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The Coming Calamity

Americas Economic Endgame and the Prophesied Plagues

Alan Rex Mitchell August 25, 2009 PO Box 113 Vernon, UT 84080 Home: 435-839-3506 Office: 435-833-4125

Mitchell, The Coming Calamity

Copyright Alan Rex Mitchell 2009

Back page. Theres a bad moon rising, and it is one that has been prophesied dozens of places in ancient and modern revelations. The coming calamites of famine, earthquake, war, pestilence, plague, storms, tsunamis, darkness, and despair will be a result of the disintegration of the family. The author doesnt believe it is right that the world should end so badly, unless, of course, the people vote for it. Sadly, the common man is the sovereign consumer and his choices are determining Zion and Babylon. By understanding simple economics principles, we can see how the violation of Gods commandments has led to consequences in our economy. The present remedies will make it worse and hyperinflation, social turmoil, and chaos are just around the corner. But be of good cheer. Watch for the signs, including a sealed book of the End of the World.

Short flap. The prophets have predicted the disintegration of the family will lead to the prophesied calamities. The author explains economic principles that show how this disintegration will lead to hyperinflation and the nanny state, followed by chaos and a great division between the saints and Babylon.

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The Coming Calamity Americas Economic Endgame and the Prophesied Plagues

Table of Contents Chapter Page No.

Preface..........................................................................................................................................v 1. Voices of Economic Warning..................................................................................................1 2. Basic Economics....................................................................................................................18 3. God and Economics...............................................................................................................36 4. Zion and Babylon...................................................................................................................56 5. Economic Planning and Other Fallacies................................................................................72 6. The Great Depression.............................................................................................................90 7. Demographics and IOUs......................................................................................................112 8. Bailouts and the Printing of Money.....................................................................................126 9. The Calamity of Hyperinflation...........................................................................................142 10. Americas Economic Endgame..........................................................................................152 11. Great Divisions and Calamities..........................................................................................167 12. Preparations........................................................................................................................179 Notes 195

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The Coming Calamity Americas Economic Endgame and the Prophesied Plagues List of Tables and Figures Page No. Zimbabwe Bank Note.................................................................................................................23 The Ten Commandments...........................................................................................................36 Births to Unmarried Women......................................................................................................41 Fish on a Bicycle........................................................................................................................42 20 Economic Commandments...................................................................................................55 Tithing and Other Offerings.......................................................................................................64 The Great Depression Checklist...............................................................................................102 Medicare and Social Security Face Large Deficits..................................................................112 Higher Social Security Costs are Caused by:...........................................................................114 Ten Lies About Social Security...............................................................................................117 Summary of Events of the Global Financial Crisis..................................................................131 U.S. National Debt...................................................................................................................136 Worth of 1970 Dollar...............................................................................................................144 How to Ruin a Currency...........................................................................................................148 U.S. Unemployment Rate, seasonally adjusted........................................................................153 Hutchinsons Recipe on How to Fix a National Economy.....................................................155 How to Fix a Family Economy................................................................................................156 Coming Calamities of Modern Revelation...............................................................................175 An End of the World Scenario Consistent with Modern Scripture and Revelation.................189

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The Coming Calamity Americas Economic Endgame and the Prophesied Plagues

Preface

During the winter of 2008 while studying energy for the Department of Agriculture, I would daily follow the price of oil and agricultural commodities as they began an unprecedented climb. Oil rose from $50 to $145 per barrel. Ethanol production from corn became profitable even without the 80-cent-per-gallon government subsidy. Corn price grew fourfold. Wheat rose from $4 to $20 per bushel as the devaluating dollar made our wheat cheaper abroad. Because fuel prices tripled, businesses were forced to decide whether to increase prices, cut profits, or lay off workers. With each piece of economic news I felt something unusual happening. I saw signs of changenot just when I filled up my pickup at the gas pump, watching the counter click up to a hundred dollars, and not just listening to the usual half-truths that went with political campaigning. A silent sixth sense that measures security was telling me something. I had the terrorizing fear that I first felt as a child when I realized for the first time that my parents would die somedaymaybe any dayand I would be left alone with a mountain of hurt. By summer, gasoline prices peaked over $4 per gallon while specific government bailouts increased in size and frequency. In September, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke visited President Bush with the news that banks had been hoarding cash from each other, and the whole credit market was about to freeze the economy. The President encouraged the two major presidential candidates and a Democratic v

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Congress to agree to an $850 billion TARP (Troubled Asset Recovery Plan) to cover the banks bad assets. The recession was now reality. But this was just the beginning of government interference into markets. A year later in the Summer of 2009, we have seen house prices fall by one third, the stock market drop to a low of 6300; which, in turn, devastated 401k and other market-based retirement accounts. The state of California began issuing creditors IOUs that were not recognized by banks. Unemployment increased to over 9.5 percent nationwide15 percent in some states. Even tent cities have cropped up. In response, our nation has turned to the federal government with its predictable plan to borrow and spend, write IOUs and bail out financial institutions, and take control of whole sections of the economy. Unfortunately, government economic planning doesnt work, as former Soviet Union showed. Do I believe that government should do nothing? Wouldnt that cause pain, tears, and temporary incapacitation? Yes, in the same way that cleaning out a wound causes them. And the delayed treatment will certainly be worse. Please understand that I dont believe in contemporary end-of-the-world fads. AIDS will not destroy us. Neither will an increase in carbon dioxide of 100 parts per million. Mankind will survive a temperature increase of a couple of degrees or a decrease of the same magnitude. I have advanced degrees in soil and environmental science, and even I dont believe environmental degradation or loss of species will be our downfall. Overpopulation is overblown. We will survive the projected inch-per-decade sea level increase. Pandemics come and go. An asteroid may hit the earth, but staying up nights worrying about it wont help. The hole in the ozone layer heals itself. Genetic modification of plants will not eliminate the world food supply. There are no killer tomatoes.

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That said, one might ask what I think about the possibility of a coming economic chaos? Im scared to death! How we practice economics is a barometer of morality. This is true at the individual level as we decide whether to buy quality necessities and wholesome entertainment or their darker counterparts of alcohol, lottery tickets, and pornography. It is true at the national level where our nation keeps going further in debt, never considering the consequences. Economics has been described as a dreary science and economists have lost respect these days for failing to predict the collapse of the real estate bubble. Because this book is about moral choices and economic consequences, I will explain economics from the Austrian School perspective, which is both simple and moral. Their business cycle theory of credit expansion enabled them to predict the 2008 collapse as well as the one in 1929. Austrian economists understand that economics is not about moneybut about wealth. Moneys importance is one of those brain ruts we get intolike Los Angeles being farther west than Reno, Nevada. In fact, Reno is farther west (look it up!) but because we think that west is the Pacific coast, and Los Angeles is closer to the coast, therefore we believe L.A. to be farther west. Our brain rut about money is that an economy in recession lacks money and jobs, and therefore adding money and jobs will solve the problem. In fact, a recession is about a reordering of consumer priorities, but if our leaders understood that and the difference between wealth and money, they wouldnt be throwing money at the latest crisis. Not surprisingly, the earliest studies of economics were a search for morality. Adam Smith, the father of modern economics, formulated his ideas while lecturing as a professor of moral philosophy at the University of Glasgow, Scotland. Morality forms the basis for the Rule of Law for a state seeking to place citizens on equal footing. There are gray areas in human behavior, but ambiguity is not to be held up as exemplary. We may choose between good and

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evil, but we cannot redefine good and evil without consequences. If we do, we fit the Lords description of the modern world, where,

every man walketh in his own way, and after the image of his own god, whose image is in the likeness of the world, and whose substance is that of an idol, which waxeth old and shall perish in Babylon, even Babylon the great which shall fall. (D&C 1:16.)

The Lords sobering assessment of modern culture brings us to the overarching theme of this book: These are the last days and modern Babylon shall fall just as historic Babylon fell, after which there will be terrible tribulations and the wicked will burn (Malachi 41) As a concerned citizen, I dont believe it is right that the world should burn as stubble, unless, of course, the people vote for it. Sadly, the common man is the sovereign consumer and his choices are determining Zion and Babylon. In this book I will review simple economics principles to show how the collective breaking of Gods commandments has led to consequences in our national and international economies. Ever since Nebuchadnezzars dream of the kingdoms of the earth (Daniel 2),the Babylonians, Persians, and Greeks all took turns at being the worlds most powerful nation. The Romans ruled for a thousand years and then faltered. The Spanish found a new world, but squandered its gold. Napoleon conquered Europe then overextended his domains. The sun never set on the British Empire, but it is setting now. The royal families of a hundred years ago are either gone or hiding out in drafty castles. For almost a century, the United States of America has

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dominated the world economically, but we are now the greatest debtor nation the world has ever known. The End of Days is approaching and although we never know exactly when, we will see it unfold like a passion play. The sins of our generation will come home to roost in economic turmoil, followed by political unrest, and ultimately, chaos. The Lord has commanded us to teach one another about the wars and the perplexities of nations, and the judgments which are on the land, and a knowledge also of countries and kingdoms, (D&C 88:79) in order that we may warn the people of the coming calamities. I hope my writings are a meek effort to that end.

Alan Rex Mitchell Benmore, Utah August 25, 2009

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Chapter 1. Voices of Economic Warning

For I, the Almighty, have laid my hands upon the nations, to scourge them for their wickedness. And plagues shall go forth, and they shall not be taken from the earth until I have completed my work, which shall be cut short in righteousness. Until all shall know me who remain, even from the least unto the greatest, and shall be filled with the knowledge of the Lord, and shall see eye to eye, and shall lift up their voice, and with the voice together sing this new song, saying The Lord had brought again Zion D&C 84:96-99.

Imagine the most joyful moment in the history of earth. What is more joyful than a reunion with loved ones? What has more anticipation and delight than a wedding? What contains more emotions than the birth of a child? What is more reassuring than being held in the arms of someone you love and respect? What is more uplifting than music that communicates pure love? When we sing the new song at the dawning of a new age (D&C 133: 33, 56), we will know more perfectly the purpose to the universe and the specific role we play in the Grand Scheme. Because our eyes and ears have not yet perceived the gifts that God has prepared, now we can only feel them through his Spirit (1 Corinthians 2:9). Promises of everlasting lives and dominions are ours if we want it badly enough. The Second Coming will be the most extraordinary dramatic event in all history. In all literature, there is nothing to compare it with. It is a drama of a rejected heir who returns to his home at its most vulnerable time to save it from destruction. Shakespeares Hamlet told of a

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rightful heir who was shunned amid the turmoil of a decaying kingdom. Romeo and Juliette told of lovers whose path for peace was unrecognized and who, with their death, buried their parents strife. The tale of MacBeth approximates the cleansing of the earth in the defeat of a villainous throne-usurping king, but is lacking a joyful scene of redemption. Only the comedies, in their raucous style, conclude with happy weddings. Homers Odyssey comes closest to the Second Coming as it tells of a noble but scheming warrior who returns home after 20 years to conquer the usurpers of his throne. Through the telling of his travels, battles, and struggles against the god of the underworld, Odysseus lays the groundwork for his final battle, son at his side, to regain his rightful Ithaca throne and his royal wife. Similarly, the End of Times will begin with prophets warnings, proceed through turmoil, climax in a bloodbath, and end with a joyful wedding of the Bridegroom (D&C 65:3). But before that day, the earth will shake.1 The economic problems resulting from individual and collective choices will cause chaos and turmoil that will be followed by war, and natural calamities. Eschatology, or the study of the end of days, has fascinated all generations. In Christian eschatology, the end of the world is accompanied by the Second Coming of Jesus to set the world right and establish a world order based on peace. The initial impetus for the Restoration was eschatologicalto prepare the world for the coming calamity and its culminating redemption at the Second Coming. The very name Latter-day Saints is often translated into other languages as Saints of the Last Days. While the Doctrine & Covenants is often thought of as an historic handbook for church organization, it is more correctly corresponds to a clarion call for preparing for the Second Coming, evidenced by its first line: Hearken, O ye people! (D&C 1:1) Dozens of

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revelations in the early church describe the coming tribulation as a day of weeping, chaos in the cosmos, hailstorms, blood, pestilence, flies and maggots (D&C 29:14-19), war, hunger, hatred, blasphemy, and failing heartsjust to name a few. In a revelation on wars that will precede the Second Coming, the Lord declared

And thus, with the sword and by bloodshed the inhabitants of the earth shall mourn; and with famine, and plague, and earthquake, and the thunder of heaven, and the fierce and vivid lightning also, shall the inhabitants of the earth be made to feel the wrath, and indignation, and chastening hand of an Almighty God, until the consumption decreed hath made a full end of all nations. (D&C 87:6)

As Latter-day Saints, we have several scriptures that tell of world-changing dispensations: the Book of Abraham, the Book of Moses and the embedded Book of Enoch. The Book of Mormon is a historical model of the Last Days as it tells of the downfall of a thousandyear civilization followed by earthquakes, destruction of the wicked, a heavenly visitation, and the establishment of a peaceful society. Christs visit came in spite of the general consensus that the prophecies were a foolish tradition of their fathers. The Book of Mormon authors explain that the final Nephite annihilation is evidence that destruction can and will happen again to the gentiles, and the desolation (Mormon 8:41) will be on a global scale. Who may abide the day of his coming? Malachi asks, And who shall stand when he appeareth? (Malachi 3: 2) The cleansing will be like fullers soap on a Saturday night. The Lord has assigned the weak of the earth to take this warning to the world (D&C 1:19). Like the biblical tale of old, it is the meek shepherd boy David who will be armed with

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strength to overcome Goliath. Like David, we have been given the task, but the calamities are coming whether the world is ready or not. In his first visit to Joseph Smith in 1823, the angel Moroni warned about great judgments which were coming upon the earth, with great desolation by famine, sword, and pestilence; and that these grievous judgments would come on the earth in this generation. (Joseph SmithHistory 1:45.) As part of this brief warning, Moroni named the first three horsemen of the apocalypse and correctly placed famine and war (the sword) before pestilence. Famine is principally caused by political conditions rather than the lack of food.2 Wherever there is famine, there are armies or police states either controlling the flow of foodstuff, or stealing it outright. The famine in the Ukraine in 1932-34, the famine in China in 1958-61, and famine in Cambodia in 1975-79, were all caused by Marxist governments enforcing Marxist economic ideology on peasant population.3 History shows that famines "have nearly always been a hallmark of economic backwardness" rather than overpopulation.4 And pestilence grows during times of war where the poor general health of displaced refugees leaves them susceptible to disease. Although the turmoil in future years will make them the worst of times, today is the best of times. Political and economic freedoms have inspired the acquisition of knowledge and technology. It was as if freedom were a gift by the Creator to nations who wanted a road to better living. Since the American Revolution, most subjects of kings have broken the shackles of their lords and headed toward freedom. Freedom has made modern man healthy and wealthy but, unfortunately, not very wise. Some nations have overthrown kings only to adopt dictatorships when short-term conditions worsened and despots offered relief from want. It was as if the freed slave became more wealthy

