Yesterday, I shared what debasement of the money supply was. Today, I am going to share what it leads to – a secret tax called inflation. I know this can be complicated stuff and some of my readers may have to read it several times, but the reader’s liberty and justice are at stake, so I encourage all to keep slogging through. 🙂 LIFE Leadership is creating a group of men and women who seek truth so they can act upon it. The LeaderShift is coming!

Sincerely.

Orrin Woodward

Debasement Leads to Inflation

German Hyper-Inflation

Nonetheless, this gain to the state’s coffers is no free lunch; rather, society pays in full for the state’s abuse of its powers. For debasement leads to a hidden tax on society’s members known as inflation. Society’s members recognize that prices are rising, but cannot identify its true cause. Ignobly, the government, instead of ensuring justice through protecting society against fraud and counterfeiters, has entered the counterfeiting business to benefit the ruling elite. To be sure, the government hammers anyone else attempting to benefit at society’s expense through the printing of fake dollars that cause inflation within society. Evidently, however, this aggressive government action is less about ensuring justice and more about ensuring the exclusive rights on the systematic counterfeiting fraud. Furthermore, since inflation is a disguised tax upon society, it is one of the safest methods of exploitation. Rothbard observed:

Direct, overt taxation raises hackles and can cause revolution; inflationary increases of the money supply can fool the public— its victims—for centuries. Only when its paper money has been accepted for a long while is the government ready to take the final inflationary step: making it irredeemable, cutting the link with the gold. After calling its dollar bills equivalent to 1/20 gold ounce for many years, and having built up the customary usage of the paper dollar as money, the government can then boldly and brazenly sever the link with gold, and then simply start referring to the dollar bill as money itself. Gold then becomes a mere commodity, and the only money is paper tickets issued by the government. The gold standard has become an arbitrary fiat standard. The government, of course, is now in seventh heaven. So long as paper money was redeemable in gold, the government had to be careful how many dollars it printed. If, for example, the government has a stock of $30 billion in gold, and keeps issuing more paper dollars redeemable in that gold, at a certain point, the public might start getting worried and call upon the government for redemption. If it wants to stay on the gold standard, the embarrassed government might have to contract the number of dollars in circulation: by spending less than it receives, and buying back and burning the paper notes. No government wants to do anything like that.

Manipulation of Money Supply

Simply stated, inflation, through society’s ignorance, allows exploiters to bilk society with little resistance. Governments, in effect, as they transform into powerful states, promote monetary sophisms to disguise its scheme of systematic exploitation of the nation’s money supply. Indeed, without public acceptance of the state’s control of the monetary system the Five Laws of Decline would be severely limited. Unfortunately, however, most of society’s members remain ignorant of monetary matters, leaving them susceptible to state propaganda. For the state and its servants argue that, since all production is good and increases wealth, the state must increase the money supply to increase wealth in society. The fallacy, however, in this argument is, unlike all other consumer goods, money is not used up in the consumption or production process. True, it is indispensable to both steps, but only as a medium of exchange for goods and services. To quote Rothbard one more time:

Unlike consumer or capital goods, we cannot say that the more money in circulation the better. In fact, since money only performs an exchange function, we can assert with the Ricardians and with Ludwig von Mises that any supply of money will be equally optimal with any other. In short, it doesn’t matter what the money supply may be; every M will be just as good as any other for performing its cash balance exchange function.

Society, in other words, can practically use any stable non-manipulated money supply level to use in its role as a medium of exchange for all other goods and services; however, the exploiters resist this economic truth for they cannot manipulate a money supply operating within free market environment. Accordingly, the state utilizes all the means at its disposal to gain control of a nation’s money thus ensuring its ability to exploit society. Interestingly, American President James Garfield emphasized the FLD risk when the state’s “monopoly of force” controlled the money supply when he declared, “He who controls the money supply of a nation controls the nation.” Garfield understood that, since money is the lifeblood of the entire economy, when the state is given control of the economy’s blood, it controls its life. For if the money supply can be expanded and contracted at will, the state can bankrupt any person, business, or political rival it chooses. Perhaps the simplest way to clear the fog on the false reasoning of financial elites is to ask: in what other field would it be proper for government to cartelize the entire field and claim the procedure is for society’s benefit?

