Rehearsals for a Civil War (Kunstler)

Amid the general incoherence of the Tea Party rebels and the failure of progressives to recognize the structural changes underway in a peak oil world, lies a deadly swamp of paradox where all parties may drown in the quicksand of their own muddled intentions.

More:

http://kunstler.com/blog/2010/02/rehearsals-for-a-civil-war.html#more

"the financial crisis is nature's way of telling us that banking occupies too much space in our economy"

He does have a way with words.

Grow our own. . . barter . . . make stuff . . . oh yeah, be hippies.

It begins: "Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. 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." Amazing words, predicting with great accuracy what would happen in Germany just a few years hence, as prices were raised weekly, then daily, then hourly, and "money" was printed so rapidly that it was blank on one side. Has the "existing basis of society" been overturned in America by inflation? If so, how many have made the diagnosis?

Speaking of various European currencies, Keynes writes: "But while these currencies enjoy a precarious value abroad, they have never entirely lost – their purchasing power at home. A sentiment of trust in the legal money of the State is so deeply implanted in the citizens of all countries that they cannot but believe that some day this money must recover a part at least of its former value. To their minds it appears that value is inherent in money as such, and they do not apprehend that the real wealth, which this money might have stood for, has been dissipated once and for all." Our Federal Reserve System assures us that it is the people’s confidence in it that makes our money useful. There certainly isn’t anything else, as Keynes observed 90 years ago.

Price controls were instituted, briefly, by President Nixon, who, in 1971, declared himself a Keynesian. In 1919, however, Keynes saw the inevitable failure of such controls, while unable to offer any satisfactory alternative. "The presumption of a spurious value for the currency, by the force of law expressed in the regulation of prices, contains in itself, however, the seeds of final economic decay, and soon dries up the sources of ultimate supply. – If, however, a government refrains from regulation and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer." Today, that "regulation" takes the form of taxation, being much more agreeable than price controls, especially since the people seem easily convinced that their high taxes are paying for "good" things, like protecting the environment, and assisting backward nations.

In short, Keynes foresaw exactly the problems which would afflict the countries whose governments adopted his theory. Of course, he may have believed that gold would provide some sort of brake to rampant inflation, although he was hardly an advocate of a gold standard. In any event, doing away with any tangible form of money opened wide the door to the economic problems he anticipated. Governments continue to accept his belief that they can spend the country into prosperity, while ignoring his earlier warnings of disaster if they attempt to do so.