Thursday, April 5, 2012


I have spent a considerable portion of my life thinking, “What if….?” It is not such a bad thing. In fact, when not taken to extremes, not psychotic, and not immoral, a little “what if” can go a long way. The greatest inventions, innovations, and discoveries in the history of mankind started out with “What if….?”
Here’s one….we hear about a federal budget deficit in excess of 14 trillion dollars (no you cannot contemplate it, it is too vast). This deficit is growing exponentially! The credit rating of the UNITED STATES was recently downgraded for the SECOND time. For those who don’t think much about such things, let me tell you, until about three years ago, a downgrading of U.S. creditworthiness was the stuff of science fiction stories, the paranoid hyperbole of conspiracy theorists, of the ilk who think the Pope is the False Prophet of Revelation or Freemasons secretly run the world, along with the Illuminati. So, U.S. Government backed securities, since World War II, and to a lesser extent before, have been THE standard bedrock security against which other investments are measured.
All of that has changed in the 21st Century Obama economy (whoops, sorry for the political commentary). We are apparently behind the exponentially growing curve of compounding federal debt, and the consequent chink in the armor of America, the economic “city on a hill”. What to do? What to do? Scurry, scurry, worry, worry, right? Make no mistake, it really bothers me, until I remember the axiom that whatever is not of faith is sin (God said that, by the way).
So, now to THINK OUTSIDE THE BOX. Now to consider “What if…the U.S. Government just gave up and defaulted?” I am serious. I am not suggesting this is necessarily the right policy at this time, but the greatest thoughts come from musing and asking “What if?”, so let’s do that. What if the United States of America were to say, “OK, we have an announcement to make. Honestly fellas….we just can’t pay it anymore. We are in so deep, it is literally, logically, mathematically, and ethically impossible to dig out. So, let’s be real. Ain’t gonna happen. The heck (or hell) with it. We aren’t paying. And if you think about it, there’s really nothing you can say about it. We are wiping the slate clean. After all, there are no REAL dollars. Only Federal Reserve Notes, that by legal decree, are backed by the good faith and credit of the United States. Not real money, but just pieces of paper, where we all gathered around and collectively said, ‘We all agree that we will use these green pieces of paper to buy and sell stuff. So, it’s agreed. Right gang? (Right!).’ By the way, you have no choice. Uncle Sugar makes the rules and, much like Cosa Nostra, he has “toughs” to act as enforcers. Why should I accept little green pieces of paper for the goods and services I supply? Because the guys who make the laws and have the guns say so, that’s why (We are to render unto Caesar what is his, but I’m just sayin’).
So, the bottom line is this: We are greedy voters who elected greedy politicians, who prostitute themselves and blow money for the proverbial “bread and circuses” (ala the latter day Roman Empire), while wasting “money” on foreign military entanglements, lining the pockets of contractors who funnel some of that money back to politicians who ensure we print more of those pieces of paper to funnel back to simple, greedy voters who vote the politicians back office so they can start the vicious cycle over again. This is a simplistic generalization. I was in politics myself, and I met some sincere, idealistic politicians. Perhaps most voters love America, as well. But, in a politico-economic sense, this is fundamentally true.
In my fantasy world, using my sometimes vivid imagination, I see someone in charge saying, “Sorry boys. The merry-go-round is about to stop. No more money. Done. Ya’ll ain’t getting’ paid because there is no more money and we are going to stop printing pieces of paper and pretending like it IS money. The ash heap of history is laden with countries who have had unrestrained currency and they have been buried by hyperinflation and currency devaluation. It is happening here, so we are stopping it right now. We, the U.S. government, are not going to pay our debt.” Wow.
I just read a book by Representative Ron Paul, entitled “End the Fed”. He asserts that modern wars, as well as reckless federal government spending and usurpation of liberty, are driven by the power to print money, to control the money supply. Thus, “End the Fed”. On August 15th, 1971, President Nixon directed the Secretary of the Treasury to limit the amount of federal currency that was convertible into fixed assets like Gold and Silver. This was an abrogation of the Bretton Woods international monetary system. Without digressing into an academic discussion of all this, we may suffice it to say that, although the Federal Reserve had been a spigot to spew forth currency as needed, President Nixon’s order was akin to opening the spigots to full blast. I listened to a video of Nixon’s speech at this time, and he assured the American people that it was not a problem, because “…the vast majority of Americans spend their hard-earned American dollars in America, on American goods.” Well, that is clearly no longer the cases. We have a criminal trade deficit, and we are shoveling dollars to China (and others) by the boatload. Our military adventures (some of which have been necessary, but far from all) have put money overseas. Finally, we must remember that the plethora of American military bases overseas, which pump many dollars out of the U.S., as well. There are too many dollars around the world. The dollar is weak. The dollar is floundering.