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and productive only to adopt a master because he had to go without an occasional meallike in the biblical story when Esau traded his birthright for pottage. It is not the freedom and selfinterest of man that may destroy him, but the failure to put first things first. The Lord has said, I will not spare any that remain in Babylon (D&C 64:24), or the world of corruption and vice. What will cause the social and natural calamities at the Last Day? The answer is simple. Mankind will. The worst collective sin, according to the 1995 Proclamation to the World, is the disintegration of the family, which will bring upon individuals, communities, and nations the calamities foretold by ancient and modern prophets.5 The battle for survival begins right at home. What causes the family to disintegrate? Primary two things: sex and money. Irresponsible sex has a way of making the young not marry and the middle-aged leave marriage. Money problems, although often listed as a primary cause of divorce , arent the whole story. All marriages have money problemstheir solutions are the way of setting priorities. He wants a new motorcycle. She wants a new kitchen. The kids want a new toy. The baby wants a diaper change. They work it out or they dont. If they go deep into debt for all the stuff, the day eventually comes when the house gets foreclosed, the motorcycles get repossessed, and the Childrens Services takes away the baby with the terminal rash. That type of irresponsible spending is what Congress has been doing for decades racking up more bills while failing to prioritize and cut spending. The end result will be the same when our fruited plain gets repossessed, our purple mountains lose their majesty, our ribbons of highway crumble, and the huddled masses leave our shores for jobs in Shanghai. In 1976, President Spencer W. Kimball admonished the saints to refrain from sexual sins and leave worship of idols of money and material possessions, and ended by quoting the

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scriptural warning, Prepare ye, prepare ye for that which is to come, for the Lord is nigh (D&C 1: 11-12). 6 A decade later in a 1986 speech on pride, President Ezra Taft Benson noted, the plaguing sin of this generation is sexual immorality. He further noted that pride of the Nephites led to their destruction, that the rich and learned are the two groups most susceptible to pride, and finally that when the earth is cleansed by burning at the last day, the proud shall burn as stubble.7 It sounds as if the two prophets had been reading from the same book. Sex and money. Money and sex. Its hard to get away from them and it has been said that neither are very important unless you dont have them.8 The problem is not that we cant have them, its that we need to be mature about them. We need to set limits for ourselves and live by themwhich may the primary lesson of this mortal schoolso that we dont misspend our money or sexual energy on things that do us harm in the long run. Sexual irresponsibility has terrible economic consequences for individuals (70 percent of single mothers are below the poverty level), for families, and for societies whose primary task is the training of its youth. Anyone who thinks sex is an individual matter needs to evaluate the consequences manifest in broken families, poverty, disease, guilt, lack of confidence, and worst of all, the loss of love. We need to see the dual challenges of sex and money as ways in which we make choices, and it helps if we can see the big picture, which is the eternity before us. In succinct terms, the gospel of Jesus Christ is the quest for eternal joy through the blood of the Lamb, and a life that will have plenty of the things we enjoy here, such as houses, land, and families (Mark 10:29-10). Those who are on the path of discipleship have been given a

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missionto gather out the elect so that they may be prepared in all things against the day when tribulation and desolation are sent forth upon the wicked. (D&C 29:7-8.) The times, they are a-changing. Theres a bad moon on the rise. The Lord is coming back to reign, and before that, the world civilization faces desolationa condition of death, destruction, and emptiness. We should contemplate the collective choices that will turn the productive vineyard of our civilization into the ashes of a stubble field. The consequences of our individual choices will determine which society will be our home during the days of calamity as well as the eternities.

Freedom and Warnings Over the past two centuries, the nations of the world have prospered to the same degree as they have followed the principle of freedom, which is a governing principle of Gods kingdom (D&C 93:30). The world economic miracle began 250 years ago with the application of Age of Enlightenment ideas about individual freedom, political governance, property rights, and commerce. Certainly trading is a natural tendency of man to better his situation. Since 1776 when Adam Smith laid the intellectual groundwork for a prosperous society, and America declared its independence from the monarchy in order to establish a free society, the world has undergone prosperity unlike any in known history. By letting inventors, organizers, financiers, and transporter do their jobs, we have produced a wealthy society where nutrition and lifeexpectancy are high, and infant mortality is at an all-time low. W. Cleon Skousen has called this the 5000 year leap, as America began practicing the principles of prosperity.9 Could adopting freedom solve the problems of the underdeveloped world, where the calamities of famine and disease still prevail? Yes, according to Amartya Kumar Sen, winner of

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the Nobel Prize in Economics, who found that political freedom is the best means to overcome the poverty cycle, as well as being a desirable goal in itself.10 He showed that famine, poverty, and war result from political and economic systems that deprive freedom from individuals, pointing out that famine has been absent from any country that had democratically elected officials and a free press. We Americans may grow weary of media muckraking, but the alternative would be worse: a national media that does not report political graft and corruption and blindly parrots the talking points of the party line. Which Im certain could never happen here. Especially not during these hard economic times, when the national media is relentless in investigating who and what is to blame for the crisis. Not. Now America is embracing an economic crisis that will endure for years and holds the potential for social chaos. We have arrived at the point where consumers would rather pay off debt than keep buying. Less consumer spending translates to fewer jobs. The media report that the sinking economy can be overcome by spending. The President, Congress, and the Federal Reserve (the Fed) have responded with stimulus packages and programs to pump money into the economy, but, at this point in time, there has been no general response in employment or business activity. If borrowing and spending were the solution to economic doldrums, it is too bad we didnt think of it sooner. It worked so well for Zimbabwe and Iceland. A few world leaders have protested Americas reckless large-scale spending. Mirek Topolnek, European Council President and Prime Minister of the Czech Republic recently warned:

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Not only is America repeating its mistakes from the 1930sthe large scale stimuli, the protectionist tendencies and appeals, the Buy American campaign all these steps, their combination and, worse, the initiative to establish them as permanent, are a road to hell. We have to return to our history books, which so far have only been gathering dust.11

One such history is by Amity Shlaes, who describes the principal players and bad decisions of Great Depression.12 Americas biggest blunder was the large-scale government intervention into the private sector from protecting union wages, to co-opting power companies, to setting the price of a chicken. Well-meaning officials enjoyed control over the economy because it gave them the power to implement their notions about what was fair. Unfortunately, planned solutions to economic problems are the worst road to take because they dull the individual spirit while giving the perception that everything is fine. Ask East Germany. Of course, planning is necessary for an entity such as an individual, family, or business. It has never worked for an economy, according to economist Friedrich Hayek, who in The Road to Serfdom13 observed that state planning alters the economy in unforeseen ways so the bigger the plans, the more difficult the planning process. And secondly, economic planning gives the state the role of biased participant and impartial arbiter of the rule of law. This is like playing Monopoly with my brother who was also the judge and the banker. For some reason the rest of us lost interest in playing. In a scathing indictment of Americas march to serfdom, Russian columnist Stanislav Mishin recently called the American people passive, hapless, sheeple, meaning people that have taken the herd mentality of sheep. He attributes Americas descent into Marxism on three

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behaviors: a politicized education system that led to pride, the loss of faith in God, and recordbreaking government spending14. Mishins criticisms echo those of Kimball and Benson, and he logically attributes the descent to factors, not to random chance. Things happen for a reason. That principle is the basis of scientific inquiry and moral reasoning and it is called the law of the harvest, or causation, karma, or there is no free lunch. Good is eventually rewarded and evil punished. All societies, cultures, and organizations, that follow this law are in position to grow. Those who dont practice justice dont receive justice. It has its corollary in religion; those religious societies that insist on no-effort salvation dont produce strong individuals with unequivocal morals. The government response to the financial crisis has been to reward evil by not letting anybody fail. First they handed out the proverbial free lunch, followed by the legendary free dinner and the quintessential free midnight snack. Free says a lot about our state of morality. Why buy the cow if you can get the milk for free? Currently, America believes in fashionable morals and we just cant tolerate failure even if we have to lower our standards of success. Weve been on a cruise with too much free food served way too often. Sure its fun for a while, but you pay for it with more than your ticket. We have rejected failure, whether found in the largest bank in America who is awarded for losing money, or in the last-place Little Leaguer who is given a trophy for trying (but losing). At least the Little Leaguer didnt charge the taxpayer for striking out. Another voice speaking against this free-lunch morality is Jim Rogers, investor and commentator who co-founded the Quantum Fund and founded the Rogers International Commodities Index. When Rogers was asked what he would tell a layman about the current economy, he replied:

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I would say that for the last 200 years, Americas elected politicians and scoundrels have built up $5 trillion in debt. In the last few weekends, some unelected officials added another $5 trillion to Americas national debt. Suddenly were on the hook for another $5 trillion. There have been attempts to explain this to the public, about whats happening with the debt, and with the fact that Americas situation is deteriorating in the world. I dont know why it doesnt sink in. People have other things on their minds, or dont want to be bothered. Too complicated, or whatever.15

We have rewarded the lazy and stupid instead of the smart and good. We gave tax money to prop up the big and rich. We welcome government meddling in private enterprise be it energy, transportation, or healthcare. We enjoy wrong thinking and free bailouts because the thousand reasons for the government aid shout down the single call for moral law. And if any group protests the futility of this course, the media calls them unintelligent, angry, redneck, and antigovernment. Returning to the Czech Prime Minister Topolnek:

The crisis and its concrete social impacts are scary. But a far more serious peril would be the victory of protectionism, isolationism, state paternalism, and ever spreading regulation. Let us find ways, how to help our citizens, not to enslave them. In this regard, we can paraphrase Thomas Jefferson who famously warned that governments are big enough to provide you with anything, but they can also be big enough to deprive you of everything.16 (Italics mine.)

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Do we really need a European from a former communist country explaining to us the dangers of state paternalism, or the nanny state? Evidently yes, because congress is embracing programs with new bureaucracies and myriad rules in new areas as banking and healthcare. Jim Rogers candidly explains where we went wrong,

Nowhere does it say: Bail out investment banks. Investment banks have been failing for centuries. The world hasnt come to an end. They just caused a setback, and so what! Recessions are usually good for the system. They clean out the excesses. And my God thereve been excesses on Wall Street in the past 10 years. You dont see a bunch of 29-year-old cotton farmers driving around in Maseratis and flying in private planes to exotic locations. Well, you see a lot of guys on Wall Street doing that. But the outrageous part is that it will cost more to try to prevent a recession than to have the recession.17

Simply stated: if investment bankers deserve a bailout for their excesses, who can be unworthy of government help? But such cycles of conceit and economic security are not new. Business leader Henning Prentis commented over 65 years ago:

Paradoxically enough, the release of initiative and enterprise made possible by popular self-government ultimately generates disintegrating forces from within. Again and again after freedom has brought opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent, the

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incompetent and the unfortunate grow envious and covetous, and all three groups turn aside from the hard road of freedom to worship the Golden Calf of economic security. The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more.18 (Authors emphasis)

The historical cycle was repeated numerous times in the Book of Mormon, as observed by the prophet Mormon,

At the very time when he doth prosper his people, yea fields flocks herdsgoldsilverprecious thingsart; yea, then is the time that they do harden their hearts, and do forget the Lord their God, and to trample under their feet the Holy Oneyea, and this because of their ease, and their exceedingly great prosperity. (Helaman 12:2)

Indeed, one could summarize the Book of Mormon as a warning from their civilization to ours to put God and morality first or face the judgments. Mormon lamented in the next verse that except he doth visit them with death and with terror, and with famine and with all manner of pestilence, they will not remember him. (Helaman 12:3.) The natural judgments that occurred prior to Christ visitation were preceded by political chaos as their enlightened government based on democracy, rule of law, and judges,

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disintegrated into tribalism. The last straw that broke the back of the Nephite government was the conspiracy to kill the chief judge in order to set free the conspiring judges who had illegally murdered the prophets (3 Nephi 7). Three years later, the natural calamities arrived. Governments, whether we like them or not, are instituted for the well-being of men (D&C 134:1) and the Lord disapproves of the destruction of governments (D&C 134:5); as he told the Nephites, the people of King Jacob were above all the wickedness of the whole earth because of their secret combinations; for it was they that did destroy the peace of my people and the government of the land. (3 Nephi 9:9) Conspiracy to avoid the consequences of bad choices is the ultimate expression of pride, which we can see the Nephites had, but which is difficult to see in ourselves. Financial analyst Richard Duncan pointed out Americas mounting private and government debt back in 2003, and again in 2005. He ends the book by saying,

Exactly how these events will unfold is impossible to forecast; nevertheless, the eventual outcome is within sight. The dollar standard is inherently flawed and increasingly unstable. Its demise is imminent. The only question is, will it be death by firehyperinflationor death by icedeflation? Fortunes will be made and lost, depending on the answer to that question.19

Investment broker Peter Schiff saw back in 2005 that the housing bubble and federal deficits would come home to roost and began advising a flight away from the dollar and NY stock exchange. In January 2008, months before the stock market freefall, he wrote about the delusions of blind investment professions:

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Despite the fact that all economic road signs continue to point the way towards recession, and likely much worse, most investment professionals continue to blindly cling to their ingrained belief that nothing could possibly derail the U.S. economy or significantly reduce the value of U.S. assets. Unfortunately, it appears that no amount of empirical evidence can intrude on this paradise of self-delusion. Despite the recent surges in the price of gold, oil and other commodities, they are convinced that there is no inflation. As home equity evaporates, consumer debt hits record levels, and retailers report disappointing sales, they remain confident that the consumer is in great shape. As manufacturing continues to contract, they still expect an export boom to keep recessionary forces at bay. As unemployment grows and job growth stalls, they maintain that rising incomes will offset the combined forces of evaporating home equity, rising food and energy costs, resetting ARM payments and stock market losses. As the credit crunch spreads well beyond subprime, most claim that it will not derail what they believe to be an otherwise sound economy.20

Of course, Schiff was quickly proven right. Now he advocates the U.S. return to sound economic practices, and recommends fleeing U.S. investments until they do. His stance reveals a deep mistrust with the administration and the bailout mentality; as he stated recently: I am certain that if Obama and the Pelosi/Reed Congress succeed in fully implementing their agenda, there is no chance the U.S economy will recover its position as worlds leading economy.21

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Why are we at this point of perpetual recession? What choices have our nation and the global community made that has us circling the drain? According to author Ayn Rand, the destruction of a free society is manifest in the attitudes toward money, especially the trust in fiat money that will eventually collapse.

Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.' When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are. 22

Since 2007, talk-radio host Glenn Beck has been talking about the perfect storm of financial and political crisis that could doom America. He recently wrote:

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So-called experts cite the historical consequences of grotesque overspending but then go on to conclude that our own destiny will be different from those who previously went down this same road. Im sorry, I did I miss something here? Isnt the definition of insanity doing the same thing over and over but expecting a different result? Spending too much money and purchasing our own debt devaluates our dollar, the inevitable consequence of which is that it will take more of them to buy what we want. Thats call inflation and it is one Law of Nature that the powers-that-be will not be able to ignore. 23

The violation of natural law and its consequences is the topic of this book. Because money is a barometer of our morality, and in order to better understand how the fall of the U.S. economy relates to natural law, we will digress into a review of the economic principles and the moral laws that have been violated. Breaking the commandments leads to family disintegration, which leads to poverty and a dependency on government. State paternalism erodes freedom, cheapens wealth, and ignores constitutional protection. The Great Depression will be reviewed as an example. After studying the consequences of the nanny state, we will then consider the impending dilemmas of demographics and calamity of hyperinflation as a prelude to the prophesied calamites at the End of Days.

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Chapter 2. Basic Economics

The common man is the sovereign consumer whose buying or abstention from buying ultimately determines what should be produced and in what quantity and quality. --Ludwig von Mises, Father of Austrian Economics

What exactly is the economy? How does it work? Who is running it? Since I participate in the free market economy, Ill start by looking in the mirror. Im wearing denim jeans, acrylic socks, leather shoes with synthetic rubber soles, a leather belt, a cotton polyester shirt, and nylon/cotton underwear. I have never in my life made any of these Im not even sure how they make denim with the little lines in it. I suppose my wife, who has been trained as a seamstress, could sew my shirt and underclothes but it is easier to buy them. My wristwatch cost $27 a couple of years ago, including the battery that cost $4. It doesnt lose one minute of time in a year. It has a calendar date, the hands glow in the dark, and the whole face glows if I push the stem. It is water resistant to 50 meters below sea level, just in case. By myself, I could not have made this watch in a thousand years, but this miracle of technology cost me about an hour of wages. Since there are over 2000 work hours in a year, so if had I wanted to I could have bought 2000 watches last year. Naturally, the second to the 2000th watch would not be worth as much to me as the first, unless I were to fill a trench coat with them and peddle them at a subway stopin other words, if I were in the retail business. Otherwise, Im exercising the concept of marginal utility, which is economics-speak for spending on what does you the most good. Or more precisely, spending your last dollars on what will give you the most benefit.

