The Almighty Dollar?
In today’s Wall Street Journal, Clare Connaghan, Nicole Hong, and Ira Iosebashvili of Dow Jones assert the resurgence of the dollar, citing “newfound strength” in corporate profits and crediting the Federal Reserve with “jump-starting the economy.”
The notion of American economic strength is perverse at best. While corporate bottom lines are indeed growing, increased private sector profits are largely due to widespread publicly subsidized corporate welfare. Moreover, the policies of the Federal Reserve keep the money supply in a constant state of expansion and succeeded in stripping the dollar of more than 95% of its value over the past century. Recent rounds of quantitative easing are the latest examples of further expanding the money supply with no real economic benefit other than satisfying short sided hucksters while leaving markets heavily distorted.
Even though the economy and dollar may appear to be relatively strong on an international stage, the aforementioned policies are mathematically unsustainable. The American people cannot be expected to further prop up the private sector while their dollars are perpetually inflated by a central bank. Although detractors point to the bond markets as evidence of inflation remaining low, hyperinflation is not an event you can mark on your calendar. One day there will simply be no further appetite for American debt.
Relying on legislative bodies and central banks to “plan” the economy turn individuals into chess pieces moved at the whims of those in positions of authority. Order will only emerge spontaneously out of individual actions in pursuit of rational self-interests. As Adam Smith famously wrote in The Theory of Moral Sentiments (1759), “society must be at all times in the highest degree of disorder.”
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