Whatever else may be said for or against it, the boom period of an inflation is marked by extensive waste of scarce and valuable resources. This is not to say that the user knows at the time that he is wasting resources. Only in retrospect, during the depression that necessarily follows such a boom, is there clear evidence that the prior practices were wasteful. The painful message the depression brings is: "Curb the waste!"
Waste is the child of excess. The boom period generates an illusion of abundance of goods and services — the reality being a lot of bad money. The more bad money people acquire, the faster they’ll try to spend it. This explains the wasteful spending habits that develop in the boom phase of inflation.
Scarce resources are malinvested and used recklessly—as seen more soberly in retrospect. A plethora of cheap money and credit, like any form of subsidy, makes scarce resources appear to be more plentiful and less costly than they really are. We consume too much too fast of those things we think "someone else" is paying for. Bad money plays tricks on us — until the depression comes. Then we’re sorry.
We barely get started with all sorts of boom-time schemes to clean the air and the water and the slums, to rid the world of illiteracy and starvation and disease, to preserve or restore the state of Nature, provide an abundance of housing, medication, transportation, recreation — the satisfaction of every form of human need or aspiration — when suddenly and apparently without warning we face a meat shortage, a grain shortage, a lumber shortage, a sugar shortage, a fuel shortage —in fact, a serious shortage of every scarce resource in the world.
If we’re now serious about stopping waste, the first step will be to learn to recognize what is wasteful before the waste occurs. And that won’t be easy.
Oh, sure, you know very well when I’m wasting something; and I can see clearly how wasteful you are. Perhaps we could even agree to talk it over, and try to take each other’s advice. But, that isn’t really the problem. I’m content to have you use your own resources as you please. If you want to waste some of them, you’ll get no criticism or complaint from me so long as your waste isn’t injuring me or damaging my property.
I believe that you do not run about consciously trying to waste your time or energy or property. With more wisdom and will power, perhaps you could multiply your productive efficiency. But you try to ‘do your best with what you have. You act to serve the most urgent need of each moment, as you then see it. Why do I believe you’ll act in such a manner? Because, that is how I act. So, I respect your use of your resources, and would hope you’ll respect my choices.
Without The Owner’s Consent
The problem — the waste I deplore — is the action of any person or group to use my resources, my property, my life for purposes I can’t approve. So I object to theft, fraud, coercive acts of any kind against me, especially coercive governmental actions that go beyond what I believe are the limited, proper functions of government. And it appears that such governmental waste is most flagrant during the printing-press financing of an inflationary boom.
True, the size and scope of government is always a compromise. Some persons want more government regulation and control; some want less. So we get about as much governing as the prevailing majority will tolerate in taxes. And the minority, plus a number of those of the majority, will see in the resultant compromise many items of waste. At least, this is the situation during "normal times," when it is reasonably clear to the electorate what the government has in mind doing and who will be taxed how much to pay for it.
Let us return now to the real problem: the excessive waste during an inflationary boom. Such waste is backed by all sorts of plausible arguments and good intentions, but the key to the excessive waste lies in the method used to finance it — the arbitrary government expansion of money and credit. The government simply prints the money it spends to withdraw goods and services from the market. It doesn’t reduce the quantity of money remaining in the pockets of civilians — it just diminishes the supplies of goods and services. This is what makes it so difficult to see the costs — to identify the wasteful spending at the time it happens. But the waste does occur, the spending increases, the supply of irredeemable paper money expands, goods become scarce, controls are applied in multiple phases, businesses fail, unemployment rises, producers and consumers become depressed.
Our depression is justified. We have been tricked with bad money. The government has wasted our resources. The message that somehow must be learned by the citizenry before it will be conveyed to Congress is to stop that waste; stop squandering and start protecting our savings; let us serve ourselves and one another through honest production and trade; let us choose a money we can trust so we can know, at the time, the cost of our actions; let us own gold. Why gold? Because governments have no power to arbitrarily increase the supply. It can’t be counterfeited. It is honest money.
That could be the message of the current depression if we will learn it; but it most certainly will never be delivered to Congress unless and until we do learn it thoroughly.
Meanwhile, instead of stopping the waste, irresponsible governments will try to stop the depression — by further deficit spending, and printing more money. Producers will be maligned for what they have brought to market rather than encouraged to produce and offer more. Consumers will be asked to voluntarily shiver and starve rather than spend their cash holdings to draw goods from the market. The usual premise of those whom we elect to govern us is that they know better how to use our resources than we do. And the longer we allow that premise to go unchallenged, the more of our precious resources will be wasted. Those resources are drawn from the market for purposes we do not understand or approve, with unlimited issue of fiat money that the government forces upon us as legal tender, even though producers and traders have every reason to mistrust it as a medium of exchange.
International Consequences of Political Intervention
The domestic consequences of these political interventions are serious enough. Citizens are regulated and controlled and taxed, producers are punished, businesses are driven into bankruptcy and then nationalized, to be governmentally operated with "post-office efficiency." As welfare programs proliferate, the "clients" sink into the ever-declining level of living characteristic of socialized societies. Waste is the order of the day, and the economy is weakened as more and more government control displaces the functioning of the market. But the disaster does not stop at the national borders.
A weakened nation can neither compete successfully in world markets nor can it command international respect by reason of its military might. It simply tends to waste away. And such a weakened economic and political machine is in no position to cope with an energy crisis. Attempts to throw the blame on the Arabs or other producers of oil — some mysterious international cartel — have a hollow ring. How stepped-up waste of resources can make the United States self-sufficient by 1985 is never explained. How further self-imposed tariffs and embargoes will help us get the oil we need is far from clear. How more paper money, which already is unacceptable in international trade, will buy us friends abroad or keep us warm at home is a puzzle. Have we not had sufficient experience with the bad money government provides, and the excessive waste of resources under government control, to get the message and relay it to Congress: "Stop the waste and leave us to our own choices in the world market. Let us buy and sell on our own terms in the money of our choice."
It might be very interesting and instructive to see what a few pieces of gold thrown into the international oil cartel would do to it. Who knows how many gallons of oil some producer might release for one ounce of the precious metal? Or how many other producers or potential producers of oil might rise to the bait and offer fuel at bargain rates for that kind of money?
Once American citizens are properly depressed over government waste through monetary manipulation, they may then get the message to Congress to let money be whatever the market says it is. Then, if government has need for resources, let them be taken directly and openly from owners — not through a mystifying monetary procedure.
Citizens then might still condone some wasteful government spending. Men do make mistakes. But the tendency is to correct such mistakes most rapidly when the costs are instantly and clearly revealed. The dreadful cost of letting the government prescribe and manage our money is now becoming clear. If that mistake is corrected, it would go far to curb numerous other wasteful practices — and our depression will not have been in vain.