Why Statists Hate Gold
June 26, 2010
Amidst the increasing calls among statists for increased federal spending, one can practically feel the deep, visceral hatred for gold arising within statists. The reason is that statists know that gold is a communications vehicle that tells people what government officials are doing to their money. That's the last thing that statists want people to find out.
Practically everywhere you look, both the federal welfare state and the federal warfare state are in deep crisis.
For all practical purposes, such beloved welfare-state programs as Social Security, Medicare, Medicaid, and other welfare entitlement programs are busted, bankrupt. That is, there is no reserve fund to make the payments that need to be made to dole recipients. Instead, the federal government collects part of the money to make these payments in the form of taxes. But the problem is that the tax revenues are still insufficient to pay all the dole recipients, and the shortfall is enormous.
For example, imagine a person who earns an annual salary of $100,000 who is committed to paying annual expenses of $1,000,000 a year but who has no savings. Wouldn't you say that he's on the road to bankruptcy?
Aggravating the matter is the warfare state, which entails the massive and ever-growing expenditures for the military and the military-industrial complex. We're not only talking about the ongoing occupations of Iraq and Afghanistan, we're also talking about the sprawling network of U.S. bases in more than 100 countries, U.S. troops in such places as Europe, Asia, Africa, and South America, and the hundreds of military bases here in the United States. As the Romans, British, and Soviets discovered, running an empire is expensive.
All that military expenditure is adding to the shortfall between what the feds are bringing in and what they're spending. How are they paying for the difference? They're borrowing the money, sending the federal government into deeper and deeper debt.
Think about that guy who has the $1,000,000 in annual payments to make who earns only $100,000 a year. Suppose he goes to the bank and borrows $900,000 every year to pay the difference. At some point, wouldn't the bank say, "No more! We're not lending you any more money and you need to pay us what you owe us"?
Meanwhile, the statists continue placing their hope in a "revitalization" of the economy, which they're hoping that more federal spending will accomplish. The idea is that if they can get more people back to work, the IRS can then tax their incomes in order to fund these massive welfare-warfare state expenditures. If there are sufficient tax revenues coming in to cover all the expenditures, no part of the welfare-warfare dole will need to be cut. Happy days will be here again. Both the parasite and the host will be thriving once again.
But how can the government spend even more money when taxes and debt are already enormously high? The statists are calling on the federal government to simply print the money to cover the existing debt and the ongoing deficit. That's where the Federal Reserve comes in. That's been its job from the beginning -- to accommodate deficit welfare-warfare state spending and ever-increasing debt by simply debasing and devaluing the currency through monetary expansion.
In actuality, inflation has long been just another way that governments historically have looted the people. By debasing the value of their income or savings through the printing of money, people become poorer. In principle, there's no difference between paying a tax of 20 percent of your income and having the value of your income drop by 20 percent because of monetary debasement.
But the beauty of inflation, from the standpoint of statists, is that most people have no idea that the government is doing this to them. They see prices rising across the board on such things as groceries, gasoline, and cars and immediately conclude that the culprit is the greedy, profit-seeking businessman. Due to the complexity of Federal Reserve operations, Joe Six Pack has no idea that the rising prices are actually how a debased currency reflects itself.
Not so with gold, however. Unlike groceries, gasoline, and cars, people instinctively know that gold is different. When they see the price of gold soaring, they know that something isn't right. They sense or hear from others that gold communicates what government officials are doing to people's money.
That's why government officials hate gold. They want to be able to spend to their heart's content and print the money to do it without people realizing how they're being looted in the process. That's, in fact, why President Franklin Roosevelt nationalized gold and made it a felony offense for Americans to own it. He didn't want Americans to see the spending, debt, and inflationary binge that the welfare-warfare state was bringing and would bring indefinitely into the future.
As federal spending and debt continue to soar under the Obama administration, count on the Federal Reserve to crank up the printing presses. And don't be surprised if Obama, the man who now wields the omnipotent power to assassinate, torture, and jail Americans and to shake them down for money, follows in FDR's footsteps when it comes to gold.
Jacob Hornberger is founder and president of The Future of Freedom Foundation.