Dr. Michael A. Berry
So why are we where we are?
Well it’s really very simple. Over the years since the tremendous pain of the Great Depression this country has become an entitlement country. It all began with FDR’s “safety net” in the 1930s. This sense of American entitlement is entirely inappropriate in the global context. But it is the reason why we borrow and why we have the world’s reserve currency which, according to reserve currency curse advocate Lew Lehrman, is the curse that has brought about our current debt problems. Mises followers called it the “Curse of Paper Money.”
Today there are 185 Federal entitlement programs in the US. These consume 50% of the Federal Government’s budget. They total $1.97 trillion (and they are growing) out of a total Federal Budget of $3.7 trillion (and growing).
It turns out of course that fiat, paper and false philanthropy monies are false guarantees. You cannot fight wars on the gold standard. Both the US and England are proof of this. Fact is post WW II we have never really reduced our debt but kept the debt to GDP ratio in check through drastic productivity gains. These privileges were defaulted to us by the state of the rest of the recovering world following WW II.
Nobody is automatically “entitled” by citizenship, except perhaps those who have served, given of themselves and earned their entitlement status. But entitlements must be sensible, sustainable and further not given as political favors. That’s where our leaders have gone astray.
I spoke on this topic for 3 ½ hours at the Federal Reserve in Arlington, Virginia (see my presentation on the web site). On the elevator with Kate following my lecture one of the participants complimented me on my presentation. Turns out this fellow was a senior bank examiner from the FDIC.
He said, and I quote,
“I really liked your presentation but you were much too optimistic.”
I was puzzled as any of you who have heard my increasing concern about our entitlement culture over the past decade of publishing Morning Notes will understand.
“Well I thought I was quite concerned and pessimistic.”
“No I am a bank examiner and I am much more pessimistic than you.”
We carried on the conversation for a while but the impact on me was instantaneous. It was like listening to a shoe shine boy proffer silver investment tips or the taxi driver talking about the great Canadian migration to Saskatoon. In an instant the realization came to me. Everybody knows that the King (Treasury) has no clothes (borrowing ability) and that the banking system is still mired in the muck (balance sheets leveraged). But it struck me that perhaps I have been far too easy on the Fed participants and perhaps my readers even though I have consistently posited these sustainability concerns.
Has our money gone bad under the assault of relentless fiat money creation and entitlement hubris? Is that the real problem? Has the reserve currency status of the dollar bequeathed a death knell sentence on the paper dollar and therefore the power and leadership of the United States?
The answer, my friend, is blowin’ in the wind, the answer is blowin’ in the wind.
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