The Logical Dead End of the Nanny State

Fall of America

Its Coming, be ready to defend yourself!

The Sun Chairman, What’s Future Is Prologue, And Why The Second French Revolution Is Coming To America

Tyler Durden's picture

http://www.zerohedge.com/news/sun-chairman-whats-future-prologue-and-why-second-french-revolution-coming-america

For our closing post of the day we once open the floor to Sean Corrigan who proves that just when we thought all historical comparisons to the current deplorable economic miasma have been used up, a new one springs up, this time perhaps the one most indicative not so much of the past but of the future. Indeed, if history is any indication, and it is, America’s catastrophic and untenable position is worse than even that of one Louis XIV, better known as “The Sun King”, whose rule set the stage for the downfall of the French monarchy and which ultimately culminated with the French Revolution of 1789. For arguably the best indication of historical parallels to the present, and yet another confirmation that there really is nothing new in this world, especially in the world of central planning of monetary affairs, we present the following summary of the practices of Louis XIV which is verbatim applicable to the actions of the current central planning cartel: “The administration of the finances appears to have practised a subtle and ingenious tactic… [and] by modifications in the monetary unit, attempted to influence economic phenomena. Changes… were made to prepare for the issue of loans or to audit the circulation of the treasury notes, or to regulate exchange, to modify the balance of trade… to effect a redistribution of wealth, to influence the price level of commodities, perhaps to attenuate economic crises and famines…

It may come as a surprise to some that the very same type of central planning that Bernanke, and his central banking brethren, are trying to inflict (and failing) upon the world, was the same that was attempted on so many occasions in history, most poignantly, and catastrophically in the late stages of the French monarchy. Needless to say the attempts by one man to control a far simpler French economy well over two centuries ago failed, yet ironically, not even then did the economy reach our current level of collapse. Which begs the question: how long until our own “Sun Chairman” finally forces the hundreds of millions of great unwashed out of their hypnotic trance following the realization that their “equity” in the great American experiment, their pensions, lifetime accrued benefits, retirement funds, and of course savings, have been completely wiped out, and another historic ‘storming‘, only this time not of the Bastille, but of the Marriner Eccles building, the focal point of all that is broken with not only America but the world, finally ensues. Just as over 200 years ago, the longer the wait, the greater the ultimate loss for the working class… and the bloodier the ultimate outcome for the modern day iteration of the clergy and aristocracy, also known as contemporary politicians and bankers. And to those saying we are getting ahead of ourselves, we borrow a phrase from the lexicon of unconventional wisdom: “this time is never different.”

From Sean Corrigan: If It’s Broke, Don’t Fix It

In Elgin Groseclose’s magisterial ‘Money and Man’, the following, eerily contemporary quote appears in his chapter on paper money:-

“The administration of the finances appears to have practised a subtle and ingenious tactic… [and] by modifications in the monetary unit, attempted to influence economic phenomena. Changes… were made to prepare for the issue of loans or to audit the circulation of the treasury notes, or to regulate exchange, to modify the balance of trade… to effect a redistribution of wealth, to influence the price level of commodities, perhaps to attenuate economic crises and famines…”

So, we are told, wrote Albert Despaux of the practices of the French regime under Louis XIV during the final, disastrous twenty-five years of his reign. Indeed, upon first examining the accounts, after seven decades of chronic warfare and costly ritual, the incoming administration was to discover that matters were even more dire than they had originally been led to believe – even without a helpful Wall St. broker-dealer to help anyone cook the books beforehand.

As the Duc de Noailles – the new chief of the Council of Finance– wrote to the dead king’s chief concubine, in the autumn of 1715:

“We have found matters in a more terrible state than can be described; both the king [i.e., the ‘public sector’] and his subjects ruined; nothing paid for several years; confidence entirely gone. Hardly ever has the monarchy been in such a condition, though it has several times been near its ruin.”

Plus ça change, one cannot refrain from remarking.

Though we must factor a larger margin of error into his accounts than we must apply to even our own governments’ dubious estimates, it seems that the sunset of le Roi Soleil was accompanied by an annual expenditure of the order of 236 million livres – of which some 86 million was interest payable on the debt – against which revenues of only some 150 million livres could be found. Total debt amounted to perhaps 3 billion livres, implying an average interest rate just south of 3% which is, ironically, much the same as that enjoyed by Uncle Sam today.