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The most expensive item Im wearing is my eyeglasses, which cost about $150. They are made of ultra-light lenses, wire frames, and nosepieces. Without them, everything is fuzzy beyond about 18 inches. It is frightening to consider what my life would be like without them. Ive never been able to use anyone elses eyeglasses, so these had to be custom made from measurements; still, they cost less than a days wage, including the examination This morning, I stopped at the market and bought a breakfast burrito consisting of a tortilla, scrambled eggs, bacon, cheese, and salsaall of which were made at locations hundreds of miles away. What miracle of organization brought these items together? The economy, thats what. It would take considerable planning and effort by many people to make a burrito from scratch: raising pigs, cows, chickens, and tomatoes, onions, peppers, garlic, and wheat. Grinding the flour, milking the cow, curing the cheese, smoking the bacon, canning the salsa, and then when all the ingredients were there, putting them together and cooking it. Now imagine the complexity of building a wristwatch. Trade and specialization made all of this happen. The watch company has made dozens of trades for metal, quartz crystals, hard plastic, boxes, etc., and a workforce to make parts, assemble, and ship. A garlic farmer has obtained a field, a tractor, a plow, a harrow, a cultivator, fertilizer, an irrigation system, herbicide, and put them together in the right combination and timing. Trade is simply exchanging something you have in excess for goods that others have in excess. It works because once you go to the trouble to grow enough garlic for yourselfthe tilling, planting, hoeing, watering, harvesting, and storingyou might as well plant another row. Although excess garlic cloves are of little value to you, they may be of value to your neighbors, who may be Italian.

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So we each do our separate things and then we trade our excesses. Nobody invented the economy; trade is just what humans do. Economists call this specialization, or division of labor. No human society has ever existed without it and we all get richer because of it. Adam Smith was among the first to observe this phenomenon and put a name to it and a cause behind it. He saw everybody was making things and trying to trade them away to get more stuff and he pointed out that there is an invisible hand, that turns this act of self interest into a benefit for others. He said that working economies have these three things: self-interest, specialization, and trade. They work interdependentlyany of these items alone will not make the economy productive. You could have any two and still flounderif you had the first two without trade, youd be busy making the wristbands for the watches without anyone to buy them. If you didnt have specialization, you would be trading things like your hourly work without knowing how to do anything; which, by the way, is a recipe for menial labor. If you didnt have the self-interest, youd have the buyers and the ability to make rare specialized things that they want, but would rather stay in bed.

Services. Time is limited to 24 hours per day; in fact, time is the limiting factor in most economic decisions. People value other peoples work almost as much as they do goods. They value expertise even more. Economists call these services. Some folks would rather pay a maid to wash the clothes and clean the house than have a new car. Some folks would rather have an accountant do their taxes, a lawyer argue a lawsuit, a doctor diagnosis an illness, and an exterminator spray their cockroaches. Some folks would rather not cut their own hair. There is nothing wrong with a large service economy as long as somebody ne is making goods to trade you cant just sell your haircut on ebay and hope to exchange it for a wristwatch. (Although one

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mother did auction advertising space on her bare pregnant bellyand one, ahem, lady auctioned her virginity for $3,000,000.)24

Scarcity or No Free Lunch. Economics is often defined at the study of the distribution of scarce resources, although economists often come to the conclusion that their distribution is unfair. Nonetheless, it seems true that goods, services, and resources are scarcethere is never enough to go around. Not enough rib-eye steaks, BMWs, leather jackets, wide screen TVs, and luminous watches. I know things are scarce in my lifethere arent enough housekeepers to turn back my bedcovers, fluff up my pillow, and put little mints on it. And if a resource is not scarce, we arent interested. There is enough oxygen to go around and, therefore, it costs nothing. At least that is true where I liveif you spend much time underwater (with or without a wristwatch) youd better buy a tank of it; or if you live in a smoggy metropolis, you can buy some at an oxygen bar. But you have to pay. In other words, there is no such thing as a free oxygen hit, or a free lunch. This goes against the reasoning of a child for whom all lunches are free. Later we realized that every time a salesman, client, boss, underling, boyfriend, etc., buys us lunch, it usually has some expectation of a favor.

Money. This brings us to moneywhich was invented to replace the barter system. I might carry around braids of garlic bulbs and still trade clothes and a wristwatch, but it is easier to carry money. Many persons wont barter in garlic but all people will trade those green-gray pieces of paper. Why? It is merely pressed, vegetable fiber with designs printed on it. It is tasteless and odorless. But why is the one bill with the picture of the guy with the powdered wig worth 5 garlic bulbs, and the other with a picture of guy with a dark beard worth 250? Could it

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be the powdered-wig guy had something to hide? No, it is the number printed in the corners. Similarly, what magically makes a flat piece of plastic with an imprinted code and bank logo into a desired medium of trade? Numbers, which are retrieved after a machine reads the magnetic strip, tell how much garlic I still have in my account. A society could use anything for money if: it is valuable so that it is universally recognized as money. (Even garlic would do.) It is portable. (Just like garlic.) It is rare enough to prevent counterfeiting (Hmmpossible rampant garlic farming.) It doesnt rot. (Looks like garlic is out.) Traditionally, metals like gold, copper, and silver match these qualities rather well, and have been used throughout history. The coining of metal was done initially to guarantee that it was indeed the metal; recall the Roman mathematician Archimedes who shouted Eureka! and ran from the public bath into the street because he figured out how to determine density by water displacement and hence, the purity of gold coins. Arrowheads were often used by huntergatherer societies because they were valuable, portable, rare, requiring time and skill to make. Rare jewels could also be used. Common rocks could not be used as money because they are not rare and that would lead to a lot of spending and not much producing. The cost of arrowheads, as measured in rocks, would go through the roof. Rocks would lose their value and require time to store and catalog. Joe Hunter-Gatherer (note the chic hyphenated name because his father was Hunter and his mother was Gatherer) would sit around in his cave and count his rocks and not do much hunting and gathering.

Fiat Money. But even gold and silver are heavy, and cumbersome, so goldsmiths began substituting gold receipts for gold itself. Then you could carry around the receipt to show you had gold deposited at the goldsmiths and transact business without the weight and the danger of

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theft. Predictably, paper money with fancy pictures took the place of those receipts, which was okay as long as there was still goldthe agreed upon moneybacking it up. The U.S. began with dollars that were redeemable for gold and eventually switched to Federal Reserve notes that were backed by The full faith of the United States Government. Had they been more specific and printed, Backed by the President, Congress, and the Judiciary the citizens might have used them for purposes better suited to hand sized pieces of paper. No, not thatI meant wallpapering a wall, such as happened during the hyperinflation of 1922 in Weimar Republic Germany. Observe the pretty art on the Zimbabwe 100 trillion dollar banknotes that is pictures of rocks forgive me, but arent they teetering? Note also the many zeros. This gives rise to Weimars Law about fiat money: if there are more than two zeros on a bank note, it will soon be worth zero.

Zimbabwe Bank Note.

Wealth. The most important thing to understand about money is that it is not wealth. This is hard to learn, as the legendary King Midas experienced, and it goes against our earliest training when a coin bought us an ice cream cone. The wealth was the cone not the coin. If we saved our coins for a whole year, then we could buy a bicyclebut the wealth was the bike, not

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the coins. English mercantilists were fooled by this slight-of-hand, and based their system on the amount of gold deposited in the bank, which is easier to measure than how many changes of clothes the peasants possessed. Gold, silver, and other precious metals may be natural money because they fit the requirements above, but they are not money if society doesnt agree. Throughout history, societies have agreed about metal. Gold has worth, not just because it is rare, but also because it is shiny and can be used as an ornament or in some industrial applications. But even though gold may be natural money, it is still not wealth, as the Spanish learned in the 16th and 17th century. Spanish explorers sailed to the Americas where they picked up gold as if it were lying around like rocks. Having immense money, they thought they would have wealth, but there was still work to be done. The burrito still had to be made and there still had to be cows, pigs, chickens, wheat, tomatoes, onions, garlic, and kitchen help. Although the gold initially bought all the extra goods at a stable price, pretty soon the prices of burritos began to go up, as it took more gold to talk the farmers out of their livestock. Wealth is subjective and local. By subjective, I mean that is depends on the person. A concert violinist may convince a benefactor to buy her a million dollar violin. For that sum of money, she could have bought 500 violins costing $2000, any one of which would be good enough to get your daughter through high school orchestra. If you are not going to play it, then a $100 violin would be more than enough. But the violinist values the sound of the Stradivarius, as may a listener, and the fact that she owns one will validate her as a musician. It may improve her reputation and allow her to perform more concerts before more audiences. Her wealth is not only measured by the value of her violin but also by the doors it opened.

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Wealth is local, because what is wealth in one place may not be in another. Two towns on opposite sides of the river may get tired of waiting for the ferry and build a bridge. The increased trade and easy of going to the next town may make everyone wealthy. But if you buy a bridge and put it out in a desert where there are no towns to serve or rivers to cross, it might not bring any wealth. (Unless the bridge is the London Bridge and you move it to Lake Havasu, Arizona as a tourist attraction.)

Balance of Trade. Individuals trade with a common currency, but what happens when countries with different currencies trade with each other? Suppose the Chinese yuan and the Russian ruble begin equal in value, and individuals in China trade toasters worth 100 yuan to Russia for a tractor worth 100,000 rubles. For 1000 toasters, they would call it a fair trade. The Russian tractor manufacturer takes the 100,000 yuan to the bank and exchanges it for rubles to pay off his bills. The Chinese toaster manufacturer takes his 100,000 rubles to the bank and exchanges it for yuan to pay his bills. The banks in each country trade currency so they can get some of their own. But what happens if Russia spends more rubles to buy more Chinese toasters? The parties could maintain the 1 to 1 exchange rate, but China ends up with more rubles when what they really wanted was yuan. Traditionally, both countries converted each currency to gold that held value and the bargain was sound. If China sold more crates of toasters than they bought in tractors, they would end up with more rubles, which they would trade back to Russia for gold. Eventually, China could end up with a lot of goldnot wealth exactly because what they really want are goods from around the world, such as Mexican sugar, a smog scrubber for a coalfired plant made in Europe, and soy sauce from Wisconsin. So they spend the gold on pesos,

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euros, and dollars to buy these items, and because they own most of the gold, they find that the price of these items has gone down. This happens because the currency of each nation has devalued to encourage trade. The tractor may still cost 100,000 rubles, but the ruble is now cheaper to buy in gold, so China gets more tractors, and, since the yuan has increased in value because China holds more gold, Russia gets fewer toasters. It all balances out. It is a way that nations can cut their prices so they can sell. Countries that have less desirable goods to trade usually end up with their currencies devalued so that other countries will still buy the goods, but they will buy more of them. In the case of two trading partners (China and Russia) they could merely barter their goods, but when more trading partners join in, an agreed-upon currency is needed because Mexico, Europe, the U.S. all buy different goods from each other. Before 1933 the international trade currency was gold, but gold didnt stand up well after World War I when most of the gold ended up in the U.S. The Bretton Woods Conference of 1933 determined the dollar would be the new reserve currency. The reserve currency is not that hard to understand if you imagine each of the nations as groups with their own currencies to trade within the group, but a common currency is needed to trade between the groups. If the bartering were even, none would be needed, just like trading garlic bulbs for wristwatches, but when it is uneven and many partners, an agreed upon reserve currency is needed. As noted above, in the past it was gold, then dollars backed by gold, then fiat dollars, which evolution has led to a situation where the banker (U.S.) owns the printing press.

You cannot sell where you do not buy. If a country runs up a habitual trade deficit, then they lose the reserve currency. Suppose Wisconsin doesnt sell enough soy sauce oversees to

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make up for the tractors and toasters they buy, then they have to replace their money (the Wisconsin taler) with the international reserve currencygold in this case. The net effect is that the worth of the taler falls so that foreign goods are more expensive and soy sauce is dirt-cheap. Wisconsin then needs to sell more soy sauce to get some gold back or come up with another item that foreigners might desire, like Munster cheese. But gold has not been the reserve currency since 1971 when the U.S. announced it would no longer back the dollar with gold. Now countries get and give U.S. dollars in return for trade imbalances. Wisconsin can keep their cheese and simply pay in paper dollars, although the Chinese would have preferred soy sauce and the Russians cheese. This paper-for-goods scenario will only work as long as the dollar has value, but it is a little like paying for the breakfast burrito with Monopoly money. There is an old adage that a country cannot sell where it does not buy, but it appears the U.S. has developed a way to buy from countries that it doesnt sell toat least temporarily. This cannot continue long term.

Price. In a free market system, the sum of all the buyers constitutes the market, and the market determines the price of the goods and services through the negotiations between seller and buyer. The buyer knows he is always getting a deal because he cannot build the watch himself. The seller knows he cant keep a few thousand watches lying around, so he wants a deal that will allow him to pay his debts and secure as much profit as he can get. For any pair of buyer and seller, the price can vary widelythe trench coat clad watch salesman doesnt usually put a price tag on each watch because he will change the price depending on the gullibility of the person he is selling to. But for a large group of buyers, the price is a result of the supply of watches and the demand for watches.

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Assume that out of a million people, one tenth of them (100,000) will usually want a watch in a given year, and one tenth of those (10,000) will want a durable, analog-style, quartz luminous, watch like mine. Suppose the store manager has paid the manufacturer $15 per watch, the wholesale price. The store manager would rather sell the watches for $100 each, but finds that not all of the 10,000 potential customers would buy at that pricemaybe only a hundred would. So he lowers the price to $50 and a thousand buy, lowers it further to $27 and he can sell 9000 watches. This relationship between the watches sold and the price is called the supply demand curve. If the makers and their competitors had produced 15,000 watches for 10,000 potential customers, the price would need to drop further to recruit other customers. Perhaps the store could have a watch sale on Fathers Day or Christmas in hopes to increase the customer base (even though the number of fathers is decreasing steadilysee chapter 6). In general, if there are too many watches selling for too cheap, some company will get out of the watch business and either fold entirely, laying off workers, or make something else, like gem bracelets. The buyers, on the other hand, would like to buy the watch for $10 or less, but more will hesitate as the price climbs higher. Fortunately, the price is determined by the last customer paying the least amountthis is the principle of marginal utility. Were it not so, the price of a gallon of milk would be set by a milk aficionado willing to pay $1000 per gallon. Either that or it would be priced so low that everybody could buy a gallon an hour, which would cause more resources diverted to milk barns and less to everything else. Besides, when priced so low, we might as well be feeding it to pigs and then nobody would produce it for that low of a price. Equilibrium is setunless there is a department of agriculture that determines the price, like we have now.

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Price responds to need. Suppose a tornado blows down 1000 houses in Kansas that need to be rebuilt. Because of increased demand for framing lumber, the price of a 2x4 stud jumps from $2.10 to $2.50. The casual observer may remark that they are gorging people in their time of need. Actually the opposite is truethey are providing for those with the most need. Because the price increases, more time and energy are diverted to procuring wood studs. If the price were fixed at $2.10 there would be no incentive for additional production. Studs would be scare. Construction workers would be standing around. Fewer homes could be rebuilt. Keeping the price of studs fixed caused this messincreasing the price would fix the problem. The price, expressed in money, is a wonderful mechanism to signal to buyers to buy and sellers to sell or quit making things. It rewards the most efficient producers (who have the lowest price) and everybody gets watches for less. The unemployed watchmakers can focus on something else.

