The Great Debasement

The 2012 election and 2013 fiscal cliff of massive tax increases are ominous echoes of what happened exactly 100 years ago, warn Smith and Ponte.

The 1912 election produced a takeover of America's government by Progressives, who in 1913 imposed the Federal Reserve System and the income tax. The 2012 election and 2013 cliff could make Progressive rule permanent.

Together, America's central bank, the Fed, and income tax have worked synergistically to give politicians almost-unlimited power to borrow and spend.

The result has been The Great Debasement of our money. Today's dollar has only two pennies of the purchasing power of the 1913 dollar. This deceptive expropriation of what workers earned has brought us to the 2013 fiscal cliff.

The Federal Reserve was designed to turn the dollar into an "elastic" currency, as the law creating it explicitly says. The income tax has forced Americans to accept and use this new ever-more-debased fiat monopoly money because it is required for the payment of taxes.

The 100th Anniversary of this transformation brings America to a tipping point.

We are becoming "a 50-50 nation - half of us paying the taxes, the other half receiving the benefits," warns Harvard economic historian Niall Ferguson.

Today 49.1 percent of households have at least one person living there who gets a government benefit. More than 47 percent of adult Americans pay no income tax. Dependents see government as a free goody-dispensing machine.

"When the people find that they can vote themselves money, that will be the end of the republic," warned Benjamin Franklin at America's birth.

Victory, or even a narrow loss, by Progressives in the 2012 elections could make their vision of ever-expandng government permanent by establishing a voting majority of those who get government money.

The Great Debasement has produced today's upside-down, Alice-in-Wonderland economy in which the stock market goes up on bad news and down on good-- because major investors now want whatever will cause the Federal Reserve to create from thin air trillions more dollars of Quantitative Easing (QE) stimulus.

The laws of Modern Monetary Theory and neo-Keynesianism that guide Fed and Federal policies now teach that borrowing another $58,000 every second to fund 40 percent of Federal spending is good, but that saving money is bad.

They teach that the dollar losing value (inflation) is good, but that the dollar gaining value (deflation) is bad. They teach that economic health requires government to tax ever more money away from productive business people to redistribute it to the unsuccessful, who must spend this money faster.

After 100 years of the Progressive Great Debasement, paying off America's debt would require a stack of dollar bills stretching from Earth to beyond the planet Mars 35.8 million miles away. Such astronomical debt is unsustainable.

So many Americans are now unemployed or in poverty that today's Food Stamp recipients could produce a new Depression soup line at least 17,564 miles long. Today's soup line is a government check in the mail, which conceals the very real economic devastation being caused by the Great Debasement.

This book shows how today's increasingly-fragile economy could be shattered by a wide range of shocks - a new Middle East war, fuel shortages, high-tech terrorism, a prolonged drought, the collapse of the Euro, the replacement of the weakening dollar as the world's Reserve Currency, or a continuing leftward shift in American politics that dries up investment in our formerly business-friendly nation.

The Great Debasement examines how the dollar is already becoming a dematerialized "ghost currency" as we follow the excessive spending-and-debt Great Debasement policies that have devastated or destroyed other nations. It concludes by showing how both prudent individual actions and restoration of the U.S. Constitution's standard for sound money could redirect our future from a potential new Dark Age to a prosperous new Golden Age.