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October 16, 2009

Money for Nothing

I remember an eminent professor’s telling me, with a barely concealed exultation, that he was making nearly $1,000 per day, week after week, merely by owning a very large house in a fashionable area: an amount that, needless to say, dwarfed any savings he might salt away from his salary. The government could not have been better pleased, for the majority of the population, who owned their own homes, felt prosperous as never before and attributed their affluence to the government’s wise economic guidance.

But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.

Except in one circumstance, that is: the possession of a salary and a pension that the government promises, implicitly or explicitly, to index against inflation. This is the situation of public-sector workers and is a pyramid scheme, too, perhaps the biggest of the lot, since events may require the government to renege on its obligations. But meantime, such employment will seem a safe haven, and the temptation will be for government to expand it, with the happy consequence—for itself—of increasing dependence. And dependence, too, undermines character.

- Theodore Dalrymple

Posted by Cassandra at October 16, 2009 06:55 AM

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This is the situation of public-sector workers and is a pyramid scheme, too, perhaps the biggest of the lot, since events may require the government to renege on its obligations.

And the gummint not only can, but *has*, reneged on its obligations in the past whenever the economy got crunchy. Congress yanked the GI Bill out from under us Viet Vets during the Carter Recession. Over half the promised VA health benefits available to vets who served prior to 1980 are no more, and trying to access the remainder sometimes requires bringing a lawsuit against the government.

But somehow, government-run health care will be *different*.


Posted by: BillT at October 16, 2009 07:34 AM

Re the social effects of extreme inflation, here's Sebastian Haffner, who grew up between the wars in Germany:

"Anyone who had savings in a bank, bonds, or gilts, saw their value disappear overnight. Soon it did not matter whether it ws a penny put away for a rainy day or a vast fortune. everything was obliterated...the cost of living had begun to spiral out of control. ..A pound of potatoes which yesterday had cost fifty thousand marks now cost a hundred thousand."

The only people who were able to survive financially, Haffner tells us, were those that bought stocks. (And, of course, were shrewd or lucky enough to buy the right stocks and to sell them at the right times.

"Every minor official, every employee, every shift-worker became a shareholder. Day-to-day purchases were paid for by selling shares. On wage days there was a general stampede to the banks, and share prices shot up like rockets...Sometimes some shares collapsed and thousands of people hurtled towards the abyss. In every shop, every factory, every school, share tips were whispered in one's ear.

The old and unworldy had the worst of it. Many were driven to begging, many to suicide. The young and quick-witted did well. Overnight they became free, rich, and independent. It was a situation in which mental itertial and reliance on past experience was punished by starvation and death, but rapid appraisal of new situations and speed of reaction was rewarded with sudden, vast riches. The twenty-one-year-old bank director appeared on the scene, and also the sixth-former who earned his living from the stock-market tips of his slighty older friends. He wore Oscar Wilde ties, organized champagne parties, and supported his emarrassed father."

Haffner believes that the great inflation--particularly by the way it destroyed the balance between generations and empowered the inexperienced young--helped pave the way for Naziism.

Posted by: david foster at October 16, 2009 09:53 AM

My retirement acreage has appreciated since I acquired it, although what with recent events, it's not worth as much it was when it peaked. I'm not even concerned about its value, though; I just can't hardly wait 'til I retire, even though I know I'll manage. It's only a few more years, after all...and if need be, I can catch fish for dinner, once I'm there.

Posted by: camojack at October 16, 2009 10:34 AM

Similarly as they say - absolute power corrupts abolutely. It is just the end of the line for someone who has ridden and driven the welfare tain for all its' worth....

O Bama, we hardly know ye....thank Zeus

Posted by: Kbob in Katy at October 16, 2009 07:48 PM