"When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it."
—Frederic Bastiat
Prostitution is a topic that most Americans would rather not discuss. As long as it’s done behind closed doors, in the dark of night, or away from the public eye we don’t have to think about the desperate circumstances that lead women to sell themselves for money, battle drug addictions, and commit to an unsustainable lifestyle that often ends in pain, trauma, or suicide.
Then again, I’m not talking about college students, single mothers, or any of the other thousand or so individuals that decide prostitution is the easiest way to reverse the hole they find themselves in. No, I’m talking about our nation.
It is tempting to think that prostitution is simply a moral issue. However, it is just as much a matter of circumstances, or even economics, than it is morality. What are the economic circumstances often associated with prostitution? Debt and drugs: two things our nation—that is, our economy—is seemingly unable to shake free from.
It doesn’t stop there though. The similarities between prostitution and the American economy are with profound historical precedent to numerous nations and empires that, without changing course, all faced a similar fate.
Yesterday I posted a video showing a portion of the documentary I.O.U.S.A., which told a parable of Thriftville vs. Squanderville—a story written by Warren Buffett to simplify the “problems inherent with persistent and large trade imbalances.” It describes what happens to a nation that continually consumes more than it produces. The moral of the story is that eventually the consuming nation will have spent all its money and must resort to selling itself, i.e. its land, property, assets, etc., to maintain its luxurious lifestyle. When the land can no longer produce or has all been sold, it becomes the property of another. A long time ago, and perhaps still true in some places today, this often resulted in a family selling their children as slaves or indentured-servants for money. Not only is this sad state of events a reoccurring pattern throughout human history but also, perhaps, the origins of prostitution itself. To me, the link between debt, slavery, and prostitution is extremely well-established.
Consider now what most Americans face. Michael Hudson put it quite well when he pointed out:
“In order to qualify for professional jobs in America, [students] have to take out loans that put them deeply in debt. Then, when it comes time to start a family, they have to take on a lifetime 30-year mortgage debt. They need to take out an auto loan to buy an automobile to drive to work, especially where public transportation has been dismantled… And when their paychecks are squeezed more, they can maintain their living standards and social status only by taking on credit card debt.”
This sad state of affairs could not happen without a monetary policy, government, and culture that rewards consumption and spending over savings and investment.
This didn’t happen overnight. Nor is it the result of a single factor. America became a debt-ridden “service-based” economy through a long-series of poor decisions that, like the prostitutes now standing on street corners, must now choose to service as many as they can and hope that make-up and lipstick will hide the signs of deterioration. Supply and demand are no longer a productive exchange of goods, but of maintaining appearances.
As the nation’s former Comptroller General, David Walker, says, “We suffer from a fiscal cancer. It is growing within us and if we do not treat it, it could have catastrophic consequences for our country.”
Like any disease, if not dealt with, it will eventually kill its host. Unfortunately, the rot, corruption, and dependency on debt-based consumption has gone so deep that to drastically cut spending will almost certainly lead to major withdrawals.
If prostitution was merely an economic issue, the solution would be easier; but, as we all know, it is also a moral and spiritual one. If this were not so, then consider this: If a woman were to plead with her possessors to help her lead a productive life, would a moral entity force her into further debasement and give her drugs to ease the pain? When god is money, the choice is obvious.
This is exactly how the Federal Reserve—our central bank—is treating the disease that is ailing America: through currency debasement and large doses of monetary injections. Long-term sustainability is not the goal. It is to keep America "servicing" as many clients as long as possible until she has been taxed, regulated, and starved of whatever productive value she has left.
In order to end this we must stand up and fight. We must learn to save and not just borrow. We must learn to produce and not just consume. This part is a fight against ourselves.
The second part is a fight against monetary policies that do not serve the long-term interests of the U.S.
As laid out in Jim Rickard’s testimony before the Senate Banking’s Subcommittee on Economic Policy, we must begin by:
- Raising interest rates in stages to provide positive real returns to savers.
- Banning over-the-counter derivatives that serve no role in capital formation but greatly increase systemic risk.
- Breaking up too big to fail banks that pose systemic risk.
- Offering real price stability. Two percent inflation is not benign, it is cancerous.
- Create a favorable investment and growth climate by ending regime uncertainty in areas such as taxes, healthcare, regulation and other government impositions.
If we do not do some of these things ourselves, they will be forced upon us by circumstances or others instead. America is still in a position to make good choices. If we wait until the "handwriting is on the wall", it is too late.
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