"The Road to Serfdom"
by Addison Wiggin
“There is something terribly wrong with this country, isn’t there? Cruelty and injustice, intolerance and oppression. And where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance coercing your conformity and soliciting your submission. How did this happen? Who’s to blame?”
- V for Vendetta
“We have arrived,” assert John & Nisha Whitehead, “at the dystopian future depicted in the 2005 film V for Vendetta... which is no future at all.” You’ll have to forgive us. We didn’t sleep well last night, got up at 4am and made the mistake of following an X (formerly Twitter) feed that began with Joe Rogan’s latest 2hr 41min podcast with the zaniest richest guy on earth, Elon Musk. It’s not all that surprising what kind of ideas an early morning coffee and social media produce.
So… After a week of recent political and economic history from the perspective of our writing partner on "Empire of Debt", Bill Bonner, today we take a break… and spend a bit of time connecting dots from film, political philosophy and monetary economics.
A simple question to begin: What happens if we continue down our current economic path? The Whiteheads kick us off by summarizing the scene in "V for Vendetta": "Concentration camps (jails, private prisons and detention facilities) have been established to house political prisoners and others deemed to be enemies of the state. Executions of undesirables (extremists, deplorables, troublemakers and the like) are common, while other enemies of the state are made to “disappear.” Populist uprisings and protests are met with extreme force. The television networks are controlled by the government with the purpose of perpetuating the regime. And most of the population is hooked into an entertainment mode and are clueless."
With "Vendetta," whose imagery borrows heavily from Nazi Germany’s Third Reich and George Orwell’s "1984", we come full circle. The corporate state in V conducts mass surveillance on its citizens, helped along by closed-circuit televisions. Also, London is under yellow-coded curfew alerts, similar to the American government’s color-coded Homeland Security Advisory System. The film’s director, James McTeighe, observed: “V for Vendetta really showed what can happen when society is ruled by government, rather than the government being run as a voice of the people. I don’t think it’s such a big leap to say things like that can happen when leaders stop listening to the people.”
Civil libertarians have been fretting over state control since the fascist movements of the 1930s. One of our favorites hits the nail on the head. The Nobel Prize winning economist Friedrich Hayek was famously alarmed by Nazi Germany and the rise of national socialism in the 1930s. Hayek’s most famous work "The Road To Serfdom" was originally published in 1944. The book began as a “memo” to Sir William Beveridge, the director of the London School of Economics (LSE), where Hayek was then teaching. Hayek intended to refute the then-popular claim that fascism represented the “dying gasp” of a failed capitalist system.
It’s hard to conceive today, but Eleanor Roosevelt, the nation’s then First Lady, was said to publicly support the efforts of Josef Stalin. Albert Einstein and many of the scientists who had fled Nazi Germany for the United States, supported socialist policies “lock, stock, and barrel.” In "The Road To Serfdom," Hayek argued that Western democracies, including the United Kingdom and the United States, have “progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past.” Government planning of economies, Hayek asserts, by its very nature leads to arbitrary and unfair edicts and loss of individual liberty.
At the time, "The Road to Serfdom" was deemed heretical for its passionate warning against the dangers of state control over the economy. Later, in the 1960’s "The Constitution of Liberty," Hayek urged“all those who wish to stop the drift toward increasing government control, should concentrate their efforts on monetary policy.”
A fitting warning today following all the ink spilt trying to read between the lines of Jerome Powell’s explanation for the decision to maintain a “hawkish pause” on interest rate hikes on Wednesday. The stock market rallied on the Fed’s decision. The Dow, S&P and Nasdaq gained half a percent each in unison. The prevailing Wall Street consensus is still “higher for longer” interest rates. But the question financial journalists are trying to answer is not “if” the Fed will revert to cutting rates, but “when.”
The trouble for us, having recently published the 3rd Edition of "Demise of the Dollar," is not just errant policy decisions regarding the nation’s money… not just the historic inflation that was stoked by years of low to zero interest rates and a gush of stimulation checks during the pandemic… but the fact that if the Fed is even successful at reaching it’s arbitrary 2% inflation target, the money in your retirement account still loses purchasing power year-over-year—by design. Here’s what the dollar purchasing power looks like since 1971 when priced in gold:
Of course, Richard Nixon famously dismantled the Bretton Woods exchange rate system linking the dollar to gold in 1971. Up until 1971, the median price for a family home rose relatively consistent when priced in gold.
Since 1971, the amount of dollars it takes to buy - or finance - a home has risen, while the former dollar peg, gold, has remained within range. “Higher for longer” interest rates only make the burden of owning the largest asset in most American families’ portfolios more difficult over time.
In the 1970s my parents bought, rehabbed and sold old colonials in New Hampshire for a living. I recall vividly moving into one house originally built in the 1750s that had no plumbing. We moved into the house in February and had to put on our mukluks and heavy wool mittens to go to the outhouse. I think I was five at the time. That’s the kind of memory that can stick with you.
But, as we recount in our video "The Great American Shell Game", even on that small income we still lived a good life. We were able to go to school, had a couple cars and a truck… we took family vacations… and didn’t have any debt. That’s a lifetime ago. Fat chance anyone trying to buy a family home on a single income anymore.
“Reckless government spending,” reads an op ed in The Hill this week following the release of both glowing GDP and CPI numbers. “Incessant money printing. Historically high interest rates. The worst inflation in 40 years. Despite the Biden administration’s best efforts to deceive them, the American people know that Bidenomics isn’t working.”
Bidenonomics isn’t working in another facet either. The government is stuck managing a rising debt load… actively engaging in two expensive wars… and politically they can’t cut spending or raise taxes. The newly minted House Speaker, Mike Johnson, just proposed cutting Social Security to finance the spending bills for Ukraine, Israel and a secure Southern border. That’s a ballsy political stunt, if you think about it… he’s basically daring the warmongers to prefer Ukraine and Israel to their own obligation to the nation’s retirees.
“It’s clear where this is going,” wrote the monetary economist Judy Shelton, critiquing Bidenomics in September during a spate of White House press releases. “When the government is unconstrained by budgetary discipline and monetary-policy makers punish the private sector with high interest rates to rectify the errors of fiscal policy, democratic capitalism can’t last long.”
The worst-case scenario, in our view, is when otherwise productive middle and lower class workers get disgruntled and start finding less-than-productive uses of their time, like taking to the streets over political issues. Or worse, engage in all sorts of random and organized theft and violence. When experiencing economic anxiety and political disenfranchisement… people will do some very foolish things.
“People shouldn’t be afraid of their government. Governments should be afraid of their people,” writes Alan Moore, in the original V for Vendetta. Check out Shell Game, here.
Follow your own bliss,
P.S. Earlier this week, we waited in line for a sales associate in Home Depot to unlock a glass panel over the selection of drill bits we wanted to buy. The guy next to us, a building contractor, had been waiting for 45 minutes to get a battery he needed on his job site. That can’t be good for business, we thought. Out of curiosity we wondered what the total (reported) cost of retail theft at stores like Target and Home Depot is… and discovered it’s astounding.
In 2023, losses from theft are projected to reach $122 billion; an amount of loss equal to the entire annual GPD of Ethiopia."
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