For instance, if a monopoly was delegated complete control over car manufacturing in the USA, would that improve or hinder the quality, quantity, and price of future cars? Historically, when competition is reduced, so is the quality. In fact the only thing that increases is the price. All of this, in short, because the monopoly has no competitors for customers to flock to when the entity is unresponsive to their needs. However, if monopolies and cartels are damaging to the Six Duties of Society in every other field, why does the state/financial elites insist on making an exception when it comes to banking and the money supply? Indeed, because the money supply is used for all other businesses transactions within society, the monopoly control over the monetary policy indirectly allows one to control all other economic activities. This is summum bonum for exploiters, allowing them to profit through foreknowledge of the inflation and deflation cycles under their control. In fact, for society to remain free, there is no greater assignment for the people than to ensure the FLD do not infect the nation’s money supply. Paradoxically, however, in no area of society is the state given a freer reign than in the nation’s money supply. In consequence, since men are not angels, the FLD temptation to expropriate the wealth of society is too great for the state’s rulers to resist.

There is probably no area of government where the Five Laws of Decline (FLD) are harder at work than in the monetary system. I cannot emphasize enough for citizens in every society to understand how the monetary system works and how to check the FLD from destroying justice. Simply stated, justice within society leads to production and prosperity. In contrast, injustice within society leads to exploitation and poverty. Everywhere we identify the FLD at work is an area where injustice is destroying society’s prosperity. Therefore, men and women of character must ensure the injustice stops and society provides justice for all.

If you haven’t read LeaderShift, I encourage the reader to do so as a primer for the new book coming out. LIFE Leadership is capturing truth in the 8F’s and sharing with the world! 🙂

Sincerely,

Orrin Woodward

Monetary Debasement

USA Monetary Debasement

The second way that government damages the distribution of goods is through manipulation of the monetary units. Although many believe the state created the monetary units within society, in fact, as Ludwig von Mises demonstrated, money originated through the free market process of bartering. Therefore, the only valid governmental function, with respect to money, is to ensure an honest Bureau of Weights and Measures to protect against the debasement of society’s money. Unfortunately, as Murray Rothbard, so aptly explained in his classic book Mystery of Banking, government routinely violates this sacred responsibility:

The problem is that governments have systematically betrayed their trust as guardians of the precisely defined weight of the money commodity. If government sets itself up as the guardian of the international meter or the standard yard or pound, there is no economic incentive for it to betray its trust and change the definition. For the Bureau of Standards to announce suddenly that 1 pound is now equal to 14 instead of 16 ounces would make no sense whatever. There is, however, all too much of an economic incentive for governments to change, especially to lighten, the definition of the currency unit; say, to change the definition of the pound sterling from 16 to 14 ounces of silver. This profitable process of the government’s repeatedly lightening the number of ounces or grams in the same monetary unit is called debasement.

In other words, the government delegated to protect against debasement and ensure justice has, instead, monopolized the monetary system and debased currency for the political leaders benefit. Regretfully, because society’s remains woefully ignorant of government’s systematic fraud, governments increasingly have used debasement to meet its financial obligations. In fact, the Five Laws of Decline thrive within most nation’s  monetary systems as debasement and inflation lead to further exploitation. Rothbard, again, cogently explained how debasement leads to the state accumulating unjust profits when he wrote:

How debasement profits the State can be seen from a hypothetical case: Say the rur, the currency of the mythical kingdom of Ruritania, is worth 20 grams of gold. A new king now ascends the throne, and, being chronically short of money, decides to take the debasement route to the acquisition of wealth. He announces a mammoth call-in of all the old gold coins of the realm, each now dirty with wear and with the picture of the previous king stamped on its face. In return he will supply brand new coins with his face stamped on them, and will return the same number of rurs paid in. Someone presenting 100 rurs in old coins will receive 100 rurs in the new.

Seemingly a bargain! Except for a slight hitch: During the course of this recoinage, the king changes the definition of the rur from 20 to 16 grams. He then pockets the extra 20 percent of gold, minting the gold for his own use and pouring the coins into circulation for his own expenses. In short, the number of grams of gold in the society remains the same, but since people are now accustomed to use the name rather than the weight in their money accounts and prices, the number of rurs will have increased by 20 percent. The money supply in rurs, therefore, has gone up by 20 percent, and, as we shall see later on, this will drive up prices in the economy in terms of rurs. Debasement, then, is the arbitrary redefining and lightening of the currency so as to add to the coffers of the State.

When I look back on my life, one of the things that I am so thankful for today is my training in systems thinking as a Manufacturing Systems Engineer at GMI-EMI (now Kettering University). This mindset of seeing the world from a systems perspective has been invaluable to me personally and professionally. In RESOLVED, I shared an entire chapter on systems thinking, but now will share systems thinking as it relates to the Six Duties of Society and the Five Laws of Decline. This material is so exciting to me, because I believe I have pinpointed how every society I have studied cycled through the “rise and fall” story. For only when we understand why something occurs can we make the changes needed to stop it.

