Dateline: 13 April 2017
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| An illustration from, "Inflation is Coming And What You Can Do About It." |
This essay is part of a series about Ralph Borsodi and his book, Inflation is Coming And What to Do About It. Click Here to go to the beginning of this series.
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In previous parts of this series I have introduced you to the economist, Ralph Borsodi, and his book, Inflation is Coming And What to Do About It. I've also spent some time expanding on Borsodi's vision of creating a network of small, intentional, communities of homesteading households on the land. Borsodi saw life in small communities as a "normal" way of life, as opposed to people living in cities, which was part of the industrialized "Ugly Civilization."
The first half of this book is about government debt and inflation. Borsodi attempts to bring the subject down to terms that would be understandable to the layman, using historical example and recent (first half of the 19th century) history.
The bottom line is that inflation is caused by government overspending. Borsodi likens the ever-expanding debt, and the inflation that is created by irresponsible government debt to an enormous dam. He says the dam will eventually break, and wipe out all those people who live downstream.
Borsodi says that government can not and will not ever fix the problem. He asserts that people should not assume or depend on the government to be able to fix the problem it has created. Rather, those people who live in the path of the flood waters should get themselves and their families to higher ground.
Borsodi says that government can not and will not ever fix the problem. He asserts that people should not assume or depend on the government to be able to fix the problem it has created. Rather, those people who live in the path of the flood waters should get themselves and their families to higher ground.
The funny thing about Borsodi's debt numbers and the danger they presented is that they are so incredibly low compared to our day. For example, he notes that America in 1941 had "a national debt of the staggering sum of $367.68 for each man, woman and child in the United States."
That is, of course, laughable when you consider that our current American debt burden is something around $200,000 for every man, woman and child. The debt dam has had some significant inflation leaks since Borsodi's book, but the dam hasn't broken.... yet.
Borsodi's book was written in 1945. The inflation rate in the US that year was 2.3%. In 1946 it jumped to 8.3%. Then in 1947 it spiked to 14.4% before dropping. Then, in the 1970s, inflation spiked up again. This chart shows the yearly inflation from 1968 to 1992. The yearly averages are the numbers down the column on the far right of the chart.
Those yearly numbers represent the percentage of systematic theft of hard-earned and sacrificially saved money from millions of Americans by government economic mismanagement. When compounded over the years, the theft is staggering. It's immoral. It is criminal.
But, as I noted, Borsodi's inflation dam has not yet broken. America has so far managed to avoid hyperinflation and the subsequent total-destruction of our paper money. We have most certainly experienced destruction in purchasing power, but not total destruction of the currency.
But, as I noted, Borsodi's inflation dam has not yet broken. America has so far managed to avoid hyperinflation and the subsequent total-destruction of our paper money. We have most certainly experienced destruction in purchasing power, but not total destruction of the currency.
Many people postulate that the American dollar has managed to survive only because of the Bretton Woods agreement in 1944 that made the American dollar the world's reserve currency. That special privilege has enabled us to continue to expand our debt to an astounding amount. But there are worldwide rumblings of discontent with the American dollar. It was a stable currency (backed by a stable and prosperous American industrial economy) back in the day. That is, however, no longer the case.
At this point, everyone is wondering how long this sort of debt bubble can continue. Can it go on perpetually? Will there ever be a harsh day of reckoning? Will that reckoning be hyperinflationary? Or will it be deflationary?
Well, we may find out soon enough. Or, maybe the bubble will expand for a few more decades. No one really knows. Borsodi was a smart man. He was right about inflation, but not the timing of the end.
What I've just written is all I'm going to say about the subject of inflation from Borsodi's book. In the rest of this series I will share with you some of the specific things that Ralph Borsodi recommended for Americans who could see that the inflation dam was eventually going to break, and who wanted to save themselves from the worst financial disaster in history.
What Borsodi recommended back in the late 1940's was pertinent then and it is pertinent now. I dare say, it is probably much more pertinent now.
At this point, everyone is wondering how long this sort of debt bubble can continue. Can it go on perpetually? Will there ever be a harsh day of reckoning? Will that reckoning be hyperinflationary? Or will it be deflationary?
Well, we may find out soon enough. Or, maybe the bubble will expand for a few more decades. No one really knows. Borsodi was a smart man. He was right about inflation, but not the timing of the end.
What I've just written is all I'm going to say about the subject of inflation from Borsodi's book. In the rest of this series I will share with you some of the specific things that Ralph Borsodi recommended for Americans who could see that the inflation dam was eventually going to break, and who wanted to save themselves from the worst financial disaster in history.
What Borsodi recommended back in the late 1940's was pertinent then and it is pertinent now. I dare say, it is probably much more pertinent now.