Simple Economic Advice 1. Dont pour money down a rat hole. This is what happens when one keeps making $50 watches that the public wont buy. Or spending $180 billion on American Insurance Group (AIG) because it would be worth a lot more than that if only it werent broke. Or spending $4500 to buy a clunker car that is only worth $500.25 To do so is to chase good money after bad. Or to keep digging after you find yourself in a hole. 2. Buy low and sell high. There are often price fluctuations because the public is fickle and doesnt know what it wants. Today they could care less about durable luminous watches and the price is low. Tomorrow, Eli Manning may be wearing one during a Monday-night football game and suddenly fans are willing to pay through the nose for one. There is no accounting for

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taste. But if you bought thousands of watches for $1, and tomorrow you could sell them for $50, you would have bought low and sold high and made money. 3. Keep your bowl right side up. Whether the above watch fad occurred by design, chance, or mistake, dont just sit there, start selling watches and pocketing the $49 per watch.

There is No Accounting for Taste. Returning to Ludwig von Mises quote at the beginning of the chapter, the common man is the ultimate decision maker about goods produced. True, a rich elite man could hypothetically determine the market price by producing thousands of watches, but he wouldnt make any profit if the public didnt buy them. He might as well store them in a rat hole (see rule 1 above.) Consumers vote every day with our dollars, and if we cant find goat cheese at our supermarket, it is not because life isnt fair (even though it isnt) or because other people are stupid (even though they are) it is because there were not enough people willing to pay enough for goat cheese. There is no accounting for taste. This is another way of saying that men are free to chose! Incidentally, all of this economic planning happened without government intervention. A Timepiece Commission did not set a fair price, determine the number of watches to be made, and a Clock Czar did not give speeches that it is our patriotic duty to buy a watch. The role of government is, first, to keep customers from stealing watches; second, to keep Watch Company A from bombing Watch Companies B, C, and D; and, third, to ensure the delivery of watches by fixing roads and managing air traffic. For that they charge taxes.

Economic Efficiency. There are, according to economist Milton Friedman, four ways to spend money. First you can spend your own money on yourself. This is where you take your

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economic vote very seriouslyyou want the best value for the least price. This is because you know that what you dont spend on a watch you can spend on goat cheese. Second, you can spend your own money on others. You still want to save money for cheese later, but youre really not sure what your wife likes in a watch. You buy one just like yours and save the receipt so she can exchange it. In this case, you had a price in mind but not a specific watch. Third, you can spend others money on yourself. Assume your company gave you $100 to buy a watch for work, and youll be darned if you are going to spend only $27. You find a rugged watch/GPS/altimeter/calculator for $119.99 with a $20 rebate and spend the whole amount. This is a case of use it or lose it. Fourth, you can spend others money on others. In this case, you dont care if you pay the $100 for the $27 watch for your wife. You buy where the salesgirl is cute or they will give you a kickback. Lets evaluate the four categories of buying: the first system is the most efficient and you dont really care what the salesgirl looks like. It is economically efficient and you did not play favorites based on gender, race, religion, ethnicity, or future favors. The last system is the most wasteful in money and promotes graft and the corruption of salesgirls. True, you may feel powerful for the money you have squandered but that feeling will impact your decision. The last system is also the one that the government works underspending others money on others.

Investment. When money is lent to a businessman, he will buy capital goods, which is why it is called capitalism. If I want to buy really big goods, like a yacht or a swimming pool or a European vacation, I will need to save my money. When anyone forgoes purchases to save

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money, it may in some instances lower the price of goods because some of the demand goes down. Furthermore, I want to get paid for saving my money, so I put it in a bank where it can earn interest. The bank can turn around and lend that money to someone who needs it, usually more than once, although banking rules change from time to time. Traditionally, banks lend money to businesses that are seeking to make themselves more efficient. The watchmaker wants to buy a machine that automatically puts the watch hands on the watch. This would lead to higher worker productivity, as only one worker would run the machine, whereas five workers once placed the watch hands. It could lower the cost of each watch by $1 and thereby save $100,000 a year on 100,000 watches. All the watchmaker would need is a loan to purchase the automatic watch-hand-sticker-on-er machine. He goes to a bank and gets the loan and pays interest until he can pay off the principle from increased income. The machine is called a capital investment. Who has benefited from the savings? Just about everybody, except the four workers who used to stick hands on watches all day and were about to quit anyway. Even the saver who has sacrificed purchasing a watch has helped the price of watches come down. Of course he doesnt know this as he has no way of knowing where his money was loaned and it doesnt matter to him as long as he gets 4 percent interest per year. For all he knew, his money was in the vault in the bank. But unless you believe in some form of asexual monetary reproduction, it is hard to explain how it could grow by 4 percent per year. And the four displaced workers? One of the good workers may be retained by the watchmaker and given a new assignment. The other three will need to look elsewhere for work, but because there will be the same $100,000 saved, someone will have that money to spend, either the watchmaker or the public as the price of watches comes down. The displaced workers

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dont need to find the reassigned moneythey only need to find a job that pays the most wages, which is where they will be doing the most economic good.

Credit and Bankruptcy. What happens when a business borrows money or goods from others then cant pay them all back? What if Hands, Inc. finds that Watchmaker General is not paying their invoices but has enough money to pay other creditors and for junkets in Bora Bora? Lawyers for Hands, Inc. may start bankruptcy proceedings to get their payment. If Watchmaker General cant pay its $100,000 in bills, the judge may require that it sell its assets for $50,000 and divide the money among the creditors so that each gets 50 cents on the dollar. The assets are purchased by other companies that are either in the same business, which means they were better managed, or that are in a business that can use the property, buildings, machines, etc., to produce something different, which is good for us all. In short, bankruptcy is better for all involved than the alternative, which is that the company cant pay its bills, the creditors keep losing money down a rat hole, and employees work but cant cash their checks.

Interest Rates. The interest rate is a price we put on money that is also subject to supply and demand. When there is an economic downturn, businesses dont want to borrow money to expand in capacity and capital improvement. Demand for money falls and puts a negative pressure on the interest rate. When trade is booming, more businesses are willing to pay for capital improvements. Demand for money increases and the interest rate rises as high as it can to the point where the business will pay no more. Or where the cost of improvement will be too expensive to pay for with added productivity.

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Other newer businesses that are growing rapidly will be willing to pay a higher rate, e.g., like manufacturers of cell phones or iPods in the last decade. In an unregulated economy, these companies would bid up the interest rate and the net effect would be to assign money (working capital) where it is most beneficial.

Fractional Reserves. Once a bank lends out the money, it would seem that they would need another deposit before they could lend more. In practice, banks are permitted to lend several times more than they have in their deposits (and only keep a fraction in reserve) on the assumption that the borrowers will keep paying and the depositors wont all withdraw their money at once. If that happened, the bank would fail and the Feds would take over with the assurance that deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to a given amount. Ability to keep only fractional reserves allows a bank to make money in interest payments several times over. It also increases the amount of money in circulation. It appears to be a fraud that the government would prosecute, except that they made laws providing for it.

What natural laws of economics laws have we violated? We have insisted on a free lunch for everybody, even if theyre job loss is natural. We thought money was wealth, and gave money to stimulate the economy. We have embraced fiat money. We made fiat money the international reserve currency, and now the U.S. balance of trade is out of whack. We bought goods from countries, such as China, where we do not sell. We want government price controls on healthcare.

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We pour money down rat holes by gambling, lotteries, and useless programs. We spend inefficiently in the 4th category with government spending. We discourage savings and investment through our tax codes. We avoid bankruptcy and by doing so have made it worse. We let the Federal Reserve artificially set interest rates and fractional reserves.

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Chapter 3. God and Economics

The Ten Commandments*


I. I am the LORD thy God. Thou shalt have none other gods before me. II. Thou shalt not make thee any graven image. III.Thou shalt not take the name of the LORD thy God in vain. IV. Keep the sabbath day to sanctify it. V. Honour thy father and thy mother. VI. VII. VIII. IX. Thou shalt not kill. Neither shalt thou steal. Neither shalt thou commit adultery. Neither shalt thou bear false witness against thy neighbour.

X. Neither shalt thou desire thy neighbors wife, neither shalt thou covet thy neighbors house, his field, or his manservant, or his maidservant, his ox, or his ass, or anything that is thy neighbors.
*Compiled from Deuteronomy 5:6-21

To sin is to know something is wrong and do it anyway. Or to not care if something is right or wrong, and do it anyway. It is not the passive and dismissive comment, mistakes were made. One could argue that sin is relative because we havent agreed upon a universal moral code, but that is just saying there is no correct behavior either. For example, if one says it doesnt matter whether a person tells the truth, then they are saying that truth doesnt matter, only politics. By this reasoning, honest persons are insane persons. It is about time to breathe new life into the term sin.When a moral law is broken, it doesnt matter much the rationalizations. Our society as a whole and our leaders should know the rudiments of good behavior, and we should hold them accountable.

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What can we learn from the Ten Commandments about the economy? How can we apply the Ten Commandments to economic behavior? Is the current economic crisis a result of breaking these or other economic commandments? Unequivocally yes, since things happen for a reason. I. The first commandment is to acknowledge the Lord as our God and to have no other gods before Him. All economic activity should be subservient God and His laws. The rich men in Israel were continuously criticized by the prophets for placing wealth above the weightier matters of the law. The most anger displayed by the Savior was when he cleansed the temple of the moneychangers, saying, It is written, my house is the house of prayer: but ye have made it a den of thieves. (Luke 19:46) It must have seemed logical to the Jews of the second temple era that the sacrifices of lambs and doves should be sold on the temple grounds, but they grew their market evidently to include exchange rates, investments, and insurance. There tables were all set uplike a modern bazaar selling souvenirs, trinkets, and postcards to the Jewish tourists who had made the pilgrimage. They were profiteering in a place meant for to prayer. II. Perhaps there were idols sold in the temple tooof that there is no record. The second commandment likely challenged the Israelites then as it does us today. What does it mean to our culture? Where do you draw the line between art and idol? At the LDS Booksellers Convention there are myriad booths selling trinkets, art, and sculpturein fact, more of these than booksellers. There are CTR rings of every metal, design, and price; necklaces, and other jewelry; bronze busts of the Latter-day prophets; small statues of Christus; and T-shirts of pop Mormon culture that included stripling warriors and faces of Jesus. No Madonna statues, but there are

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several likenesses of Emma Smith. I wonder if, in the second century, there were Mary Magdalene figurines? Apostle Paul bobble-head dolls? III. The third commandment regarding taking the Lords name in vain, is far from being a prohibition on speech, but refers to the practice of attributing your business activity to the Lord. For example, a seller of sacrificial doves may find he can sell more if he adds a story about the Lord revealing to him that his are doves are top-notch because they are raised with organically grown grain and kosher protein pellets. As ridiculous as that sounds, the Roman Emperor Constantine claimed a vision of the sign of cross to inspire his army to battleand the troops delivered for him. There have been several scam artists who have used their membership in the church as a means to sell their products. We are prohibited from using His name as a business reference. (Disclaimer: Lest I be accused of writing this book as a means to improve my business or investment service, I want the reader to know that I have no financial services or retail business that can profit thereby. Also, God did not reveal this book in a vision.) IV. Too much work is too muchand God wants us to take a day off and dedicated it to him and the contemplation of the eternities. In the full text of the fourth commandment, the Lords not only wants you to restrain from work, he wants all your employees and livestock to have the day off as well. Of course, this commandment is one that many retailers ignore today for the sake of gaining that extra money. V. Honoring your parents might not seem economic in nature, yet it came up in Jesus day as he accused the lawyers of establishing laws to get out of supporting their parents in old age (Mark 7:10-11). As Paul pointed out (Ephesians 6:2), the fifth commandment is the first one with promisespecifically of long life personally, or perhaps long life as a society. Evidently, what

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goes around comes around, and if you honor and support your parents in their old age, your children may take notice of the acceptable behavior. Do we care for our elderly today? Often we think that social security payments will suffice and relieve us of the responsibility. Is this a societal responsibility or a family responsibility? The fifth commandment was to individuals, and societies throughout history have deferred it to the individual families. In a real economic sense, the labor of parents to raise their productive and generous children becomes a blessing to them in their old age. VI. Murder is a drastic measure to gain business advantageand one that has been practiced since Cain, who killed Abel to acquire his brothers property and livestock. The impulse began when Cain set a value on life and livelihood, and then compared the numbers and acting out on the profit motive. That is the satanic rationale for justification of murder and war. John Taylor perceived the persecution of the saints in Illinois as a clash of cultures in Hancock County, where the Latter-day Saints culture of industry clashed with the established residents culture of acquisition.26 The people of western Illinois, like the Missourians, were happy to sell lands and goods to the Saints, but when Joseph and Hyrum Smith began exercising the political power of the growing population, others saw that as a threat to their economic way of life. The religious persecutions were mostly motivated by economic, not religious, concerns. Religion was used to categorize the newcomers as crazy lunatics, but the motivation was the money. Cybernetics, or the theory of survival of the fittest applied to human genetics, was employed by the Nazis to justify the genocide of Jews and undesirables. At its base, cybernetics relies on the idea that unfit people use time (wealth) and resources (wealth) while producing little. Today a similar economic argument is used to say that that saving the planet and its resources requires having fewer children. It is putting a price on the value of a human life.

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Economics is used to justify the killing of the unborn that is practiced in our society today. How could a woman spend time and money caring for an unwanted child? To rely on a husband is often out of the question for some women. This prompted columnist Ann Coulter to define the abortion issue as guaranteeing women the right to have sex with men they dont want to have children with.27 Flushing away the unborn child away may seem to make the problem disappear, but because of the large fraction of unborn children (49 million since 1971), abortion has altered the demographics of our society and left us top-heavy with elderly. The impending demographic disaster will be addressed in Chapter 7. VII. The Lord prohibits adultery and other sexual sins. Most people would not think of sex as part of the economy, except in the case of prostitution, but sexual activity determines family relations upon which society is organized. To a family oriented society, sexual sins dont make much sense economically as they break up families that are invariably worse off than before. Economist Walter Williams has summarized national statistics on poverty and notes that the majority of poverty is in female-headed households, where over 70 percent are poor. He recommends the a simple plan to avoid poverty: graduate from high school, get a job, get married before you have children, and stay out of jail.28 The level of poverty for two-parent families is miniscule. Poverty results from having children out of wedlock. The family has been assaulted on several sides and in multiple ways, such as: entertainment that glorifies pre-marital sex and extra-marital sex; the blaming of any catastrophe on declining resources cause by increasing population; the distain for children; pornography that inspires sexual predators; the culture of sex-saturated advertising, homosexual and lesbian groups aggressively pursuing societal change, and the lack of sanctity of marriage vows. All the assaults on marriage and the family are the subject for another book, and here we are just

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concerned with at the end results, which are out-of-wedlock births. They have been increasing since 1960 and have recently accelerated to 40 percent of all births in the U.S. in 2007.29 See graph below.30

Seventy percent of children born to single mothers are born to poverty, as Williams noted above. The psychological poverty may be worse than material poverty for children from a broken homeremember when we could speak of children from a broken home. A single woman may easily join a man and bring a stepfamily, but the stepchildren and new spouses have natural conflicts for the parents attention and loyalty. The fairy tales Hansel and Gretel and Cinderella were telling the truththe evil stepmother will pay for it someday. Children with stepfathers are more likely to be abused than those in an intact family. Traditionally, marriage was the basic commitment between adults that became a partnership economically, socially, sexually, and provided reproduction and training of the reproduced. The family was and is the basic unit of society. Disconnecting of sexual relations from having children was a progressive goal established over a century ago and championed by

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Margaret Sanger, a eugenics advocate, feminist, and founder of Planned Parenthood.31 It relied on elevating sexual pleasure ahead of family solidarity and marriage vows. With slogans like, a woman needs a man like a fish needs a bicycle, the feminist movement is a formidable foe in the culture war when 40 percent of the mothers believe just that. Perhaps the men are to blame because they are the ones that get the free lunch while the mother and child pays.

