an income tax. The income tax can be used to force people to change their spending and savings habits through incentives codified in the Federal Tax Code, effectively handcuffing Adam Smith’s “invisible hand”.

The citizens of America were no longer allowed to work in a system that allowed the promotion of their individual interest alone. Their interest was now co-mingled with the interest of the state. The states interest in the beginning seemed small, only a few percent. But the camel’s nose had found its way into the tent.

Interestingly enough, 1913 also saw the creation of the Federal Reserve, which of course is not Federal and holds nothing in reserve. It is privately owned by the Rothschild family and other global banking interests. There are all kinds of accusations that revolve around this ownership, none of which I intend to discuss here. I am mainly concerned with the ability of the Fed to control and manipulate the free market.


The ability of the Government and the Federal Reserve to control our economy has been exhibited repeatedly over the course of the last century. From the debacle of the depression to the vast military industrial complex that President Eisenhower warned us of. From wage and price controls under Nixon to the current sad state of our economy today, these “experts” have, through sheer hubris and an incredible arrogance, stolen from us our freedom. We no longer live in a free market but instead have found ourselves residents of a fascist oligarchy, a place where Mussolini would have felt right at home.

Government, bankers, unions, environmentalists, a select group of large corporations and the media have combined to form a system of government that has no relationship or allegiance to our Constitution. The United States as designed by the Founding Fathers and fought and died for by generations of our predecessors no longer exists. The Government and the Federal Reserve, through tax and monetary policy, control nearly every aspect of our lives.

The Federal Reserve determines the availability and cost of credit, the value of our dollar and its availability. The Government, through tax policy, determines how much of our labor is ours, what we can do with it, how we use it, at least the part we get to keep; the Government then claims for itself something that it has no right to, our labor, a piece of our soul. It takes this part of us and does with it what it will; something we used to call slavery.

These experts and bureaucrats have so badly manipulated the economy over such a long period of time that it can no longer stand on its own two feet, like a junkie that can’t get through the day without a needle in the arm. In the case of the economy the drug of choice is manipulation; of business, labor and credit. Today we will favor this sector of the economy, tomorrow that. We’ll hold down the cost of credit so that everyone can afford a house. It looks like too many bought houses that they wouldn’t have been able to afford if the market had been allowed to set the cost of money, so now we have to bail out the banks.

The cost of money was kept artificially low over a long period of time to fuel the 70% of our GDP that is made up of consumer spending. It sure made the books look good to our creditors but now everyone is spent out and we’ve forgotten how to actually produce durable goods. Demand has been pulled forward to such an extent that it hardly exists in its natural form any longer.

The best example of this today is the “Cash for Clunkers” program. This was instituted to pay back the unions for their support, but what has it really done? It has 1) redistributed wealth (labor) from those that own it to a favored group, the UAW, 2) it has created yet another government bureaucracy which will take more of our wealth, 3) it has distorted the market place, in so far as someone that may have been thinking about buying a car but was going to put it off so that they could hire me to install a new kitchen will now instead spend their money on the car, hurting me and benefitting the favored group instead and 4) artificially pulling forward demand for cars, causing an artificial slump in the market at a later date. This is also just putting off until later a correction in the labor market that would cut the number of auto workers to a level more in line with actual demand.

The bottom line is this; no matter how smart these expert and bureaucrats think they are they cannot manage this economy; except, at the end of a gun barrel.

That is the choice that we are going to face. Do we accept our slavery and bow to our masters, or do we rise up, take control and reduce the size and scope of this economy to a level more reflective of the guidance of the invisible hand. We can’t have both; it has to be one or the other. We know from history that the free market in America has given us the highest standard of living the world has ever seen; we also know that no other system, especially those that are guided by the state, have ever succeeded.

Whatever happens, it will change everything we know.