"[If Parliament] may take from me one shilling in the pound, what security have I for the other nineteen?" ~ Richard Henry Lee
Lions and Tigers and Bears, Oh My!
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My Wizard of Oz 2006 cast of characters includes: Lions (suspension of specie payments); Tigers (central banks); Bears (going off the gold standard); Munchkins (sheeple); Dorothy (you); Wicked Witch of the West (Federal Reserve); and the Wizard of Oz (Alan Greenspan).
My contention: The U.S. has not been in recession for almost 200 years.
Forget about the State's definition of recession; let's try something much more relevant, revealing, accurate, truthful, and useful instead: common sense.
The first definition of recession on Dictionary.com is, 'The act of restoring possession to a former owner.' That's good enough for me.
I will draw heavily from Murray Rothbard's book, What Has Government Done to Our Money?
Regarding Lions, Rothbard writes, 'But it is, of course, essential to any system of private property that contract obligations be fulfilled. The bluntest way for government to foster inflation, then, is to grant the banks the special privilege of refusing to pay their obligations, while yet continuing in their operation. While everyone else must pay their debts or go bankrupt, the banks are permitted to refuse redemption of their receipts, at the same time forcing their own debtors to pay when their loans fall due. The usual name for this is a 'suspension of specie payments.' A more accurate name would be 'license for theft;' for what else can we call a governmental permission to continue in business without fulfilling one's contract?
'In the United States , mass suspension of specie payment in times of bank troubles became almost a tradition. It started in the War of 1812. Most of the country's banks were located in New England , a section unsympathetic to America 's entry into the war. These banks refused to lend for war purposes, and so the government borrowed from new banks in the other states. These banks issued new paper money to make the loans. The inflation was so great that calls for redemption flooded into the new banks, especially from the conservative nonexpanding banks of New England , where the government spent most of its money on war goods. As a result, there was a mass 'suspension' in 1814, lasting for over two years (well beyond the end of the war); during that time, banks sprouted up, issuing notes with no need to redeem in gold or silver. This suspension set a precedent for succeeding economic crises; 1819, 1837, 1857, and so forth.'
Regarding Tigers, Rothbard writes, 'Central Banking is now put in the same class with modern plumbing and good roads: any economy that doesn't have it is called 'backward,' 'primitive,' hopelessly out of the swim. America 's adoption of the Federal Reserve System'our central bank'in 1913 was greeted as finally putting us in the ranks of the advanced 'nations.'
'Central banks are often nominally owned by private individuals or, as in the United States , jointly by private banks; but they are always directed by government-appointed officials, and serve as arms of the government. Where they are privately owned, as in the original Bank of England or the Second Bank of the United States , their prospective profits add to the usual governmental desire for inflation.
'A Central Bank attains its commanding position from its governmentally granted monopoly of the note issue. This is often the unsung key to its power. Invariably, private banks are prohibited from issuing notes, and the privilege is reserved to the Central Bank. The private banks can only grant deposits. If their customers ever wish to shift from deposits to notes, therefore, the banks must go to the Central Bank to get them. Hence the Central Bank's lofty perch as a 'bankers' bank.' It is a bankers' bank because the bankers are forced to do business with it.'
Regarding Bears, Rothbard writes, 'In the twentieth century, governments, rather than deflate or limit their own inflation, have simply 'gone off the gold standard' when confronted with heavy demands for gold. This, of course, insures that the Central Bank cannot fail, since its notes now become the standard money. In short, government has finally refused to pay its debts, and has virtually absolved the banking system from that onerous duty. Pseudo-receipts to gold were first issued without banking and then, when the day of reckoning drew near, the bankruptcy was shamelessly completed by simply eliminating gold redemption. The severance of the various national currency names (dollar, pound, mark) from gold and silver is now complete.
'At first, governments refused to admit that this was a permanent measure. They referred to the 'suspension of specie payments,' and it was always understood that eventually, after the war or other 'emergency' had ended, the government would again redeem its obligations. When the Bank of England went off gold at the end of the eighteenth century, it continued in this state for twenty years, but always with the understanding that gold payment would be resumed after the French wars were ended.
'Temporary 'suspensions,' however, are primrose paths to outright repudiation. The gold standard, after all, is no spigot that can be turned on or off as government whim decrees. Either a gold-receipt is redeemable or it is not; once redemption is suspended the gold standard is itself a mockery.'
Of course, none of this happened overnight. The Scarecrow (FDR) took Americans off the gold standard in 1933 and the Tin Man (Nixon) finished the job 38 years later.
Rothbard writes, 'On August 15, 1971 , at the same time that President Nixon imposed a price-wage freeze in a vain attempt to check bounding inflation, Mr. Nixon also brought the post-war Bretton Woods system to a crashing end. As European Central Banks at last threatened to redeem much of their swollen stock of dollars for gold, President Nixon went totally off gold. For the first time in American history, the dollar was totally fiat, totally without backing in gold. Even the tenuous link with gold maintained since 1933 was now severed. The world was plunged into the fiat system of the thirties'and worse, since now even the dollar was no longer linked to gold.'
This left the Munchkins totally dependent on the Wizard of Oz for protection from the Wicked Witch of the West since 1987, but does this make any sense to you? How could the Wizard of Oz possibly protect the Munchkins when he was also the Head Witch?
Don't even get me started about the Cowardly Lion (Congress).
Where does that leave Dorothy?
Unlike in the 1939 film, today's Land of Oz has no Emerald City, Dorothy's companions are not on her side, the Wicked Witch of the West is still alive and well, and the State's Yellow Brick Road (fiat currency) leads only to ruin.
Just like in the film, the Wizard of Oz recently flew away just before the final scene, displaying no special ability to help Dorothy or anyone else.
At the end of the film, Dorothy discovered that her ruby slippers (gold) could take her back to Kansas (the gold standard), but where is the Good Witch of the North today?
As shown above, the U.S. has not been in recession (common sense definition) for almost 200 years, but it has most certainly been in a financial death spiral since 1814.
My assertion is currently supported by a fiat currency that has been inflated over 95% since 1913, an $8.2 trillion national debt, a federal current account deficit of over $700 billion last year, a fiscal 2006 projected budget deficit of $423 billion, at least $40 trillion in federal unfunded liabilities, and $550+ an ounce gold, despite gold price suppression by western central banks.
That leaves one group of unsavory characters still unaccounted for: the Flying Monkeys. In the film, they served the Wicked Witch of the West, but today they are Internal Revenue Agents, serving the collection branch of the State using guns and badges.
But no matter who plays the Wizard of Oz, he always booms, 'Pay no attention to the man behind the curtain!' Why? Because every Wizard knows that the real Yellow Brick Road is paved with gold bars, not fiat currency.