How does lack of a family make the single mother feel? Do unwed fathers regret never being there for their children? The children, of course, are the ones who grow up believing that everybody has a wicked stepparent and that stable family life is an unachievable standard. The poetry of our generation reflects this emptiness and insecurity due to loss of family and religion. Illegitimacy is no longer a legal designation, nor a moral concept, and it is doubtful that most children even know the definition. Paternity is now determined by a genetic test rather than by a marriage license.

VIII. Stealing, of course, is primarily about the money. It can temporarily make ones personal economic situation easier, but hurts the economics and morality of a society. All trade and wealth can vanish if laws against theft are not enforced. Since the beginning of trade, there have been pirates at sea and robber barons on land to skim off the wealth others have produced.

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Somali pirates have shown that even old-school piracy is still alive in our day when identitytheft, burglary, and scams are the preferred means of theft. Stealing a loaf of bread from a baker, when repeated often, results in the baker needing to raise the price of all loaves. His loss is passed on to the consumer. Likewise, credit card users pay a higher fee because of others who have defaulted on their bills. Not paying bills is stealing both from the person who invoiced you and from everybody in the form of higher prices. What happens when a larger entity doesnt pay its bills? When the federal government borrows money in the short term, it ends up owing the bill plus the interest, the cost of the extra money it borrowed. But when a government continuously borrows money that it has no intention of paying backit pays the money back only with another loanthen it is creating money and increases the price of goods for everyone. Returning to our bread example, a large-volume customer buys 20 loaves every day on credit, and when the January bill comes due, he promises to pay at the end of February. Then in March, he pays for the January bill, but defers the February bill. And by the end of the year, the government is 3 months behind in payment. The next year they are 6 months behind. It seems the buyer only pays for three-fourths of what he takes. What should the baker do? He could cut off credit to the government, but he thinks that they at least pay most of their bill. Soon the baker must realize that they are always a quarter behindhe is selling them the bread for a 25-percent discount. He decides that he needs to charge everybody more for the breadperhaps a 5-percent increase each year, to make up the difference. Wouldnt this be the same if the government paid in cash on delivery? No, because if the government had the money, it would have been money taken from taxpayers, who might have bought more bread, but would probably have purchased something else (butter and jam). By

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using questionable credit over the long term, the government has caused the price of bread to increase. If the government, through their purchasing, increased the demand for bread over what was normal, they have also increased the price. What did the government do with the bread? Well, they likely gave it to the poorer populace, some of whom may not care for bread and thrown it in the garbage, or in the case of the Soviet Union, gave it to the chickens. Once again, government spends in the 4th category, which is the least efficient way to spendall the while diverting resources and labor from other activity and increasing the price of bread. Confiscatory taxation is stealing. Even well intentioned government programs can have the approximate effect on the economy as stealing. Later in this book, rampant government spending will be shown to cause inflation leading to hyperinflation, with the final effect of the destruction of currency, which, next to war, is the largest theft.

IX. Bearing false witness is not just limited to the judicial image of putting your hand on a bible, and then concocting a story that fixes blame on the neighbor and exonerates yourself. That, of course, is perjury. Ask former President Clinton about the Paula Jones case. False witness could be as simple as misrepresenting your goods and services, or denigrating the products of others. For example, a piano salesman goes to his competitors store, plays a scale, and then pounds on the F sharp key, commenting to a potential customer that it doesnt sound in tune. (Note: F sharp will never sound in tune.) This is a misrepresentation of their product or a false witness.

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Similarly when the gold standard was finally and completely abandoned, it was replaced with fiat money. We still use fiat money because we can still trade a piece of authorized paper for a pizza or a million other things. The truth is that fiat money is worth only what people think it is worth. The falsehood is that fiat money has intrinsic value, or that its worth is somehow built in. When faith falters, so does fiat money. In 1971, there were some doubters in the dollar and inflation took off almost immediately and didnt stop until Fed Chairman Paul Volcker raised the interest rate to 20 percent. At that point, people realized that if someone was charging that much for money, it must be worth something. So by the 1990s inflation had settled down, everyone had an idea of what the dollar was worth, and it was still used as the global reserve currency. We are now in the situation that faith in the dollar is starting to waver because of the enormity of the habitual government debt (stealing) and the fear that the state will eventually use devalued dollars to pay back their debt. They will pay pennies on the dollar. It is a fallacy the dollar will remain strong because the government will see to it. This fallacy was repeated when Treasury Secretary Tim Geithner visited Peking University and insisted that Chinas dollar assets were very safe. 32 Misrepresenting an activist program could also be lying. If a person proclaims that there is no credible scientific opposition to global warming theory, when in fact many respected scientists are skepticalthe person is bearing false witness. Suppose a person says that the carbon cap-and-trade bill will save the world from global warming, when, in fact, the calculations show that at best it will only change the world temperature by less than one degree in a centuryanother false witness. Similarly, the act of false witness is employed by Party A in

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the name of Party X to fleece money from Party C. Most lying is done to gain financial advantage. X. The tenth commandment prohibits coveting, or wanting others property. Brigham Young said that he was more afraid of covetousness in our Elders than I am of the hordes of hell, [Journal of Discourses (JD) 5:353]. Coveting is not greedalthough greed has evolved into one of the seven deadly sins and has recently been blamed as one of the primary causes of our economic woes. Greed is closely related to want of a good or service or honor, and it can be good or bad depending on the circumstance. God didnt command against greedbut rather against wanting others property. He didnt say not to want a wife, manservant, maidservant, house, ox, donkey, or a Ford MustangHe said not to covet your neighbors. Abraham wanted to possess further light and knowledge and family (Abraham 1:1) He was greedy, but he wanted his ownnot the wealth of others. When he conquered the kings of the plain who had captured his nephew while sacking Sodom, he took their spoils but none of the goods of Sodom lest he be viewed a thief. The Author of the Ten Commandments assumed individual property rights. Why else would there be prohibition on stealing? And why would covetousnessa mere not-acted-upon thoughtbe a sin? Because it leads to discontent, discord, and disputes. Property, although physical, vulgar, and common, consists of the objects of life that we need and use. In this world, stuff is necessary. The glorious gifts of life and love are still dependent on the core of the mortal body with its want of food, clothing, and shelter. The Ten Commandments are both spiritual and temporal laws with similar blessing. They form a basis for society to live peacefully, and when broken they bring upon a nation the judgments of God. As the Lord told the Children of Israel:

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As the nations which the LORD destroyeth before your face, so shall ye perish; because ye would not be obedient unto the voice of the LORD your God. (Deuteronomy 8:20)

What Commandments have we violated? We break the first commandment every day by not acknowledging his role in our gifts. We break the second with our idols of wealth and prestige. We break the third by selling in Gods name. We break the fourth when the Sabbath becomes a day of recreation and purchasing. We break the fifth when, instead of providing for elderly parents, we abdicate to the governments retirement program. We admire those who break the sixth commandment in soap operas about murder for gain, such as the smash TV show Sopranos. We have broken the seventh commandment with our sexually misguided society that is destroying marriage and resulting in out-of-wedlock births that bring poverty. We have broken the eighth commandment when we believe we have the right to take property from another person either for ourselves or for others. Confiscatory taxation is stealing. We break the ninth commandment when we lie or misrepresent, even the worth of our work or currency.

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Our politically parties have broken the tenth commandment by coveting property or power under the name of class warfare, which is the institutionalized envy of another class.

Additional Economic Commandments. The Law of Moses contained more economic laws for Israel to follow. Of course there were the required sacrifices and offerings. But also included were the injunctions to treat the servants well, itemizing the claims that servants would have when they left their masters early. If the servant were laid off, the master would have to open up his storehouse to the displaced workerit sounds a lot more drastic than two weeks severance pay. Additionally, day laborers were to be paid the same day. A concept of a sabbatical year was invoked where the servants, indeed all contracts, would be cleared every seventh year. Furthermore, land was to be rested that year. The knowledge that all debts were to be cancelled undoubtedly led to contracts that were only in force for that time period. Incidentally, this may have been an ancient law prior to Moses since Genesis records how Jacob worked for his uncle for 7 years in payment for his future wife; then another 7 years for his second wife. A jubilee year in the 50th year after seven 7-year periods was not only a Sabbath for the land but all purchased land would return to its original family. There is no record of this ever occurring, although the 70 years in Babylonian captivity were to make up for the 70 Sabbath years that were ignored by the Israelites (2 Chronicles 36:21). Later the returning Israelites renewed this law (Nehemiah 10:31). If one considers the reoccurrence of depressions at least every 80 years, it may be that the economy needs to start all over again every so often so that old contracts, companies, bureaucracies, etc., can be washed out and the people can begin again. But

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it is unclear how this would be put in practice. How does a society reassemble the assets and start all over? This confusion might have led to the Israelites overlooking the law. Land reform has been practiced by several Latin American counties and consists of breaking up large Haciendas (estates) and giving them to the people. Invariably, these reforms begin in chaos, and end up with the land in the hands of an owner who can consolidate the pieces and make some productive sense out of the whole. Perhaps the jubilee was designed to add chaos to land ownership so that economic order could be restored.

Duty to the Poor. Another economic commandment given through Moses was to give generously to the poor.

If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the Lord thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother: But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth. Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him nought; and he cry unto the Lord against thee, and it be sin unto thee. Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the Lord thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto. For the poor shall never cease out of the land: therefore I command thee, saying, Thou

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shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land. (Deuteronomy 15: 7-11, italics mine)

Note the blessing for keeping this commandment is that the giver should be blest in whatever he puts his hand into. The requirement applies to all within thy gates in thy land. Perhaps it is too much to worry about strangers half a world away. The offering is voluntary and demands that our heart be pure in the givingunlike redistributing wealth through taxation.

Usury. Ancient banking may not have been substantially different than now. We know trade takes some investment to occur, to hire caravans, ships, and a security force to accompany them. When merchants embarked on a trip, they were carrying enormous wealth that was probably collected from several investors, each of whom expected a return. Hence, usury, or interest was promised on the money. The children of Israel were forbidden to charge interest on money lent to fellow Israelites, although they could lend and charge interest to foreigners. The reasoning is that family is family, even if it was the whole nation. The Law of Moses is silent about fractional reserves. The fact that the Israelites could lend to foreigners showed that they werent isolated from the world around them, but they were forbidden to borrow from foreigners who could end up owning them if business went bad. This is a sound piece of economic advice for any country that wants to be independent and wealthy. The largest problem facing the U.S. today is the large consumer and government debt that was financed by lenders such as China. Since China holds perhaps ten percent of our national debt, and the U.S. Treasury is afraid they may dump the debt by not continuing to buy government bonds after the ones they are holding mature. If that

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happens it will drive up the price the U.S. would pay to borrow money (the interest rate) and force the U.S. to borrow even more money to pay the interest on our debt.

New Testament Economic Commandments The New Testament changed the way we look at the Ten Commandments. In the Sermon on the Mount (Matthew chapters 5-7; 3Nephi chapters 12-14), Jesus stressed obeying the commandments in the heart as well as with actions. In essence, he started where the 10 commandment left offwith change in attitude. He said the man angry with his brother was committing murder in his heart. He suggested that the man ogling a woman was committing adultery in his heart. And what did His sermon say about economics? He spoke against the first cause of povertythe break-up of the familyby equating divorce with the mortal sin of adultery (Matthew 5:27-28). Then expanded the commandments for providing for the poor and laying up treasures in heaven.

Provide for Poor and Strangers. Jesus said that donations should be done in such secret that the right hand would not know what the left hand was doing (Matthew 6:1-3). Obviously a figure of speech, it is used to show the level of secrecy that should be employed by even the closest associate. And thy Father who seeth in secret, himself shall reward thee openly. (Matthew 6: 4) This advice could alleviate much of the hate of the rich for their snobbishness. If the rich are giving in secret and seeking heavenly rewards, it may be hard to point the finger at their mansions, parties, and outward trappings of wealth. Likewise, the poor are helped in secret and not embarrassed or encouraged to join an advocacy group that would exploit their poverty.

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Jesus description of the final judgment comes down to the simple standard of how you treated the poor and the sick. If you are found on his right hand, you had fed the hungry, watered the thirsty, took in the stranger, clothed the naked, visited the sick and the prisoner (Matthew 25: 35-40). If not, you are found on the left hand, with a future of regret.

Treasures in Heaven. Jesus admonished his followers to collect treasures in heaven rather than the treasures of the earth, for a man cannot serve both God and mammon (Matthew 6:19-33). He used the analogy of the flowers and birds in nature that God clothes and feeds, to suggest that as children of God we are likewise worthy of his caretaking. This was a way of repeating three of the Ten Commandments by placing the Lord first in worship (I), respect (III), and dedicating a holy day to Him (IV). God allows us to choose what we want in this life. He doesnt prohibit gaining wealth, (Deuteronomy 8:18) but he does have certain rules about it. Dont steal it. Dont lie to get it. Dont use Gods name to get it. Dont work for it on the Sabbath. Dont even think about taking it from your neighbor, especially by killing him. Help out your parents. And dont spend it on anything you will bow down to. He promises us richesassuming again that they can be our property. Speaking to the church, He said:

And if ye seek the riches which it is the will of the Father to give unto you, ye shall be the richest of all people, for ye shall have the riches of eternity; and it must needs be that the riches of the earth are mine to give; but beware of pride, lest ye become as the Nephites of old. (D&C 38:39)

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The Nephites were cursed, according to the Book of Mormon prophet Samuel, because:

Ye do not remember the Lord your God in the things with which he hath blessed you, but ye do always remember your riches, not to thank the Lord your God for them; yea, your hearts are not drawn out unto the Lord, but they do swell with great pride, unto boasting, and unto great swelling, envyings, strifes, malice, persecutions, and murders, and all manner of iniquities. (Helaman 13:22)

Pride is the first problem with riches because the world affixes status to money. As the Shakespearean character Timon of Athens33 pointed out, gold doesnt really do much by itself, but everyone wants it because it can make the old young, help the old haggard widow remarry, and the vile and greedy appear wise and noble. It can give status. But this is not just the problem of the wealthythe wise and learned are equally despised before the Lord, especially if they cling to economic and moral fallacies.

And the wise, and the learned, and they that are rich, who are puffed up because of their learning, and their wisdom, and their richesyea, they are they whom he despiseth; and save they shall cast these things away, and consider themselves fools before God, and come down in the depths of humility, he will not open unto them. (2 Nephi 9:42)

As Latter-day Saints we might call this advice the law of consecration. By putting the Lord first, strengthening the family, and distributing wealth privately, we are following the recipe of dedicating ourselvesour time and talentsto Him. Of course, in the law of

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consecration we need to give everything to the church, first you must own something to give. How can one consecrate property if property is intrinsically evil? How does a Latter-day Saint serve God but not mammon? Especially since we live in a world of wealth that has been provided by trade and property rights, and not of subsistence agriculture? There is no simple answer other than to put God first and work on the rest. May I suggest twenty economic commandments and translate them into todays language. First the Ten Commandments are applied to economics, followed by four other scriptural commandments, and six pieces of economic advice.

