Financing the Empire with Inflation
by Jacob G. Hornberger
The New York Times is reporting that U.S. officials are reacting with “contented silence” to the enormous drop in the value of the dollar. Well, of course they are. This is the way they are able to finance their out-of-control federal spending by not raising taxes. Nothing new here — this is what profligate rulers have done throughout history — debase the currency to finance their big-spending binges.
Despite the official mantra expressed by President Bush and his conservative cohorts — that a “strong dollar is in our nation’s interest”—the dollar has lost about a third of its value against the euro during the last 5 five years. Now, isn’t that a coincidence! Wasn’t it about five years ago that President Bush and his cohorts embarked on their foreign military escapades against Afghanistan and Iraq? Isn’t that when federal spending on the military-industrial complex began going through the roof?
As longtime FFF readers know, we’ve been predicting this would happen for the past several years — that the out-of-control federal spending would ultimately result in a severe monetary crisis reflected by a crash in the value of the dollar. And my hunch is that we haven’t seen anything yet. If China and other foreign regimes that have loaned large amounts of money to the U.S. to finance its foreign military adventures decide to dump their securities, the monetary chaos could be quite serious.
Make no mistake about it: Despite claims by some U.S. officials that a constantly devaluing dollar is a “benefit,” it is instead the time-honored way to plunder and loot the citizenry by not raising taxes. A devaluing currency is reflected by prices rising across the board. Everyone, especially the poor and middle class, will witness it in the grocery store, the cleaners, the repair shops, the gas stations, the restaurants, and everywhere else.
Meanwhile, President Bush and his Republican cohorts will prattle on about how they haven’t raised taxes to finance their out-of-control spending binges, behaving as if the federal government can do whatever it wants by magic. Don’t fall for it. The empire has been paying its bills by using its power to print unlimited amounts of paper money. And the American people are going to pay for it all through reduced purchased power of their money.
Welcome to Empire Economics 101, what they didn’t teach you in your government-approved schools. Have you noticed that President Bush and his conservative cohorts no longer brag about how Ronald Reagan supposedly brought down the Soviet Union — by making the Soviet government spend the nation into bankruptcy?
Given the inability of most Americans to realize that U.S. officials are behind their growing economic pain, no wonder Washington officials are maintaining a “contented silence.”
Mr. Hornberger is founder and president of The Future of Freedom Foundation.