In yesterday's post, I discussed, among other things, how Keynesians cheat the working class through inflationism. This thwarts the efforts of many workers to turn into capitalists themselves, by eroding the value of their savings. Keynesians, after all, know nothing about savings; their theories are all about consumption - how "aggregate demand" must be boosted by "monetary stimulus" in order to achieve "full employment." When we see chacha manmohan s gandhi working hard in order to "produce work" - the NREGA - we must also see that his error lies in his Keynesian education, which sees the achievement of full employment as a "role of State." Never mind the fact that the very same State has destroyed over 200,000 high-paying jobs by killing the "dance bars" of Mumbai. Schizophrenia.
Before the curse of fiat paper money, when people saved for the morrow, they bought gold. The yellow metal was universally seen as a safe "store of value." Even before standardised gold coinage - that is, gold "money" - people bought quantities of gold and stored it, knowing well that this metal would preserve its value. Today, when you save in fiat paper money, you lose value. Inflationism (which is another word for Keynesianism) penalises savers and rewards borrowers. Money as well as credit are both "created out of thin air" - with central banks issuing fiat paper notes monopolistically, and "fractional reserve banking" allowing member banks to issue loans way beyond their deposits. This is how the "money supply" is fraudulently expanded - and the more we have of this money, the less is its value: inflation. This is what The State has done to our money.
When gold was chosen as a store of value, and later, when gold became money - a "medium of exchange" - it was NOT because of a ruler's decree. On the contrary, the choice of a medium of exchange was a spontaneous one on the part of those who traded. Only today is money a creature of The State. In the past, people have traded using various commodities as money - from cowrie shells to salt (the word "salary") to animal skins (the word "buck"). Thus, the solution to inflationism lies in a return to traditional moneys, freely chosen by those who trade. No more government issued fiat papers as "legal tender." In the modern world, this means a return to the Gold Standard. Gold coins are then "real money" - and redeemable paper notes are "money substitutes." The great advantage of such a system is that no State can tamper in any way with the supply of money.
As inflationism ravages India, it is interesting to note what our The State's take is on it. Yesterday, I wrote about the "high level meeting" called my chacha manmohan - how cabinet ministers met for two hours and the reporters who patiently waited were told that the deliberations were "inconclusive." Today, we have Rahul Gandhi saying something quite bizarre: that his grandmother Indira Gandhi could control inflation better because the country had a purely CONgress government then, while today there is a coalition, and hence there are "compulsions." Do they buy off their coalition partners by handing over newly printed rupee notes?
In any case, inflationism has been with us since Nehru's days - all the "deficit financing" to fund his "Soviet-model heavy industrialisation" steel plants. When Indira Gandhi declared Emergency in the mid-1970s, I was in college. A pack of Wills cost a buck or so then; it costs over 50 rupees now. A litre of petrol was Rs. 3.50 then; it is over 55 rupees today. The rise in prices has been "continuous" and not "sudden" - because inflationism is "deliberate policy." This has always been CONgress policy - and still is. Rahul Gandhi is talking nonsense. The report says that he is asking the youth to "join politics." What he really means is "join CONgress," of course. Joining a centralised, hierarchical political party is not "politics." It is slavery and fascism. It is obedience and loyalty to a High Command.
The actual "actions" of our The State are also quite bizarre and theatrical. Concerned over the high prices of onions, our The State has launched "income tax raids" on all major dealers of onions. The idea is to deflect the blame - while also pretending to do something. It is the fiat paper money Keynesianism that is causing inflation - of all goods, not just onions. To "raid" onion dealers is perverse. Onions cannot be hoarded for long, anyway.
And what exactly is wrong with hoarding? Don't we all hoard whatever we think will increase in value in the future - from shares to gold? Trade is based on the changing values of the same quantity of goods. These values change over distance - as when apples are transported from Kullu to Madras. These values also change over time - as when gold prices spike during festivals. This depraved attack on onion traders shows the evil mentality of our The State.
It is the greatest error ever in human history that The State has been given a monopoly over money. Responsibility rests squarely on economists. But here, all economists are monopolistically "produced" by our The State - with the Keynesian chacha manmohan setting the syllabus: "macroeconomics for all."
Errors are being compounded by even bigger errors. This is why I have for long been insisting that in India, the people, the "population," are a resource; and it is The State that is The Problem.
State money, State education, State electricity, State highways... let's get rid of them all.
Recommended reading: My recent column in Mint calling for a return to the Gold Standard.
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