LIFE Leadership applies the same principles to one’s life. For only when someone understands why he is not getting the results he desires can he make the needed changes to produce the right results. Here is part of the chapter on the SDS and FLD interactions within society.

Sincerely,

Orrin Woodward

Knocking Down the Berlin Wall

Government, accordingly, must be strong enough to restrain the strong from exploiting the weak within society to ensure justice for all, fulfilling the SDS. However, government, even though it is society’s delegated agent for justice, must be watched and restrained. For negligence will lead to the exploiters gaining control of the government’s “monopoly of force,” activating the FLD by redirecting government into an agent of injustice through the systematic exploitation of society. The exploiters do not intend to destroy society, for a long life of the host ensures more plunder for the parasites. However, the greater the unchecked exploitation becomes, the greater the reduction in production of society as the exploited resist the unjust exploitation. For society’s members, if they cannot legally stop the exploitation, will, at a minimum, refuse to produce above what they are allowed to keep. In other words, the SDS and FLD counteract one another, for the FLD thrives in injustice and the SDS prospers in justice. Therefore, when government protects the inalienable rights of its members by performing its delegated assignment of justice, society will rise; however, when government is either too powerless to ensure justice or, worse yet, becomes the agent of injustice, society begins to fall. Indeed, one could compare the SDS to an airplane, lifting society upward and the FLD to gravity, forcing the plane to fall. Thankfully for society, just like a plane can overcome gravity, the SDS can overcome the FLD when society applies the proper policies.

Nonetheless, for an airplane to stay in the air, there must be a refueling plan; otherwise the plane will fall when it runs out of power. In a similar fashion, a society can “rise”, but it must also designs checks to prevent the parasitic FLD; otherwise the society will fall when the FLD consumes the production of the SDS. Ideally, with an understanding of the negative symbiosis between the SDS and FLD, today’s political leaders could radically change the position of the Power Pendulum within society by ensuring justice for its members. For just as the laws of nature are predictable, so too are the laws of human nature when studied systematically within society. Although each person is unique and will respond in his own way to various stimulus, in mass, human nature is surprisingly predictable. Consequently, society can be studied to identify the systemic response of its members to specific government policies. If society allows the FLD to increase, people react, in mass, in specific patterns that will become clear when we examine the six case-studies. For now, its important to understand that society’s responses to the systemic processes and interactions of the SDS and FLD are predictable. Indeed, just as aeronautical engineers, through comprehending the laws of nature, design airplanes for flight; so too can political scientists, through comprehending human nature, design policies for society’s rise.

Interestingly, the systemic effects of the SDS and FLD interactions have been remarkably consistent within Western Societies. This indicates that, similar to scientist predicting responses in the laws of nature, the systemic reactions of human beings to government policies can be consistently predicted. For the application of human nature to predict societal events isn’t a new concept. For instance, insurance companies have, for centuries, made predictions based upon human nature. Has anyone noticed that when car drivers apply for insurance, the insurance companies assess different rates based upon the insured’s age and family status? But how can they possible do this without evaluating a person’s actual driving abilities? Just because, in other words, one driver is an 18 year old doesn’t necessarily mean he is a poorer driver than a married 35 year old driver with children. Statistically, however, for drivers in mass, the average 18 year old is simply a higher risk than the average 35 year old. Consequently, the insurance rates are adjusted accordingly with an impressive degree of accuracy. Warren Buffet, in fact, once remarked, “there is no such thing as bad insurance, only bad rates.”  Man, in other words, as an individual, is unpredictable, but when studied in mass, he is extremely predictable. Insurance companies, in sum, have utilized the laws of human nature to predict mass behavior for centuries; likewise, why aren’t societal leaders using the same methods to enhance the SDS and check the FLD within society?  For although it may be difficult to forecast how each individual will respond to a specific policy, society, in mass, will respond to the SDS and FLD with astonishing consistency based upon justice or injustice of the policy proposed.