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20 Economic Commandments
I. II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. XIII. XIV. XV. XVI. XVII. XVIII. XIX. XX.

God will provide if you work for Him. Dont put your wealth in idols. Dont claim God as a sponsor. Take one day off each week and worship Him. Support your parents in their old age. Dont kill your competitor. Dont chase wild women (or sweet-talking men). Confiscatory taxation is stealing property. Dont lie to hurt anyone or to make a sale. Dont covet others property. Give to the poor in secret. Take care of the man working for you. Dont charge interest when loaning to family. Dont borrow from your enemies. Clear all debts every 7 years. Get a job. Save for a rainy day. Dont pour money down a rat hole. Buy low and sell high. Keep your bowl right side up.

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Chapter 4. Zion and Babylon

By the rivers of Babylon, there we sat down, yea, we wept, when we remembered Zion. Psalm 137:1

And the Lord called his people Zion, because they were of one heart and one mind, and dwelt in righteousness; and there was no poor among them. Moses 7: 18

Babylon is the world of luxury and snobbery. It is the society in the great and spacious building of Lehis dream (1 Nephi 12); where people dressed in exceedingly fine clothing and mocked the true believers. John the Revelators described his vision thus:

I saw a woman sit upon a scarlet coloured beast, full of names of blasphemy, having seven heads and ten horns. And the woman was arrayed in purple and scarlet colour, and decked with gold and precious stones and pearls, having a golden cup in her hand full of abominations and filthiness of her fornication: And upon her forehead was a name written, MYSTERY, BABYLON THE GREAT, THE MOTHER OF HARLOTS AND ABOMINATIONS OF THE EARTH. And I saw the woman drunken with the blood of the saints, and with the blood of the martyrs of Jesus: and when I saw her, I wondered with great admiration. (Revelations. 18:3-6.)

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Our modern pop culture has morphed into Babylon, which is symbolized by a woman driving a red sports car, wearing a purple gown, gold jewelry, gems, pearls, and drinking from a golden goblet full of abominations, filthiness, fornication, and prostitution. She conspires against the righteous (Revelation 18:3-6). She is Madonna, Paris Hilton, and gangster rap all wrapped into one. The city is the Las Vegas strip, with its high temples to games of chance, musical follies where sex-roles are reversed, mind altering elixirs, small chapels where drunken couples marry briefly, machines that spew money, tables of cards and dice, roulette wheels, cocktail waitresses, neon lights that turn night into day, prostitution, pornography, alcohol, jewelry, roller-coasters, pyramids, circuses, castles, fanciful gardens, fountains, exotic animals, exotic clothes, exotic everything. Babylon is a party. She is a luxury junket that we call a conference, lotteries, video poker, and pornography. Babylon is the free lunch; free health care, free schools, free roads, free love, and investments that keep going up, up, up. Like King Noah (Mosiah 11), she ignores enemies and failure but believes in success and harlots. She believes that pills are the solution to our deficiencies and that drugs will make our children behave. Babylon is Huxleys Brave New World culture that is soma-dependent and always watching the big screen. She is a group where nobody is left out, but parenthood is anathema. Babylon is more movies, more rock concerts, more sportsand where poker and gambling is a sport. Where sport stars are supersized by steroids. She is the girls who just wanna have fun, and abortions. She finds fun in wickedness but never finds happiness. In contrast, Zion is boring but real. The community of the pure in heart is a project for the Latter-Day Saints as they the march towards the Millennium. In 1977, President Spencer W. Kimball outlined three fundamental actions to bring about Zion.34 First, we must eliminate the

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individual tendency to selfishness. This selfish was described as power, authority, riches, and vain things of the world. Selfishness does not consist of the three desires of Abraham for family, knowledge, and salvation. President Kimball continued, Second, we must cooperate completely and work in harmony one with the other. Interestingly, cooperation and work are often easier in the workplace than in church. Occasionally people understand that the boss isnt always right (but hes always the boss), but are reluctant to give a bishop the same benefit of the doubt. Still, cooperation consists of each person in the church doing his or her individual assignment. Third, we must lay on the altar and sacrifice whatever is required by the Lord. Usually these offerings are not of our choosing but are cast on us by life itself. Kimball had the vision of a latter-day Zion, but realized it would require a change in values that was not to be understood by the world; he concluded:

Unfortunately we live in a world that largely rejects the values of Zion. Babylon has not and never will comprehend Zion. Zion can be built up only among those who are the pure in heart, not a people torn by covetousness or greed, but a pure and selfless people. Not a people who are pure in appearance, rather a people who are pure in heart. Zion is to be in the world and not of the world, not dulled by a sense of carnal security, nor paralyzed by materialism. No, Zion is not things of the lower, but of the higher order, things that exalt the mind and sanctify the heart. 35

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In the first century, the apostle Paul and the early church were persecuted in Ephesus because it was perceived that their new religion would hurt the silversmiths who made idols (Acts 19:24-41). Similar to ancient unbelievers, latter-day Babylonians may claim that righteous people are bad for their business, when in reality, the righteous are building Zion and helping society through their work and purchases. They are the salt of the earth. Like Kimball, LDS scholar Hugh Nibley expounded the changes necessary in U.S. and LDS culture in his book, Approaching Zion.36 According to Nibley, our culture is and has been about making money, which he decried as serving mammon and Babylon. In a series of essays, he showed how the concepts of business and career are a modern day golden calf that blinds us to the truly important virtues such as charity, the natural world, and knowledge. Addressing scarcity, Nibley turned economic thinking on its head by insisting that everything, especially our lives here on earth, is a free gift given with a specific religious purpose. He attributed poverty, not to single parent households, but to the greed of the few. He insisted that we approach Zion only as we leave behind the world of business and commerceBabylon. Whatever the mistrust of money pursuits that Nibley inherited, the issue is not as clearcut as money is bad, or poverty is good. As we have seen, Babylon is not defined as money and commerce but the wickedness it purchases, and which we have already reviewed: lying, stealing, cheating, fornicating, coveting, dishonoring parents, and blasphemy (D&C 133: 14). Money by itself did not create Babylon. After all, money is only a medium of exchange. It cannot decide what to buy. Although it may be used to purchase desired goods, it cannot provide them. It is neutral, and it is not a shortcut to knowledge or virtue. Money then, cannot buy happiness if the man has no concept of joy, value, and trust. It will not buy intelligence for the fool, or admiration for the coward, or respect for the

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incompetent, according to Rand.37 In other words, Timon of Athens was wrong about money it can only give the pretense of respectability. Obviously, money does is necessary for individuals and families, and fortunately there is not a fixed amount so that what makes one man rich doesnt make the others poor. It is not a zero sum game. The distribution of wealth is, perhaps, the greatest fallacy of economic thinking, partly because we routinely assume there is only so much gold and paper money to go around. But if we think of the economy as wealth in goods and services, then economics is about the creation of wealth rather than dividing the spoils. If you take a lazy teenage boy and wrest the game controller from his hands and put him to work mowing lawns, chopping wood, or tying fishing flies, the world is richer in firewood, compost, and trout. If you take a gabby teenage girl and put her to work cutting hair, washing clothes, or sewing a dress, the world is that much richer. Even if you have you boy practice the cello three hours a day, he is providing a service, developing his brain, and you get the music in the bargain. (Note: Do not try this at home with drums.) When an idealistic young college graduate happens to discuss the problem of big oil making profits off the little guy, remind him that their oil didnt make anybody poor. Most people are glad they dont have to bicycle to work in the snow. Because the common man gets to decide what is produced and what is not, money can be used for good. Money is spent on missionaries, building churches and conference centers, feeding and clothing the poor, providing jobs for the handicapped, operating temples, publishing books and conference reports, satellite communications systems, websites and magazines for communication, temple clothing, humanitarian aid, education funding, and a Perpetual Education Fund that improves the earning capacity of members in developing countries. Brigham Young explained the proper use of money,

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I am not for hoarding up gold and other property to lie useless; I wish to put everything to a good use. I never keep a dollar lying idly by me, for I wish all the means to be put into active operation. (JD 3:160)

Young, the great colonizer who had seen and experienced wealth and poverty several times in his life, noted that the rich were frequently arrogant in their riches (JD 13:247), yet he decried poverty as a lack of work and management, and counseled the poor not to covet (JD 2:52). In Youngs philosophy, the work of building Zion was building the wealth of an agrarian society where there was neither debt, nor dole, nor speculation (JD 13:176). Still, Young was smart enough to recommend that you keep your bowl right side up, and when the U.S. army arrived in Utah to squelch a rebellion, he understood supply and demand, selective pricing and government spendinghe advised the locals to double their prices for eggs and flour. He even thanked the Lord publically the next year for sending the U.S. Army because now he was $2 million richer than the year before. (JD 8:356-357). Hugh Nibley poised a question to the saints: What would you do with all your needs provided and 1000 years to do whatever you want? Then he reminded us this is the promised state of the world during the Millennium that is just around the corner. The question transforms into, What we will do in the Millennium and how do we prepare for it? Brigham Young said that in heaven all speculation and competition would cease, although he wasnt speaking about the economics in the Millennium. We should ask the question: Will money cease to exist? How would we trade? What will replace the price mechanism for planning what is needed and what is not?

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Young described the Millennium as natural, not altogether religious, and as a society where our agency will still exist.38 This suggests that trade, specialization, prices, and money will still exist; however, the motivation to kill the competition, to lie, cheat, misrepresent, and steal will be gone. Money, in that scenario, would serve Zion without compulsion. But money could do that now if spent on goods and services that improve mankind rather than on ego-gratifying perversions, such as gambling, pornography, prostitution, alcohol, tobacco, and thrills. By fleeing Babylon in our purchases, we can begin to create the utopia where the pure in heart dwell. For me, money provides books, transportation, food, concerts, livestock, garden seeds, high-speed internet, machinery and tools of trade, a missionary in the field, a durable wristwatch, wholesome recreation, musical instruments, a drawing of my grandparents hanging on the wall, Handels Messiah CD, a new sidewalk to avoid tracking mud in the house, food stored in the basement, a wedding gift, an airplane ticket for my mother, and occasionally, chocolate. The order doesnt necessarily represent the priority. The material world is not a realm to despise but to cherish. If the Creator had wanted us to forever distain the material things, why did he put us in a situation where we have to eat, we have to cover our bodies, and we have to sleep every night? Perhaps the Creator wanted us to organize and prioritize time to fill these first necessities and then go on to choose which things we find most valuable? We need to consecratemake holythe material objects of this world to create Zion. This consecration effort is required of all disciples. In the early days of the church, the saints sought to establish Zion by consecrating their property, time, and talents to the Lords church. The United Order was revealed as a means to that end, and it was attempted on a limited scale in small communities in the west, such as

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Orderville, Utah. All such communities have long been discontinued, although Mormon fundamentalists and other small churches still practice them on a small scale. Even President Kimball with his clear vision of Zion did not recommend working toward Zion through communities based on the structure of the United Order; instead he urged personal and family righteousness. Similarly, church leaders do not ask members to leave their homes for Zion as they did in the 19th century; instead they call on them to build up Zion where they live.39 The Church is in a missionary era where the wheat and tares are growing together. Zion is in the midst of Babylon, at least physically. While it may appear that the Church has abandoned its utopian ideals, church leaders have discussed the topic of Zion regularly, and it appears that the church is relying more heavily on individuals and families rather than the community to live the law of consecration. The true Zion community will come together when the wheat and the tares are separated after harvest, but for now we have the last days (today) and the Millennium (tomorrow),

Behold, now it is called today until the coming of the Son of Man, and verily it is a day of sacrifice, and a day for the tithing of my people; for he that is tithed shall not be burned at his coming. For after today cometh the burningthis is speaking after the manner of the Lordfor verily I say, tomorrow all the proud and they that do wickedly shall be as stubble; and I will burn them up, for I am the Lord of Hosts; and I will not spare any that remain in Babylon. Wherefore, if ye believe me, ye will labor while it is called today. (D&C 64:23-25)

Tomorrow we may gather in utopian villages, but today we will live in the world among

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the tares until the burning. It has been suggested that tithing is a preparatory law for the Law of Consecration and the churchs donation slips are a practical way of living the law of consecration today. Starting with tithing, the 10 percent offering, it is followed by fast offerings, which is the Lords system to aid the needy, and six other categories that to contribute to our fellowman. Tithing and Other Offerings Tithing Fast Offering Ward Missionary General Missionary Book of Mormon Humanitarian aid Temple construction Perpetual education Other The missionary funds for the ward and general church promote the teaching of the gospel throughout the world. Likewise, the Book of Mormon donations go to provide copies of that scripture. Humanitarian aid can be given to relief efforts throughout the world, and temple construction provided more temples in closer proximity to church members. The Perpetual Education Fund was started by President Gordon B. Hinckley to aid young adult members in gaining an education and become more productive workers in their local economies.40 In a 2009 update, Church President Thomas S. Monson reported:

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Since its inception, 35,600 young men and young women have been enrolled in the program and have trained to improve their skills and their employment opportunities. Thus far, 18,900 have finished that training. On average, with the 2.7 years of education they are now receiving, they are increasing their income by three to four times.41

Although this program is still in its infancy, it could in time quietly revolutionize third world countries as the church members advance in learning and earning power. They could serve as examples of upward mobility to others in their country.

The Government of Zion. In a recent study of different organizational structures on which to build utopia, an LDS economist and an LDS businessmen collaborated to use the principles of the United Order as a template for the modern world.42 Lucas and Woodworth outlined the history of economics and of the United Order as it fit into the various utopian projects of the 19th century, then proceeded to describe possible structures such as worker-owned cooperatives as stepping-stones to Zion. The problem is that any organization can be corrupted, especially if it does not contain checks and balances and power sharing. Business organization should fit the needs of timely innovation, although government, by nature, should be made to act as slow as possible as a safeguard against a power grab. In other words, we shouldnt let all employees of a typewriter company vote on their production quotas on the eve of a personal computer revolutionwe need a boss. But in government, a slower pace is needednever has there been a military coup that

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was gradual. Because cooperation is desirable and absolutely necessary in Zion, the organizational structure should mimic the republican structure of our government. In the hands of men, power corrupts both the man and the institution. We have learned by sad experience that it is the nature and disposition of almost all men to misuse power as soon as they get it (D&C 121:39). Hence, any government system that keeps specific men in power for extended periods is playing with fire. Brigham Young taught that a theocratic government would be republican in form (representative democracy) and void of any oppression. The difference would be that the subjects would recognize the truth behind the laws and the officers would possess the eternal powers of the Almighty. Young continued,

When the kingdom of God is established upon the earth, people will find it to be very different from what they now imagine. Will it be in the least degree tyrannical and oppressive towards and human being? No, it will not; for such is not the kingdom of God. What do I understand by a theocratic government? One in which all laws are enacted and executed in righteousness, and whose officers possess that power which proceedeth from the Almighty. That is the kind of government I allude to when I speak of a theocratic government, or the kingdom of God upon the earth. It is, in short, the eternal powers of the Gods. Few if any, understand what a theocratic government is. In every sense of the word, it is a republican government and differs but little in form from our National, State, and Territorial Governments; but its subjects will recognize the will and dictation of the Almighty!

