Tuesday, January 25, 2011

Historic Parallels

Tonight we will be treated or subjected (depending on your viewpoint) to the Kabuki theater performance known as the "State of the Union" address by the President of the United States. Rumor has it that POTUS will be pushing for increased "investment" in national infrastructure and "research" in order to "restore" competitiveness. It is further rumored that POTUS will acknowledge the negative impact of excessive regulation on the nation's economy and in addressing the situation will impose additional regulations. In other words: "the beatings will continue until morale improves".

The President will doubtless urge the Congress to increase the national debt ceiling by at least another trillion dollars in order to "buy time" to implement "deficit reduction". Have we heard this before? Since Congress first enacted a debt ceiling has it EVER failed to raise that ceiling in order to accommodate the increased spending investment? I thought not. Why not simply repeal the so called debt ceiling and continue borrowing until our creditors finally wise up and refuse to finance the spending addiction? It is only a matter of time until the inevitable day of reckoning arrives. The question answers itself. The current political class assumes the collapse can be postponed until they are safely retired.

Additionally, there is always the Federal Reserve which will; and is arguably now acting as the lender of last resort by buying government bonds with freshly created banknotes and electronic digits.  This practice is already resulting in the inflation that government hastens daily to deny, understanding that the booboisie will eventually realize that the 2% Fed inflation target (soon to be spiraling upward) is in fact a tax. The government profits from inflation when it prints additional banknotes by being the first to spend them before their inflationary impact works its evil on the rest of the serfs. This is an ancient practice dating from at least the later Roman Empire where taxes were required to be paid in unclipped gold coins but imperial expenditures were paid in clipped or debased coins at face value.

The government schools of recent decades when deigning to teach history at all, which is increasingly rare, offer up a sanitized version of past "civilizations". These versions generally designate the fall of the western Roman empire in Europe as A.D. 476 when a descent into the "dark ages" occurred. This factual distortion conveniently obscures the economic/cultural situation which obtained in fourth and fifth century Europe.
One of the great weaknesses of standard accounts of the Middle Ages is that they compare the poverty of the provinces with the wealth of the city of Rome in the early Empire. This is completely misleading. The comparison should be between the provinces in the first century with the provinces five centuries or more later. Here, the typical serf was better off under the manorial system of the so-called "dark ages" than the slave had been in Augustus' day. Farming was more efficient, due to crop rotation. Metallurgy was more advanced. Road building was not, but the roads had been more for military control than trade.

Economic historian Robert Latouche as far back as 1956 argued that, in comparison to the heartland of Western Europe in the early Roman Empire, economic conditions were better during the dark ages. Another economic historian, Rondo Cameron, two decades ago wrote that "medieval Europe experienced a flowering of technological creativity and economic dynamism that contrasts strongly with the routine of the ancient Mediterranean world.

During the rule of the later Roman emperors citizens were legally bound to their taxing districts and sons were forced to enter the trades and occupations of their fathers. We see the beginnings of such a system today in the US where income earned outside of the country by expatriate citizens is taxed as if it were earned within the US.

Another measure of what our government has wrought is comparing the value of our (infinite) currency today to the purchasing power of a finite commodity such as gold. During the reign of Augustus Caesar in the first century an ounce of gold bought a quality robe/toga or a suit of armor.  The services of a Roman scribe-messenger could be obtained for the better part of a month for an ounce of gold. In 1910 an ounce of gold equalled US $20.00 which was the price of a quality man's suit. In 2011 an equivalent man's suit is priced at $1,300.00 about equal to an ounce of gold or the wages of an urban messenger for the better part of a month.

This is the work of the Federal Reserve Bank whose enabling act of 1913 stated its purpose as "stabilizing" the value of our currency. How's that working out?

cross posted at: Eternity Road

1 comment:

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