Through the systematic study of the SDS and FLD, political leaders can better comprehend how their legislation affects these crucial systems and adjust accordingly. The political leaders main objective is to ensure all legislation enhances the SDS without initiating the FLD. To rephrase Buffet’s dictum for political purposes, “There is no such thing as bad society, only bad policies.” Government, in other words, becomes bad when its “monopoly of force” is used to plunder the people rather than ensure justice for all. Unfortunately, when the SDS is fulfilled and society prospers, the FLD temptation, for those who rule the government’s “monopoly of force,” to use it as a hammer of exploitation becomes increasingly difficult to resist. Society, as a result, must set up the proper checks on governmental power or it will fall victim to the FLD. In effect, the unchecked FLD produces a class of plunderers (the state) within society who sponge off the producers. This parasitic condition worsens until the flourishing FLD eventually destroys the SDS. The producers, sick of the few siphoning off the many’s wealth by the thriving FLD, refuse to produce anymore, killing the SDS as poverty replaces prosperity. This, in fact, is exactly how the Soviet bloc collapsed just a few decades ago. 

I am continuing to write away on my new book describing man, society, and government’s true responsibilities in the quest for concord and justice for all. What a fascinating study this has been for me. I know, I am strange, but I love seeking for answers as to why all society’s seem to leave concord and die in either chaos or coercion. I am so pumped, because I truly believe I have discovered the key to the answer. In fact, I cannot find any historical case-study that doesn’t display the predictable effects of the Six Duties of Society and the Five Laws of Decline. LIFE Leadership will get the inside exclusive on this book as I intend to publish this under Obstacle’s Press. Here is another segment on society, justice, and injustice.

Sincerely,

Orrin Woodward

At any rate, the State of Nature for man is similar to the status of sovereign-nations in the world. For each nation must rely upon its own resources to protect its right to life, liberty, and property from potential aggressor nations. Likewise, man, in the State of Nature, must rely upon his own resources to protect his inalienable rights from potential aggressor neighbors. In both instances, with no higher authority to help adjudicate the dispute peacefully, the conflict must either be settled by peaceful negotiation or through violent force. Unfortunately, just as the history books are filled with unjust wars among nations, as man entered society, the right and responsibility for each person to protect his life, liberty, and property became unjust and unwieldy. Consequently, society, in an effort to systematically ensure justice, created a government to defend each of the members life, liberty, and property in a systematic fashion. Now, instead of each member having the dual responsibilities of both production and protection, could specialize further on his production, because the government was now delegated the responsibility of protection. Government, accordingly, was society’s solution to the increasing division of labor through assigning all force-functions within society to a government in the narrow sphere of the protection of each members life, liberty, and property. In short, society delegated to government the force necessary to protect its members inalienable rights to ensure justice for all.

East German Injustice vs West German Justice

The historical record, not surprisingly, reveals that society seems to flourish under liberty and justice while floundering under oppression and injustice. For when injustice within society is not immediately punished, it opens the door for more injustice and the concurrent loss of liberty. Indeed, there are three main avenues for injustice within society. The first is when society’s members oppress one another. For man seeks the satisfaction of his wants with the least amount of effort, and since plunder is easier than production, without government force to check aggression, the strong will predictably plunder the weak, leading to an unjust society. The second type of injustice occurs when the government exceeds its delegated boundaries and uses force where freedom is the norm. Government, in other words, is delegated a limited force in a limited sphere to protect man’s inalienable rights by coercing exploiters to cease from unjust actions and return to just methods of production. However, when government force is used beyond this limited sphere, it begins coercing members in areas where liberty and freedom should reign; thus, violating its reason for existence. The third form of injustice in when an external foe attacks and defeats another society. The victors create an unjust state to systematically plunder the production of its defeated victim.

Each of these three injustices are met by society’s members in a predictable pattern. For mankind fights injustice and when the force is too great to fight physically, he will resist mentally. In other words, when injustice abounds within a society, repeatedly violating the people’s inalienable rights, they simply reduce their productive efforts accordingly. Why, for example, should a person work hard to increase his wealth if it will just be taken from him anyway? In effect, when injustice becomes large enough to deny the society’s members the right to their life, liberty, and property, the oppressed members will produce just enough to sustain life. An unjust society, however, that produces just enough for man to live at subsistence levels, will soon collapse under its own oppressive weight. Interestingly, the historical record, in contrast to Locke’s theory, indicates that most states were founded upon military aggression, oppression, and injustice, rather than the people’s will. For when a productive society is weaker than one of its surrounding neighbors, the hostile invader seeks to reap what it hasn’t sown. Of course, the subsequent state, created to rule the society, is formed by the victors to systematically plunder the production of its defeated rival. Not surprisingly, though, the unjust society displays little productive capacity beyond the satisfaction of its members hunger. Society simply doesn’t flourish under injustice.