Fiat Money Is Immoral

The following is an excerpt from Richard Russell's Dow Theory Letters

"One Nation — SUBSIDIZED — How Big Government Underwrites Your Life." From the cover of this week's Time magazine.

Russell goes moral — I may work my whole life and make an after-tax total of five million dollars. The Fed, with nobody working, can "create" 100 billion dollars out of thin air in a matter of a few seconds. To me, this is absolutely immoral. Furthermore, the Fed wants inflation to continue at 2% a year. Again, I maintain that this is immoral. It's wiping out the middle class over time. I have a GI life insurance policy that was worth $10,000 when I took it out in 1945. At that time, the policy looked like big money. I scrimped and saved to buy and pay off that policy. What's the policy worth today, after years of compounded 2% inflation? Not much — talk about legal robbery!

A few American generations had a party after World War II. They borrowed and lived on a diet of steady inflation for over fifty years — until the present. Almost everything they did was inflated and subsidized by the government. Two or three generations voted themselves the good, inflated, subsidized life — and did they worry? Hell no, their kids and grandkids could pay for the fun later.

Now, payback time has come for their kids and grandkids. And the nation is close to suffering a nervous, debt-filled breakdown.

How will we ever pay off the debts the postwar generations ran up? Hey, no problem, we'll just print the money.

My take on this. The fiat money we print is immoral money. Nobody worked for it. I'm saying that the nation can't bail itself out with immoral money. It won't work. The Founding Fathers warned against fiat money, money that was backed by nothing, money that nobody worked for. If the Founding Fathers could see what has happened to their republic, they would roll over in their graves. "We give you a republic — if you can keep it," said Ben Franklin.

I am saying that we haven't kept it. Franklin's warning proved prophetic. We haven't kept the republic that our forefathers created for us. Some gave their lives for our republic, all staked their sacred honor for it, and in our greed and stupidity we have failed them.

I'm saying that the US can't keep its current system if we depend on immoral money. I'm saying that we can't print ourselves out of this mess. The Fed can print itself silly — it won't work. The post World War II generations had their long, subsidized party. Now I'm afraid that we're fated to take the pain. Unless, of course, we can print ourselves out of this disaster with worthless, immoral fiat money — money that nobody worked for.

The Fed and its junk money made the current disaster possible. Now let's see if the Fed can get us out of this miasma.

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