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The Constitution and laws of the United States resemble a theocracy more closely than any government now on earth. (JD 6:342-349, italics mine)

Young was not describing the order of heaven but the type of government that will exist during the Millennium. The theocracy he envisioned resembles the Constitution of the United States, which we can assume possesses a Bill of Rights that ensures individual freedoms, separate but equal branches of government, a legislative body that represents both people and states, and a chief executive that is constrained in his power. How would such a government look like? What role does God play in this republic? If it is true that God will force no man to heaven,43 then coercion would be replaced by persuasion at the personal level where the Spirit may have the greatest influence. Young spoke of the officers of the government being equivalent to the righteous men of the priesthood. When the people want freedom and justice, and their representatives are armed with power, truth, and wisdom (and restraint), it would follow that the elected rulers could rule without the loyal opposition combating their every move. Will there be a need for an opposition party? The Constitution was originally designed without political parties or a two-party system, which system would seem unnecessary and constricting to men who respect truth rather than which team they are playing on. A government with power fractured into the legislative, executive, and judicial branches can work well if two of the branches do not let the third one dominate to take their power from the people. More fracturing into state and local control would help diffuse the power further. The ideal may be where righteous officers at the local level handle most of the problems. This was

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the position of the government until a century ago when the Federal Government had a budget that was less than that of the combined States. How did Enoch rule the City of Enoch, or Zion? He was known for being slow of speech, yet powerful. He undoubtedly taught principles of sharing, love, and trust; but his city of Zion still took 365 years to be perfected. The Nephite utopia of 35 to 200 A.D. (see 4 Nephi 1) didnt have factions, had perpetual peace, and all things (property) in common. This did not mean there was a common storehouse, or that all worked in communal fields and factories for the same pay, nor that money and prices ceased to exist. If there had been coercion in the organization, peace could not have prevailed. What the utopia showed was that if people willingly give their substance because of a higher righteousness, then pure civilization can result. Usually we are willing to share our wealth with our family, but concern about the motives of others keeps us from sharing with strangers. The Nephites only overcame these stumbling blocks through following the commandments and fasting and praying often (4 Nephi 1:12). When we can do likewise we can start to love an entire society like our family, and thereby approach the Zion ideal. In modern revelation the Lord said:

And, now, behold, if Zion do these things [temple work] she shall prosper, and spread herself and become very glorious, very great, and very terrible. And the nations of the earth shall honor her, and shall say: Surely Zion is the city of our God, and surely Zion cannot fall, neither be moved out of her place, for God is there, and the hand of the Lord is there; And he hath sworn by the power of his might to be her salvation and her high tower. Therefore, verily, thus saith the

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Lord, let Zion rejoice, for this is Zionthe pure in heart; therefore, let Zion rejoice (D&C 97:1521).

According to Enochs testimony, a latter-day Zion would be established to join Enochs Zion in the last days.

And the Lord said unto Enoch: then shall thou and all thy city meet them there, and we will receive them into our bosom, and they shall see us; and we will fall upon their necks, and they shall fall upon our necks, and we will kiss each other. And there shall be mine abode, and it shall be Zion, which shall come forth out of all the creations which I have made; and for the space of a thousand years the earth shall rest. (Moses 7:62-63)

The two worlds of Babylon and Zion exist together physically for today, but spiritually and behaviorally they are worlds apart. Zion proves herself by her righteousness, and will endure the turmoil of the last days and receive her inheritance when Babylon will be burnt as stubble. But before that day, as Enoch saw, there would be great tribulations both among men and in nature itself, before the earth could rest from the evil that was upon her (Moses 7:66). Addressing recent turmoil, the death and destruction of the 20th century was mostly centered in the early part of the century between the World War I, the Great Depression, and World War II, although weapons of mass destructionnuclear, chemical, and biologicalhave been mass produced to the extent that they could poison and burn the world population several

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times over. It is not unimaginable that the weapons will show themselves as part of the tribulation. One of the purposes in establishing Zion today is to prepare a community that will meet Enochs Zion tomorrow. It is to show that a model utopia can be established upon which to construct society for the Millennium. Zion is the kingdom, spoken of by Daniel, which God will establish and spread throughout the world.

And in the days of these kings shall the God of heaven set up a kingdom, which shall never be destroyed: and the kingdom shall not be left to other people, but it shall break in pieces and consume all these kingdoms, and it shall stand for ever. (Daniel 2:44.)

Several church leaders have repeated the phrase that the Constitution would hang by a thread, and that the Elders would save it. President John Taylor explained in 1879 that the prophecy was in reference to the constitutional principles, not the U.S.,

The Elders of Israel will step forth to save the constitutional principle set forth in the Constitution rather than the actual government itself. When the people have torn to shreds the Constitution of the United States the Elders of Israel will be found holding it up to the nations of the earth and proclaiming liberty and equal rights to all men, and extending the hand of fellowship to the oppressed of all nations. (JD 21:8.)

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The breaking of all nations, prophesied by Daniel, would necessarily include the U.S., but the constitutional principles of liberty, individual rights of property and speech, representative democracy, power shared among branches, and legislative bodies will endure as Zion is established and perfected.

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Chapter 5. Economic Planning and Other Fallacies.

Freedom is the recognition that no single person, no single authority or government has a monopoly on the truth, but that every individual life is infinitely precious, that every one of us put in this world has been put there for a reason and has something to offer. Its so hard for government planners, no matter how sophisticated, to ever substitute for millions of individuals working night and day to make their dreams come true. Ronald W. Reagan

To talk about planning an economic system is to talk in old terms, and I find myself sometimes having to teach Westerns about what the market really means. Vaclav Klaus44

What can the government do to help us all become rich? That is the question that has plagued societies since the invention of borders and taxes. It was just as pertinent in Adam Smiths time when the mercantilists were convincing government to stimulate economic growth. Any government intervention requires a plan, and large scale planning has always failed in the long run; consider the Chinese children, Russian cornfields, and Soviet breadline. During Chairman Maos Cultural Revolution in China, the government planned families by dictating the number of children was to be no greater than two. This was purportedly done to conserve the nations resources, but it has resulted in an unequal gender distribution as some

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parents discarded unwanted daughters in favor of desirable sons. Today in China there are 20 million more men than women.45 The design for Russian corn was the brainchild of Nikita Khrushchev who, after pounding his shoe on the table at the United Nations, insisted that Russia would overtake Iowa as the top corn grower. Unfortunately, Russia is, in most years, too far north to grow corn. They should have stuck to growing potatoes and beets to maintain their position as number one in vodka and borsch. We could say that Khrushchev wasnt intelligent, that the Soviets were bound to an ideology, and that everybody makes mistakes. But that just proves the point. Nobody knows everything; everybody is bound to an ideology, and everybody makes mistakes. Ditto for a committee of planners who realize that after the committee reaches a consensus that no single person will be blamed for the failure. Nor can planners just plan one thing, like the price of bread. In the Soviet Union it was kept low, and people spent hours standing in line for bread that wasnt there for long. Standing in line is not a good use of time when you could be working or playing. In fact, a practical definition of hell is a place where they tell you to stand in line. Later the Soviet planners got smart and subsidized bread production so that the farms and bakeries could afford to make bread. So bakeries made too much bread to capitalize on their profit margin. Still, the price was kept low, and the enterprising Russian farmers were soon feeding their chickens bread instead of raw grain because it was cheaper. This is an example of an unintended consequence. A fundamental problem with economic planning is that nobody knows what will happen in the future. In chaos theory, a butterfly flaps its wings in China and two weeks later there is a

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tornado in Des Moines, Iowa. We know improbable things can happen in the future because they have happened in the past. The Spanish Armada could hit a storm. A tidal wide could strike Thailand. The Arizona Cardinals could go to the Super Bowl. Arnold Schwarzenegger could be elected the governor of California. Napoleons cavalry could run out of nails to disarm Wellingtons cannons. It may even be possible, by the time this book is published, that someone will discover a cheap unlimited source of energy, the American economy will turn around, and Congress will balance the budget and pay off the national debt. But lets not bet on it. Planning relies on the extreme hubris that humans can fully control the world around them, but is neutralized by the law of unintended consequences and the damage done to unintended victims. To use a recent example of planning, the government decided to keep its largest automobile manufacturer General Motors (GM) afloat so that it can keep union workers employed at a high wage. Besides, new more fuel-efficient automobiles are part of a national energy plan. By combining the two goals, government justifies spending taxpayer money to bailout GM. But what happens to the competitors? If GM succeeds, it will be at the expense of Ford, Honda, and Toyota. If GM fails, it will lead to more taxpayer-funded bailouts. Government planning in a free market usually ends up biting the taxpayer in the rear. Are the new economic conditions of today so much worse than yesterday that they demand intervention? It is hard to imagine a worse time than 1943 in the depths of war and depression, but in that year businessman Henning Prentis commented:

Usually so-called new remedies are not new at all. Compulsory planned economy, for example, was tried by the Chinese some three millennia ago, and by the Romans in the early centuries of the Christian era. It was applied in Germany,

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Italy and Russia long before the present war [WWII] broke out. Yet it is being seriously advocated today as a solution of our economic problems in the United States. Its proponents confidently assert that government can successfully plan and control all major business activity in the nation, and still not interfere with our political freedom and our hard-won civil and religious liberties. The lessons of history all point in exactly the reverse direction.46 (Authors italics)

Indeed, the old idea of government interference was rationalized with the best intentions, just as it is today. We need to save GM, Chrysler, Citibank, AGI, the State of California, Detroit, Iceland, a school by a railroad track in Georgia, union jobs, houses (especially those with nonpaying owners), the stock market, carbon markets, wooden arrow manufacturers, etc. Although well meaning, political power is called upon to purportedly prevent suffering, and seldom is political power used with subtlety. French historian Alexis de Tocqueville (1805-1859) told how the joining of political and economic power would quickly:

cover the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate to rise above the crowd. The will of man is not shattered but softened, bent and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to be nothing

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better than a flock of timid and industrial animals, of which government is the shepherd.47

Nothing makes men into dependent sheep (or sheeple) like a feeding trough maintained by a benevolent government. It was Satans plan in the pre-earth convention to give all men the same reward with a full-coverage insurance policy. Damnation, in LDS theology, is the stopping of progress, and the best way to stop progress is to restrict freedom through planning and regulation. Typical of Satans kingdom, central planning only works during times of war. In one creation drama, Satan threatens to destroy Gods plan by using money to turn the world into a war economy (Moses 5:31). War is typical of Satans kingdom in that it requires compulsion. The dark ages of Europe were centrally planned by dukes and kings, and were in a constant state of war. War results from the zero-sum economic fallacy that there is only so much wealth, and the way to get money is to take it. It needs to be combated by the philosophy that intelligence, industry, and trade create wealth. Government takeover by spending during recessions has been justified by Keynesianism, the hip economic theory that came out of the Great Depression. John Maynard Keynes was a celebrated economist (although I use the term loosely, much like Madonna is a celebrated moralist) who postulated that in times of economic slowdown, the government in concert with a central bank should increase spending to get money flowing and business active. President Obama has said he considers Keynesian economics to be well proven; governments should incur deficits to save the people they govern. Sadly, solving a credit crisis with more credit is like using water to fight a flood.

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And the skeptic sees increased government spending as merely handouts to buy votes. For example, if a man has a million-dollar city road contract, we can pretty much guess for whom he is going to vote in the upcoming mayoral election. Now imagine that half of the nations citizens were dependent on government jobs and a particular candidate or party to keep the funding in place. Elections would no longer be close. Could this happen in America? I think it just did. To evaluate Keynes justification for spending, we need to consider how and why recessions begin. If they are random acts of nature, if they are spins of the wheel, then government is justified in trying any chance program to get us out. But if there is an underlying cause to recessions, such as too much borrowing, spending, and speculation, then it makes little sense to continue borrowing, spending, and speculation. If recessions inspire individuals and businesses to liquidate unprofitable holdings, pay off debts, and shift work to more productive enterprises, how is that bad in the long term? It isnt. Keynesian theory recommends spending money in poor times and paying it back in good timesan unworkable policy for three reasons. First, spending incurs more debt. Second, it diverts workers into less productive enterprises that are politically determined and would not be rewarded under ordinary circumstances. Third, there is never a payback of the spending spree. Politicians are re-elected for bringing money home to their districtsnot for paying off the debt. Keyness disciple, Franklin D. Roosevelt (FDR), hoped to build confidence by dispelling fear. FDR, in a memorable quote, said, We have nothing to fear but fear itself. It was like saying, If we are confident, confidence will give us the confidence we need. Can government instill confidence by meddling? Or will the natural response always be hesitation? We know phony confidence when we see it. In the real world, bad things happen for

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a reason. In business, bad things means not being able to sell enough products to make a profit. Unemployment also happens for a reasontoo many people are working in businesses that cant sell enough products. The free market requires these workers find new jobs. It isnt fun. There is no harder work than looking for a jobthis is because you are trying to convince someone that they need you. Besides, FDR misspoke. Businessmen had a lot to fear as the federal government imposed new regulations, increased their taxes, competed in the same markets, portrayed them as villains, and established an alphabet soup of bureaucracies to regulate and compete with them e.g., FERA, CCC, TVA, AAA, NIRA, PWA, FDIC, SEC, CWA, SSA, WPA, NLRA, to name a few.48 Businessmen were the only ones that could get America working again, but as Tocquerville predicted, they were restraining from acting. It was not the perception of fear but real fear. A recent bad example of government recessionary spending is the intervention into automobile industry, as the government took over GM and encouraged us to buy GM cars and that they will back up the warranty. We should know enough to buy Fords, Toyotas, or Hondas. Although each individuals finances are different, we are skeptical enough to know that when the government tells us to spend, then wed better not spend. If the government really wants their program to work, they had better just tax us $20,000 and give us the GM car. Of course the car wouldnt be the size that we need or the style that we want. Alternatively, the government could tax us for the GM car, give the money to GM to retool for the new GM line, find that we wont buy GM cars, fire the CEO of GM, and force them into bankruptcy court without giving us a car. This is precisely what has happened up to May 2008. At which time the government took over the automaker. Now they will try it all again.

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Central Bank Planning. A central bank, such as the Federal Reserve, has a charter to stabilize the currency and exercises control over the interest rate by being a bank for the banks. It loans money to banks and charges them a discount rate that is based on what the Fed thinks the interest rate should be. If the economy is slow, they may lower the rate to stimulate borrowing and purchases. If inflation is increasing, they may raise the rate to discourage business investment and borrowing. In the 1980s, Fed Chairman Paul Volcker successfully raised the interest rate to record high levels to combat inflation. Any planner, such as a central bank, has to have an end goal in mind and be willing to sacrifice other goals to achieve it. If interest rates were not controlled by a central bank, which was the case for 80 years after Andrew Jackson abolished the Bank of the United States and before the Federal Reserve, and then the interest rate would be set by supply of savings and the demand for debit. The interest rate would rise to the point where savings would be encouraged, unlike today, when savings is penalized both by the tax code and by inflation. Today, interest rates are more a product of the attitude of the Federal Reserve Chairman and his response to economic news, and not as a measure of where resources should be diverted. If we start out asking for help from the government, well ended up with families with just boys, poor yielding corn, and misallocated bread. As Ronald Reagan was fond of saying, the worst words in the English language are, Im from the government and Im here to help. It is tempting to think that every economic planner is Satan himself, partly because it was Satan who first promulgated the one-size-fits-all plan for earth (Moses 4:1-4). What can government do for me? Leave me alone. Let the free market system work by not intervening.

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Economic Freedom. In contrast economic freedom has accomplished more in the last two centuries in America than the 5000 years preceding itmore inventions, more education, more exploration, more travel, better health, faster communication, more everything. The 19th century was especially productive when men began to exercise their freedom to invest and improve themselves. It is paradoxical that individual freedom and responsibility leads to collective betterment. If a company has gotten rich, it has usually provided a good or service that is better and at a lower cost to the majority of people. People spend their money where they want, and it is only through this spending that they reward certain businesses. Competition insures that nobody has done it better, but that someone eventually willno company has lasted forever and very few for longer than the age of a man. Ayn Rand praised those who honestly earned their money through production, and Americans in general, whom she called the first people to use the phrase, to make money.49 There is a difference, she understood, between a society where wealth is static and one where wealth is generated. One fights over a piece of the pie, and the other is more concerned about making pies. The first begs, bribes, and steals. The second assembles flour, fat, and fruit; then bakes the pie, creating wealth through his organization and work. In Latter-day Saint cosmology, organization and work are at the center of creation itself. Creation was not ex nihilo (from nothing). It consisted of assembling the matter, organizing it, and giving it life. In the pre-earth council, the choice was between a savior who would do the work of salvation to allow mankind to progress, and a savior who promised to not let a single person fail so long as he could have the glory (Moses 4:1). It was a choice between a pie maker and a pie Czar.