To go to Part 6 of this series
I always enjoy your economic discussions, Herrick. Perhaps it's the twenty years I spent as a futures/commodities trader. What you (and Borsodi) say about the government never solving inflation is absolutely true. I don't know if you've ever read any books by James Rickards, but if not, you would definitely benefit from his book "The Death of Money." It's a followup of sorts to a book he wrote titled "Currency Wars" although they both stand alone.
ReplyDeleteIn "The Death of Money," Rickards is essentially building a case for a return to the gold standard; something that he willfully admits is unlikely to happen because of the hard decisions it would require and there is zero immediate political benefit to doing so. There is a lot of good information as he goes around the world laying out the state of world finance and central banking, the subject of which is key to understanding the problem.
And that brings me to the related part to this discussion - Governments and central banks are inextricably linked and have a vested interest in maintaining an inflationary environment. He gives a very good analogy of how both deflation and inflation can add to a person's buying power, but only inflation makes that increase taxable. Since governments can increase spending (and thus, power) by inflationary monetary policy and that policy also creates increased revenue through taxation, there is absolutely no way you'll ever see government do the things it needs to do to stave off collapse. They will continue to drive the bus towards the cliff with their foot on the accelerator.
Hi Chad,
DeleteI appreciate your perspective. I've listened to James Rickards on numerous YouTube interviews but have not read his books.
Elizabeth L. Johnson said,
DeleteChad, talk about inflation and increased taxes. Our California legislators and governor just passed a law raising diesel fuel tax by 20 cents, fuel taxes by 12 cents per gallon (our present fuel tax is 48 cents on the gallon), and a 5.75% increase in diesel sales taxes. (Yes environmentalists, tree-huggers can't wait to get those horrible, nasty, polluting diesel trucks out of California. We have more trucks per capita than any other state. Never mind that our air is remarkably cleaner than in the 1990s). Vehicle license fees will raise an avg. of $38/yearly, and a new yearly fee on vehicle registration will range from $25 to $175. And this, under the premise(lie) that we need highway improvements. One theory states the new taxes are to make up for our state as a 'sanctuary' state making up for the loss of fed. government funds. People will flee the state!
always insightful, and i'm eager to hear what Mr. Borsodis (or you) have to recommend by way of action. getting back to the land and self-production is the key, however land ownership is both prohibitive and treacherous in these times. Land is expensive, tempting the young to get into debt. Land ownership is also a red flag to the bull of local and State gov for taxation in the future when Inflation's debt comes due. owning any significant land will be a risk. Our local county has 22 (by my last count) beautiful, small, county parks, MOST of which were seized in the 50's for tax reasons.
ReplyDeleteone suggestion i have, especially for the young: try guerrilla gardening in 'public' land. keep it simple and inconspicuous. the young have energy to put into a small garden to practice self-production and trying to grow and harvest on public land will give good experience for the minor 'infraction' that it is. worst case - they are caught and lose that season's efforts.
another suggestion (for the youth) is to work with older family members who have land and work the land with them. they both get benefit - the land is owned and the land is worked by younger family. best part it produces stronger family relationships (vital in difficult times) that will last forever. the food is a big benefit vs. inflation as you've stated.
i don't mean to take over your posting, just trying to fish for ideas on what action to take.
eagerly waiting for the next post...
wildbillb—
DeleteYou've got the key right. Seems so obvious, doesn't it?
Fortunately, a lot of self reliance can happen on a small amount of land, if it is managed properly.
I've not heard of guerrilla gardening on public land but I read the 1978 book "Possum Living: How to Live Well Without a Job and With (Almost) No Money." It's sort of along those lines.
I like the idea of families working land together for subsistence purposes. Families are natural "communities."
Thanks for the comment!
Elizabeth L. Johnson said,
DeleteAn old saying says, "You're not a man, until you have land!" As far as I know, banks will not loan on unimproved land. Making it harder, and more out-of-reach debt for the young. If it is improved, that is, it has the addition of electricity, they are more likely to loan. What is sad is the giving over of more and more masses of land out of families and into the state or government power to "conserve" and "preserve". Also sad is the BLM removing public lands from ranchers that have been used for generations. They don't seem to give explanation, either. Seems to be the removal of land to keep it out-of-the-reach of self-sufficient agrarians and agrarian communities.
I am learning from these two commenters...
ReplyDeleteWhen people comment, sharing their opinions and insights, we have an online community. That's always nice. :-)
DeleteElizabeth L. Johnson said,and
ReplyDeleteIt's so interesting that what wildbillb said about young relatives returning to their elders land to help them survive off the land is exactly the reverse what industrialization took to empower itself and ruin the concept of agrarian communities. Industry made slaves dependent on them, instead of connection/dependence on the land, and subsequently the Lord. Guerrilla gardening (I've never heard it put that way) is new to me, which I happened to see modeled recently. It means disguising your gardens and orchard by planting in a scattered, chaotic pattern amid the woods, so the roving crowds do not recognize it to ravage your hard work for themselves when they become desperate and starving because of industrialism.