Amid all of the mixed messages on the strength of the economy coming from the White House, one theme has emerged loudly, clearly, and unvaryingly: The American economic system is about to undergo a profound shift. “Never allow a crisis to go to waste,” President Obama’s chief of staff Rahm Emanuel famously stated. “Never waste a good crisis,” concurred Secretary of State Hillary Clinton. Americans, said Obama, should “discover great opportunity in great crisis.” What kind of opportunity? “Capitalism,” Secretary of the Treasury Tim Geithner said last week, “will be different.”
All of Obama’s economic policies thus far are designed to drive America into full embrace of socialism. His chief means for this transformation: inflation. He is attempting to inflate the currency through two primary means: intense deficit spending, and pushing up production costs through union subsidization. In order to make these measures politically palatable, he cites FDR as an example of good deficit spending; he cites the credit crunch as an excuse for inflationary monetary policy; and he recommends unionization in order to boost wages.
It’s a beautiful strategy for purposefully trashing capitalism, all the while blaming capitalism for its own downfall. John Maynard Keynes, the liberal economist who championed government intervention during recessions, recognized Obama’s inflationary strategy for what it is: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency,” said Keynes. “Lenin was certainly right. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Obama pursues inflation — government devaluation of the currency — with the zeal of the newly converted. His deficit spending will be financed either through higher taxes or through inflation. Obama says he will push higher taxes — after all, he wants to appease the Chinese, who don’t want their U.S. securities paid off with inflated dollars. But covertly, Obama fully intends on inflating the currency to pay of the massive deficit he has shoved through Congress. Meanwhile, he uses the increased prices produced by inflation to justify continuing unionization — he backs “card check” legislation — forcing up the cost of doing business and throwing people out of work. He then blames unemployment on the failure of the free market and states that the government must step in to hire more Americans.
It’s the same tried and true policy that created the Great Depression. During the inflationary period following the institution of the Federal Reserve in 1913, the purchasing power of the dollar fell rapidly — 56 percent by 1929. The easy availability of credit led to the same sort of economic bubble mirrored during the recent real estate boom.
The government’s response was the same, too. According to economist Murray Rothbard, within a week after the stock market crash of 1929, the Federal Reserve pumped cash into the system: it added $300 million to the private bank reserves; it doubled its holdings of government securities, adding $150 million to the reserves, and discounting $200 million for member banks. Writes Rothbard, “As a result, the weekly reporting member banks expanded their deposits during the fateful last week of October by $1.8 billion (a monetary expansion of nearly 10 percent in one week).” The Federal Reserve lowered its discount rate from 6 percent to 4.5 percent.
This, of course, did not stave off the Great Depression. Similarly, Germany, Britain and many other European countries moved off the gold standard in the early 1930s; this merely heightened the sense of urgency in the United States, where the gold standard was still in place, leading to runs on gold. FDR countered by dramatically inflating the currency in 1933, when he made it unlawful for private persons to hold gold; in 1934, he reset the value of the dollar at $35 per ounce of gold rather than the previous $20.67.
Without financial stability ensured by the free market gold standard, banks became even less willing to lend. FDR attempted to push up wage rates by backing labor against business; the result was prolonged unemployment, because prices were already too high.
And all of this justified more and more governmental intrusion.
Now Obama wants to pursue the same inflationary policies. He’s pushing the deficit beyond the breaking point. He’s using “card check” to inflate wages, producing unemployment. He’s destroying savings.
And he’s loving every minute of it. When it comes to inflation, very few people can identify its pernicious effects; it’s far easier to cite the dangers of laissez-faire capitalism. Which, of course, is Obama’s plan. Capitalism will be different when Obama finishes with it — it will be another name for socialism, purposefully brought on by governmental measures.
Sign up to the Human Events newsletter