The annual deficit, therefore, amounted to some 43% of revenue, or 30% of outlays – still below the Bernholz accelerating inflation threshold of 66% and 40%, respectively, even if not exactly a testimony of rude fiscal health. Things had been deteriorating for quite some time before this, so that, overall, the grand Bourbon’s debt rose twentyfold in thirty years. By way of comparison, the imperial presidency in Washington has allowed its own count of obligations to climb a not wholly incomparable fifteenfold in a like period of time.

It is of note, then, that the abject financial state to which Louis’ vainglory had reduced his realm compares fairly favourably with that produced by a similar threescore years-and-ten of military welfarism in his successors’ populist republic, where the latest €150bln deficit represents 54% of receipts and 35% of expenditures – and the old satyr‘s performance looks even more attractive beside the newly ex-AAA United States’ tally of 60% and 38%.

Moreover, whereas the currency doctoring of which Despaux so disapproved was the culmination of a 66-year process during which the livre was devalued 40% in terms of gold and 35% in terms of silver (for a mean inflation rate of 0.8%!), that same proportionate loss of gold value has occurred to the livre’s paper descendants in just the last sixteen-eighteen months – much less the last six-seven decades. Moreover, in the same, two-generation period up to the present, the US dollar has lost 98% of its gold and over 99% of its silver value, with the franc putting up an even poorer showing beside it.

Even in CPI terms, the US dollar buys only 8% of what it did in 1945, a 3.8% annualized drop whose overall extent it has taken successive French governments something of the order of fifty years to accomplish at the compounded 4.7% rate prevailing in l’Hexagone.

The consequences of the penury of the early eighteenth-century French state are well known to students of human folly, for these were the all-too familiar circumstances in which the regent, the personally extravagant Duc d’Orleans – eschewing both politically unpalatable alternatives of swingeing austerity or outright default – turned to the twisted, Scots genius of John Law, that patron saint of underconsumptionist currency quacks and the honorary founding-father of latter-day central banking.

The broad thrust of the insanity and wastefulness unleashed by this pecuniary Pandora are perhaps too well known to bear overmuch repetition here, but what should be emphasised is that Law – like Bernanke – at first tried to argue that he was not some crude inflationist, but merely arranging an asset-swap of paper money for mortgages. He also held, like all of his ilk who have succeeded him, that the panacea for a nation groaning under an insupportable burden of debt and famished for a lack of productive capital was the emission of more and more money.

This age old error of confusing the medium of exchange with the object of exchange is one we continue to commit. It as if a man’s thirst can be slaked by giving him a box of drinking straws or his appetite sated by kitting him out with a shopping basket.

Soon, enough, for all his astuteness, the malign side-effects of Law’s scheme made themselves felt, not the least of them, the distress occasioned to the ordinary household by the rising price of necessities in a world simultaneously subject to the blatant vulgarities of the rising mob of instant, speculative ‘millionaires’ (as the new phrase had it). Just as we have learned all over again, such disadvantages came rapidly to overwhelm the largely incidental fillip the inflation accorded to genuine economic activity.

Unabashed, our Caledonian conjuror could only plunge ever further into a maze of bewildering – and often contradictory – expedients of his own construction, blurring the lines between state debt and public equity, between common stock and bank money; banning, then re-instating the use of gold and silver and altering their official parities with mind-numbing speed until all trust in his System – its specious virtues so recently extolled to the heavens – collapsed and France lay broken alongside it.

So, too, do we – the voluntary legatees of John Law – face a world which is seemingly broken, in its turn.

Sauve qui peut!

With the PR-man’s trained ear for a catchy phrase, that emptiest of empty suits, UK PM David Cameron declared, in the aftermath of this week’s appalling display of mass barbarism, that society in the unhappy land over which he shakily exercises power was ‘broken’ – to the ill-concealed schadenfreude of much of the continental press, many of whose own cities still bear the scars of similar irruptions of the Noble Savages whom their Provider States have so successfully reared in the moral wasteland of their sprawling favelas and seething bainlieues.