So, what if we just said, “We can’t pay you. Sorry.”? What if we then wiped the board clean, started over with a brand new currency, backed by a fixed standard, whether it be hold or some other universally respected commodity that holds its value, is easily divisible, and is portable? I am reading “Worldly Goods: A new history of the Renaissance”, by Lisa Jardine. In it, she describes the formation of banking and money, as we know them, beginning in the 15th century. In the 1430’s “The Medicis” were the Pope’s bankers. One beautiful part of the whole compound interest gig is the fact that is could finance wars. The concept of capital was born. Some of the Popes liked interest, because interest meant venture capital, which meant the outfitting of armies, which meant plunder and profit, which could be used to pay back the lenders. Nice little cycle, not unlike, hmmm……us? Military contractors financing wars, to ostensibly noble motives….I dunno, just some thoughts.
But, this is pretty interesting, I think: The Bible teaches against usury so those unscrupulous Popes (and they were not all dirtbags, by the way), avoided that pesky admonition against charging interest by permitting what is like a modern day pawn shop. People paid someone to hold their commodities or other valuables for safekeeping. So, it was ostensibly a “fee”, when it was de facto interest.
Bartering was big back then, without a universally accepted form of money. When money WAS used, it was a commodity with real value. A common money in the 15th Century was pepper. Pepper was highly, universally coveted, valuable, easy divisible, and portable. We all agreed on pepper. Other things can be used, but they all had value. I know little about prison life, other than what I have seen on TV, or what I have learned talking to people. However, I know cigarettes are commonly used as currency. They are coveted, and they have real, tangible valuable that is easily convertible (like, you just open the package and get one of those babies out then fire homie up). Like gold, cigarettes are easily convertible. Gold is highly malleable, and likewise, cigarette cartons can be divided into packs, each transaction consisting of 3 packs, 2 packs, or 1, etc. Then, as you would pull change out of your pocket to fine-tune your purchase, you could do like this, “OK, that shank (I learned that cool, prison sounding slang word on TV)….That shank costs 2 pack 1, meaning 2 packs of cigarettes plus 1 additional cigarette.
So, if Uncle Sam decided to stiff everybody by defaulting, it would hurt China and no doubt have large political and international trade ramifications. A lot of Americans would be hurt, but in the long run they would get over it and perhaps the long-term benefit of living in a sound economy, with real, sound currency would far surpass the temporary discomfort of losing their investments. True wealth, true trade, after all, is mere barter. But, in order to barter, one must have a unit of currency that has universal value. When a currency loses enough of its value, it ceases to be a reliable medium for barter. Then, we get a black market. People begin using whatever they have, of universally recognizable value. In a post-apocalyptic world, money could be fresh water (rather heavy, though), grain, even ammunition.
I try not to be an anachronism of the late 20th Century, but try as I might, part of me IS that anachronism. Accordingly, one of my favorite, and perhaps my very favorite movie of all time, is Thunderdome. The characters live in Bartertown. In this story, people are “real”, bare. When we are stripped of trappings, pretense, falsity, and smoke and mirrors, only that which is honest remains. Good or evil, but honest. The madman master of ceremonies, in the Thunderdome, spoke of the modern world of finance and war as “damn near the death of us all”. In my view, at least, the dome, where opponents entered and fought to the death (the chant: “Two men enter. One man leave.”), is a metaphor for the inner motivation of corrupted mankind. When all the pretense and general B.S. is eliminated, fallen men are simply savages who want what the other guy has. The world is a contest with winner and losers, and often the stakes are high, and the game is for keeps.

1 comment:

  1. Say we decided to throw out the financial system. Wouldn't our average (let's call it) class status be more comparable to nations we consider (think Africa) less developed? In an America where everyone seems to want the spotlight of having the "best" things, this might piss off a lot of Americans. There might be some merit here.