Inflation, Socialism And The Fourth Branch Of Government

The slow and steady rise of socialism in the modern era has officially peaked with the recent release Thomas Piketty's new best-seller, “Capital in the Twenty-First Century”. 

The book arrives as a time traveler from the distant past, cloaked behind the attempt to combat wealth inequality. Yet the traveler fails to acknowledge both the meaning of capital - especially in the context of the current failed monetary experiment. 

Any discussion of wealth inequality that fails to define, compare and contrast the current state of affairs is futile discussion of apples and oranges. 

Good intentions can be dangerous, particularly when they inspire intervention and reaction. Alarm bells should be ringing across the land as the media (the American fourth branch) embraces the misguided concept. 

First and foremost, Piketty’s historical high-inequality periods perfectly coincide with the two greatest monetary-induced bubble and crony capitalism periods — 1929 and now.

Monetary Policy 

Monetary policy is the foundation for an economic system. If there is any question about the measuring stick, any ambiguity about value of money. 

Broken monetary systems create immediate inequality. Even an unconscious misunderstanding creates a system ripe for abuse by those that gain the most from it. 

Analysis of the aftermath is the epitome of a dangerous intellectual exercise. It creates a massive vacuum, where ignorance is replaced by misguided activism and, usually, danger. 

Inflation

Inflation is an unjustifiable redistribution of income in favor of those who receive the new money and money titles first - and to the detriment of those who receive them last.

In practice, the redistribution always works out in favor of the fiat-money producers themselves (whom we misleadingly call central banks) and of their partners in the banking sector and at the stock exchange.

And of course, inflation works out to the advantage of governments and their closest allies in the business world.

Inflation is the vehicle through which these individuals and groups enrich themselves, unjustifiably, at the expense of the citizenry at large.

If there is any truth to the socialist caricature of capitalism — an economic system that exploits the poor to the benefit of the rich — then this caricature holds true for a capitalist system strangulated by inflation.

The relentless influx of paper money makes the wealthy and powerful richer and more powerful than they would be if they depended exclusively on the voluntary support of their fellow citizens.

And because it shields the political and economic establishment of the country from the competition emanating from the rest of society, inflation puts a brake on social mobility.

The rich stay rich (longer) and the poor stay poor (longer) than they would in a free society.

The Benefits of Saving and Capital 

The new book is based on an all too common but mistaken perception of capitalism.

It just doesn’t allow for the monetary distortions and consequent booms and busts we’ve seen.

While most modern economists believe that savings detract from an economy by reducing current spending, it is actually the seed capital that funds future economic growth.

The primary flaw in his arguments are not moral, or even computational, but logical.

He notes that the return of capital is greater than economic growth, but he fails to consider how capital itself "returns" benefits for all.

Perhaps the great irony is that the same people who today loudly endorse a global wealth tax to rein in inequality were also the same who were apoplectic toward those opposing the bailouts back in 2008.

Alas, this is ultimately one more soft sign of where we are headed. 

The part and parcel of a political movement that seeps out from a broken monetary system. 

Precious metals are an ancient store of value and a reliable inflation hedge. But, even more so, the metals are precious seed capital that can be held outside of a downward spiraling system. 

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