Painted in oscillating shades of red and green on our dealing screens, we can also see the full, epileptic frenzy of our broken financial markets, no longer evidence of the rational allocation of hard-spared capital to the enriching process of patient and diligent entrepreneurship, but a wild, computer-driven video arena where countless billions swarm into and out of the sea of tickers from one micro-second to the next, with each successive ebb and flow of this leveraged flood further reducing the informational content of the associated prices and so defeating the very purpose of the capital market itself.

Many disparate classes of ‘assets’ had spent eight months trading ever more closely bound to one another on the wave of Bernanke’s last, fatuous, Rooseveltian ‘experiment’ of QEII. So it was that the expiry of that nakedly cynical programme, at a time when the underlying macro-data had rather predictably started to turn sour, left a vacuum behind the broken-record promises of the stock promoters. Unfortunately, the milling Herd to whose members they exist to whisper their blandishments – much like Nature herself – absolutely abhors a vacuum.

A long time ago, we first wrote about what we had come to recognise as the bipolar tendency of financial orthodoxy to undergo opposing, Kuhnian revolutions of its Groupthink every six to twelve months, or so.

Typically, the players first persuade themselves of the validity of an often arbitrary, but usually bullish, scenario which, by dint of constant repetition and uncritical mimicry comes not only to serve as a dogma, but one which each believer professes to have discovered for himself. Along the way, all objective data and governmental statistics which can possibly be construed to support this scenario are talked up and re-transmitted in confirmation of the first idea: those which cannot be so re-interpreted are simply ignored as ‘outliers’ by all except the small cluster of much-derided contrarians and habitual Cassandras.

Eventually, as the trend matures and its espousal becomes near universal, it begins to lose its onward momentum. Now, for the first time, the dissonant evidence, which has long been accumulating, begins to excite a certain uneasiness in the Jungian mass consciousness.

Finally, the trend turns – sometimes to, but often absent, the accompaniment of some unanimously-recognised trigger event – and the first losses start to be taken by those latecomers caught in the reversal. As each successively lesser, Greater Fool sells out, cursing himself that he always buys the top, as he does, he encourages another of this time’s Smart(er) Money men to quit while he’s ahead, too. So, each initial trickle dislodges more and more of those clinging precariously to the edges of a now-vertiginous slope below, until the first, trivial setback snowballs its way into a screaming avalanche of head-in-the-hands liquidation.

Now, at this point of maximum dislocation and mental discomfort, all those inconvenient developments which should have long since called the move into question are suddenly rediscovered and – lo! – they crystallise instantly into the foundational themes of a counter-trend of equal and opposite conviction.

Sadly for them, the earlier naysayers will find no belated applause for being right, being despised for their pusillanimous refusal to play the game if they say, ‘I told you so’ and being anyway doomed to seeing their premature insights co-opted shamelessly – and without the slightest attribution – by the post hoc rationalisations of a consensus-hugging crowd soon avidly blowing themselves an anti-bubble to replace the inflated soapskin of ill-starred hope which has just imploded all around them.

So it has been here, too, with the Shock! Horror! Hoocoodanode? of the downwardly-revised US GDP numbers; the farce of the WWF grand slam which was the Federal budget dispute; and the ritual slaying of the sacred cow of that nation’s undeserved prime credit rating.

Up until that point even the yawning cracks opening up around the foundations of the Eurozone could largely be ignored in the eagerness to buy a small section of Blue Sky, but, once sufficient self-doubt was ignited in some corner of that Gordian tangle of correlated and cross-margined trade in which the near-free leverage of QE-II had enmeshed everyone, that ongoing turmoil also became one of the defining features of the new bearishness and its expression in market pricing became violently intensified as a result.

So the first sparks of panic were struck to find a ready kindling among the garish paraphernalia of illusion piled high behind the flats and tableaus which comprised the backstage clutter in the Theatre of the Absurd where the ‘Great Global Recovery’ play had been enjoying its unbroken, 15-month run.

In time-honoured fashion, a mad rush for the exits soon followed.

Grigg: The Only Reason To Vote Republican

 Image: Sean Hannity interviews Mitt Romney this weekend on the Iowa straw poll and his Presidential campaign 

Read this Will Grigg blast from the past, as the Dead Elephants start to re-animate in preparation for their upcoming defeat by the Mighty Kenyan.

Forward, with a motto for America’s future:

2012: The Year Of The Foot-Long Corn Dog

Collapsapalooza!


