Consumption without Production
“Every man is a consumer, and ought to be a producer”, observed 19th century philosopher Ralph Waldo Emerson. “He is by constitution expensive, and needs to be rich.”
Ralph Waldo Emerson (May 25, 1803 – April 27, 1882), who inter alia opined on consumers and the need to not only consume, but also produce. The latter activity has recently become even more severely hampered than it already was. And yet, government is spending like a drunken sailor. [PT]
These days Emerson’s critical insight is being taken to its extreme. Consumers, many whom lost their jobs due to government lockdown orders, no longer produce. Yet they still consume. They are expensive. Not rich.
What’s more, this consumption is not funded through personal savings. Nor is it funded through government transfer payments. Rather, it is funded via the printing press.
Emerson, no doubt, was lacking in the unique perspective we are presently granted. He did not have the special opportunity to watch his government destroy the economy in short order. Perhaps if he had, he would have penned a neat axiom to distill the essence of what happened.
The world today looks nothing like Emerson’s day. The 19th century was an age of honest money. Central bankers did not roam the land.
Printing money to buy bonds and stocks, and to sprinkle on people, would have been quickly dismissed. The experience of the Continental Congress during the American Revolution, and their over-issuance of paper “continentals”, had shown that resorting to the printing press was an act of suicide.
Promises, promises… “not worth a continental” became a saying after this early experience with paper money. [PT]
Currently, printing press money is considered enlightened central banking policy. Inflation targets, zero interest rate policy (ZIRP), direct bond purchases, twisting the yield curve, unlimited credit. This is merely a partial list of the trouble central bankers are up to.
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