Vigilant Investor

If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy.
~James Madison

The urge to save humanity is almost always a false front for the urge to rule.
~H.L. Mencken

The welfare of the people in particular has always been the alibi of tyrants.
~Albert Camus

It is a universal truth that the loss of liberty at home is to be charged to the provisions against danger, real or pretended, from abroad.
~James Madison

If you live long enough, you’ll see that every victory turns into a defeat.
~Simone de Beauvoir

How far can you go without destroying from within what you are trying to defend from without?
~Dwight D. Eisenhower

Those are all valid quotes.

Yet, if brought up regarding the recent revelations that Bush’s security apparatus is monitoring private money transactions on a global scale in its war against terror, each would be dismissed by supporters as irrelevant given the “obvious need” to fight terror and enemies of the U.S.

Yet one can’t help but figure that once such practices become normalized, the tools necessary for oppression of freedom are forever in the hands of a government, and therefore subject to future misuse.

We bring this up because of the likelihood of capital controls in the future of U.S. in an attempt to prop up the dollar should years and years of constant inflation (that is, in the classic definition of the word, meaning increasing the money supply) finally catches up to the U.S. Whenever a financial crisis happens in a country, smart, entrepreneurial wealth seeks to protect itself however it can. When a nation’s politicians and central bankers gear up for policies that enable them to confiscate citizen’s wealth in order to play god with the economy, the result is that wealth wants to flow out of a country. Enter capital controls, which prevent the free movement of capital to where the market deems it should go..

Sound far fetched in the supposed “land of the free”? While often not talked about, but our very own St. FDR — Franklin Roosevelt was guilty of just such a scam. After the Federal Reserve managed (or, mismanaged, as the case would be) to engineer the 1920s bubble and subsequent crash and credit contraction, leading to the depression, FDR stepped in and placed severe restriction on the free movement of dollars in the U.S.A. For example, while you won’t be taught this in school, gold was made illegal to own by the common citizen. The reason? Because it presented valid competition as a safe haven for wealth vs. the dollar.

FDR and his cadre of economic meddlers (Keynes, Friedman, et al) had it in their minds that they would not only partially default on the dollar, but that they would expand the money supply vastly in order to bail out the economy. By printing dollars out of thin air, they would be used to buy FDR’s New Deal projects. But we used to learn in economics 101 that wealth gained by printing money comes at the expense of those already storing their wealth in the currency. What the new money gains the old money loses. Not being stupid, the more entrepreneurial citizens holding the wealth would soon enough be selling dollars for something that couldn’t be counterfeited, and FDR’s dollar would have dropped substantially as people exchanged dollars for the only currency to have lasted thousands of years: gold.

That said, in this modern age, should we end up in a financial crisis that would require the Federal Reserve to work with the U.S. Treasury to inflate the dollar at an even faster pace than it is currently, one could expect people to exchange their dollars fairly quickly for alternatives. In the face of authoritarian laws like those from FDR, many would still choose to exercise true freedom in an attempt to move their money offshore. Enter all the lessons Big Brother learned in tracking offshore money movements thanks to the War on Terror.

This may sound as if it is an unlikely circumstance to ever unfold, but tipping points historically hit fast and unexpected. And, as regular readers of Vigilant Investor know, the U.S. economy and Federal Government face enough structural headwinds where scenarios of the dollar losing its status as the world’s reserve currency need to be weighed.

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