Silicon Graybeard riffs on Mark Steyn’s latest, along with others.

They are coming.

Resist.

The Logical Dead End of the Nanny State

http://thesilicongraybeard.blogspot.com/2011/08/logical-dead-end-of-nanny-state.html

Quote of the Day from Mark Steyn in today’s Orange County Register:

This is the logical dead end of the Nanny State. When William Beveridge laid out his blueprint for the British welfare regime in 1942, his goal was the “abolition of want” to be accomplished by “co-operation between the State and the individual.” In attempting to insulate the citizenry from life’s vicissitudes, Sir William succeeded beyond his wildest dreams. As I write in my book: “Want has been all but abolished. Today, fewer and fewer Britons want to work, want to marry, want to raise children, want to lead a life of any purpose or dignity.”

In Steyn’s unique style of wit and sarcasm, and having witnessed much of it personally, he speaks the truth no one else dares to:

…one-fifth of children are raised in homes in which no adult works – in which the weekday ritual of rising, dressing and leaving for gainful employment is entirely unknown. One-tenth of the adult population has done not a day’s work since Tony Blair took office on May 1, 1997. (emphasis added)

The European Nanny State is collapsing in front of TV news cameras every day.  There are really only two possible outcomes that I can see: either the governments collapse into bankruptcy and currency destruction, or the EU turns into a giant command economy: communism, fascism or National Socialism (Nazism).  Years ago, I remember quipping “who would have thought world communism would collapse because there’s no money in it?”, but it’s true.  A command economy can never out compete a free market economy, even one like ours which had been hobbled by a century of socialist policies.  If the EU becomes a command economy, it just kicks the collapse can down the road and makes it worse.  Janet Daley, writing in the Telegraph last week said,

The truly fundamental question that is at the heart of the disaster toward which we are racing is being debated only in America: is it possible for a free market economy to support a democratic socialist society?

As both Steyn and Daley emphasize, and we can clearly see, the idea that a capitalist economy can support an ever-expanding socialist welfare state is collapsing in flames right in front of us.  It’s not the poor vs. the rich.  It’s bored kids who have never earned any self-esteem by accomplishing anything (precisely because of the welfare state) going “wilding” and burning and stealing because they’re bored.  How else do you explain the millionaire’s daughter breaking down stores to add to her (presumably) already stuffed closets?  Or the “stunning 22 year old model”, and the others who give the lie to the story that it’s poor people getting revenge.

Back to Steyn,

The London rioters are the children of dependency, the progeny of Big Government: they have been marinated in “stimulus” their entire lives.

There is literally nothing you can’t get Her Majesty’s Government to pay for. From page 205 of my book: “A man of 21 with learning disabilities has been granted taxpayers’ money to fly to Amsterdam and have sex with a prostitute.”

Hey, why not? “He’s planning to do more than just have his end away,” explained his social worker. “Refusing to offer him this service would be a violation of his human rights.”

If taxpayers funding a man’s flight to Holland to employ a prostitute (is this one of those jobs that British women just won’t do?) isn’t enough; Ann Coulter contributes this:

A year earlier, in 2007, another product of the new order, Fiona MacKeown, took seven of her eight children (by five different fathers) and her then-boyfriend, on a drug-fueled, six-month vacation to the Indian island of Goa. The trip was paid for — like everything else in her life — with government benefits.

(When was the last time you had a free, six-month vacation? I’m drawing a blank, too.)

This is one of those cases where you need a Ph.D. in economics to be stupid enough to fall for the idea that everything can be paid for by a productive class and will be forever.  “From each according to his abilities to each according to his need” always, always, falls apart at that “need” part, when need turns from a meal to a flight to Amsterdam for a prostitute or to India for six months vacation.  From bread to circuses.  At some point, the system falls apart.  The productive class sees the life that parasites lead, sees progressively less and less of their efforts, the sweat of their brow, being “allowed” to stay in their wallets, and they quit.  Then the whole society collapses.

Starting now.

‘Bread and Circuses’ is the cancer of democracy, the fatal disease for which there is no cure. Democracy often works beautifully at first. But once a state extends the franchise to every warm body, be he producer or parasite, that day marks the beginning of the end of the state. For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader—the barbarians enter Rome.” – Robert A. Heinlein

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