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There is a distinction between those who create wealth and those who loot the money; the latter group includes the rulers of all ages, the robber barons, the conquistadores, Alexander the Great, Genghis Khan, and Napoleon. It is notable that strong leaders attempt to dominate in the economy. Government should stand back and let competition thrive while resisting the urge to loot, tax, spend, regulate, and pontificate. A person who takes money from the public treasury, in the form of a government job, actually is taking that which belongs to another. He takes taxes that belonged to all of us. If he builds a needed bridge, develops a better crop, or enforces just laws to protect property, then he is benefitting mankind through a collective agreement and deserves a good wage. But if he uses the government job to stand in the way of progress through some obtuse regulation (like limiting oil drilling), he is robbing us thrice; first by his salary and expenses, second by holding back production that will increase supply and lower price, and third in the opportunity costhe might have produced a better good or service at another job.

Public Spending Projects. The town fool might deduce that the towns could get twice as rich by building a second bridge, and thrice as rich with a third bridge, and so on ad infinitum but that would be lunacy, unless the towns grew in population until there were long lines waiting to cross the bridge. Otherwise, one bridge made them richer; two, not so much. The City of Lake Havasu could buy the Brooklyn Bridge and it wouldnt help them very much. Followed by the Golden Gate Bridge, which may be a real boondoggle. Not to mention the Bridge Over the River Kwai. And if they continued relocating dozens of bridges, people would be taxed so much that families might start living underneath them instead of in houses.

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Yet one of the primary functions of government is to build roads and bridges for the benefit of the public. If they dont build too many, bridges can make us richer. Another task of government is to protect our wealth from getting stolen, either from marauding armies or from shysters. In other words, the government needs to recognize that private property is just that private. Its our stuff. All property does not belong to a supreme leader to bestow on whomever he pleases; rather it was produced through our own labor. My watch doesnt belong to everybody, even if everybody helped me get it, because I already traded everybody for it. But I cannot trade with paper pictures of rocks, nor real rocks, not even if the rocks have been coated with gold paint.

Contracts. Honest trade must be promoted and agreements (contracts) must be enforced. If you paid Hands, Inc., to provide the hands for the wristwatch you were assembling, and the company took the money but never sent the watch hands, you would be 99 percent complete with the watch but for all intents and purposes, you have a funny looking bracelet. You would find someone else to make the hands, and this time you would insist on paying cash on delivery. Then you would sue Hands Inc. for the amount that his breach of contract cost you. That is what contract law is all about.

The Broken Window. One of the prominent fallacies of economic and political thinking is the example of a hoodlum who throws a rock and breaks the window of a local baker.50 The baker, realizing he must have a storefront window for his business, buys a window from the glassmaker. Whether he gets the money from his personal reserve or from an insurance company is irrelevant because the baker ends up paying for it in the end. In this fallacy, where once there

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was no economic activity, now there was money in the hands of the glassmaker, who in turn would spend the money in a multiplying way. By breaking a window, wealth is created. Or is it? Wealth was the window in the first place, and its replacement was just to offset its destruction. True, there is now money in the hands of the glassmaker. But that is money that was in the bakers possession. Had he just been saving it in a bank, it could have been lent to enterprising businesses to further wealth while gaining the baker the interest and assisting in employing the banker. The baker, in this example, had actually earmarked the money for a new suit to please his wife. Now the tailor who would have made his suit is without a sale, not to mention the weaver who lost a sale to the tailor, and the sheepherder who lost a sale to the weaver. The baker may raise the price of bread to pay for his window. What the hoodlum did was shift production, cause inflation, and make a bakers wife unhappy.

Opportunity Cost. When you buy a window you cant buy a suit. When you build a bridge you cant build a radio tower. When you pay $100,000,000,000 to bailout GM and Chrysler, you cant spend it on whatever you spend $100 billion on. You cant simply say the money was well spent, unless you consider the opportunity costwhat else you could have done with the money?

The Forgotten Man. First proposed in the 19th century, it is a story of playing politics with the economy. Party A observes the plight of Party X and convinces Party B that something must be done. Working together, A and B pass a law mandating that everybody will help X. Party C was not consulted, but he ends up paying to help X as well. Party X may or may not

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benefit from the help, but Party C suffers. Party C is the man who pays the bill without the benefit; he is the forgotten man51. This story is reenacted during every piece of pork-barrel legislation. For example, to pass the TARP bill, Democrats (A) and Republicans (B) got together to help financial institutions (X) while the American taxpayer (C) pays the bill. Whenever Congress votes for a monument, dam, museum, art endowment, etc. Party X received the benefits while Parties A and B score some serious high self esteem, and Party C pays.

Menckens Law. When Party A annoys or injures Party C on the pretense of saving or improving X, Party A is a scoundrel.52 One example of Menckens law is the recent law prohibiting incandescent light bulbs in order to convince Americans to buy florescent light bulbs that theoretically cost less, last longer, but use less energy and thereby save the world. In this example, A are activists, X is the fragile planet, and C is the forgotten man who liked the old light bulb. In fact, other than laws that promote human rights and dignity, most laws encouraged by activists/scoundrels harm the forgotten man for little or no improvement in the X. During the Great Depression, FDR changed the term forgotten man to represent the special interest groups. Earlier the forgotten man was the one who carried the burdens placed on him by third partiesthe taxpayer. In FDRs lexicon, it became the man waiting in line for a handoutthe special interest group seeking government funding. In other words, FDR changed the identity of the forgotten man from Party C to Party X. His obfuscation was a breakthrough for activists, special interests, lobbyists, etc., at the expense of the taxpayer.

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Natural Law. The economic science of the free market system is a wonderful system but it was not invented by Adam Smith, Carl Menger, Ludwig von Mises, or Thomas Edison. It was discovered in the same way that Isaac Newton discovered gravity, and Christopher Columbus discovered a continentby observation. The free market is not an exclusive cult that worships the invisible hand like the Pythagoreans worshipped the squared sides of a triangle the free market is natural law. Trade is the activity to which mankind will gravitate. Prosperity and wealth happens when people are left alone to trade and provided with property rights, minimal taxation, and simple laws to redress theft. It is as natural for Homo sapiens to trade as it is for dogs to bark. Prosperity through trade a natural law. Perhaps no wiser words were uttered than those by President Warren G. Harding when facing the economic turmoil of 1920, We must proceed with a full realization that no statute enacted by man can repeal the inexorable laws of nature. Our most dangerous tendency is to expect too much of government, and at the same time do for it too little.53 Government is not the answer. If we sit at our roadside stand and cannot sell our garlic for the price we want, we can lower the price, we can package it better, we can develop new uses for garlic, we can start a garlic fad, or we can give up on garlic and grow rutabagas. We should not barricade the road to stop cars, then throw garlic in their windows and make them pay. Neither should we demand a government bailout, or ask that we be protected from the foreign garlic farmers, or any number of selfish and silly behaviors. Harding added, No altered system will work a miracle. Any wild experiment will only add to the confusion. Our best assurance lies in efficient administration of our proven system.

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The Spending-Makes-Wealth Fallacy. On the surface, it seems logical that money makes the world go round, and the more money going around, the more wealth there is. Remember, the first bridge was important and created wealth, but the other bridges were redundant. Still, spending is perceived by some to be a panacea for economic slowdowns. Keynes described how governments could solve unemployment.

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.54

Ah yes, nothing makes us wealthy and wise like destroying time, money, and intelligence. Remember, wealth is goods and services that are produced by planning and work. Money buried in a bottle is not wealth but a silly game. Where would the Treasury get the money it would put in the old bottles or spend needlessly? It only has two options, from the taxpayer or from the printing press. It might be difficult to justify the bury-the-taxpayers-money-in-trash stimulus to the taxpayer. Printing

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money would erode its value, leading to inflation and eventually hyperinflation. It should be noted that Keynes didnt suggest burying real gold bullioneven he was not so foolish to assert that the Treasury should award gold to such a useless activity. Keyness brainchild demonstrates the idiocy inherent in the 4th category of spendingspending other peoples money on other peopleto solve unemployment.

The Savings-Leads-To-Recession Fallacy. If individuals save money, they are not spending it, which causes business to lay workers off. It is a vicious cycle, according to Nobel Prize winning economist Paul Krugman55the New York Times economic columnist. Unfortunately, Krugman is not alone in the belief that spending leads to prosperityour leaders not only overspend their budget, they encourage spending through tax breaks while taxing the interest income on savings. The fallacy is that Dr. Krugman hasnt considered what the banks do with the money that individuals deposit with them. We should ask him, where do you think the savings went? Banks lend it to businesses, which in turn spend it on improvements in machinery, wages, benefits, or junkets/conferences to reward management. Saved money gets spent, and more goods are produced.

Business Cycle Theory. Austrian school economist Fredrick Hayek developed the theory to explain the boom-bust cycles in the economy. First, there is credit expansion (lots of lending), which is fueled by the Fed and by banks lending fractional reserves. Second, a lot of this money is poorly invested in the boom of the dayin the 1920s it was stocks and in the 1990s it was housesand that drives up the price and causes overproduction in that sector. Too many

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McMansions were built. Third, the bust/collapse comes when the overproduction and malinvestment is exposed. Fourth, there is a painful readjustment as builders, realtors, and suppliers are unemployed and need to find more productive employment. Banks may fail if they have lot of their reserves tied up in bundles of McMansion mortgages. Popping of the bubble leads to reorganization of the economy, which could mean that housing prices fall, banks fail and their assets are sold, construction workers find new jobs, and the economy is put back in order. While such cycles can occur with about any unfounded hysteria (such as the dot-com bubble of the late 1990s) they can become worse if the government backs a particular industry, such as mortgage lenders and gives the impression that they will not let them fail. Gamblers take more risks when they know they will be bailed out. It was the like the Fed telling investment giants to keep rolling the dice because if it comes up craps, well bail you out.56 According to Hayek, the boom/bust cycle would be dampened if there were no central bank, such as the Fed, controlling the interest rate and money supply. In a gold economy with fewer fractional reserves, the interest rate would be higher, rewarding savers while ensuring businesses use judgment to ensure they can pay the interest rate bill. Consumer debt, a fairly recent phenomenon, would be limited. After reviewing bailouts and economic fallacies, we find we have sinned in the following ways: We believed the lie that an economy can be planned. We embraced the lie that governments must spend during recessions. We were tricked into believing that breaking a window is good. We didnt realize that there is a forgotten man who pays. We thought that the free market was a theory, not a natural law.

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We believed that credit expansion would provide wealth for all, or that spending makes us wealthy, or that lunch was free.

Believed the lie that savings leads to recession. Misunderstood that public spending must have a specific goal. Thought that business cycles were random rather than due to excess credit and bad investment.

We now turn our attention to the Great Depression of the 1930s as a decade of poor economic thinking and Americas biggest attempt at central planning.

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Chapter 6. The Great Depression.

If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold. William Jennings Bryant57

But the most fanatical attacks against gold are made by those intent upon credit expansion. With them credit expansion is the panacea for all economic ills. It could lower or even entirely abolish interest rates, raise wages and prices for the benefit of all except the parasitic capitalists and the exploiting employers, free the state from the necessity of balancing its budgetin short, make all decent people prosperous and happy. Only the gold standard, that devilish contrivance of the wicked and stupid "orthodox" economists, prevents mankind from attaining everlasting prosperity. Ludwig von Mises58

William Jennings Bryant gave the most famous political speech in American history and associated the banking powers holding to the gold standard with Roman soldiers crucifying mankind. The gold debate was largely forgotten for a century, but it is making a comeback as

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gold is perceived as stability against the declining dollar. A century ago, the issue was whether the U.S. should abandon the gold standard and international agreements, thereby inflating the money supply with silver followed by a printed currency. The beneficiaries would be the indebted farmers (or others) who could find their debts easier to repay with the hope that more currency in circulation would bring a better market for goods. The Cross of Gold speech gave William Jennings Bryant the presidential nomination in 1896, but America wasnt quite ready for the monetary revolution, and Bryant lost the election that year, then again four years later. Eventually the idea of credit expansion revolutionized currency in the 20th century. Its justification was that the American government was of the people and should exist to lift up the common man. To do that, government had the right and duty to print money. Later, the bankers would lobby for a central bank that could print official money and in 1913 Congress created the Federal Reserve, whose notes were originally backed by gold. But the two currencies had a hard time co-existing; the fiat money was redeemable in gold, but the existence of notes (and the Fed itself) was designed to expand the supply of money. The redemption of paper notes by gold was been suspended from time to time in the 20 years that followed, usually when gold reserves were in danger of running out. Inevitably, the U.S. abandoned the gold standard in 1933, which is another way of saying that the U.S. declared Federal Reserve Notes were not redeemable in gold. Simultaneously, FDR, by presidential order, dictated that all private gold be surrendered to the government and made the mere possession of gold illegal. But the U.S. dollar, backed by gold, remained the international reserve currency. In 1971 with gold reserves running low, President Nixon announced that the dollar and not its gold backing would serve as the worlds reserve currency. We are left with the unfortunate legacy to see it all play out, but this was not the first time the fiat money chickens had come home to roost.

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Only a decade old, the Federal Reserve created a credit bubble and watched it burst. In the 1920s the Federal Reserve increased the money supply by lowering the interest rates it charged bank and reduced the reserve require for banks, which increased lending. The money supply increased by half and the credit bubble was underway. Although chartered to keep the money sound, the Fed did what Bryant and his populist comrades really wanted it to do: expand the supply of money to the common man. Who, ironically, didnt buy more farm goods so the prairie farmers could pay off their debts. It seems one can only eat so much grain and meat. The common man looked at the wealth of the previous century and the new industrial inventions of electricity, the automobile, communications, machinery, and decided to invest in the stock market. Soon, everybody put money in the market because everyone was doing it. Money became cheap, WWI was over, President Harding promised normalcy, and President Coolidge removed government restraints so that could happen. More stock market gains increased the money on paper, which was reinvested in the stock market. Perversely, speculating with borrowed money made more money with which to speculate. And then the bubble burst in the stock market crash of 1929. Obviously a bubble cant last forever. Some practical philosophers maintain there is symmetry with the economy: that the good times have to equal the bad times. In other words, a hangover has to equal the drunk that caused it. Austrian economists F.A. Hayek and Ludwig von Mises, predicted the crash of 192959,60, based on Federal Reserves policies leading up to the crash that produced an overabundance of credit. The solution, although painful, is to stand back and watch credit tighten. Those banks and businesses that didnt have enough reserves would liquidate or fold. Banks holding bad assets in stocks (or Fannie Mae-backed real estate) would go to bankruptcy court where their good assets would be divided up and sold, perhaps to other

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banks that would then have more money to lend. Businesses would need to cut their workforce, change products, sell assets, or let the bankruptcy court sell them. The people and assets of one business would become the basis for a new business directionwhich is called restructuring, or creative destruction. President Hoover was truly the one of the greatest humanitarians of the age when, as a private citizen he organized aid to a worn-torn Europe. His successes with turning around mining operations had earned him respect as the greatest engineer of his generation. As Commerce Secretary under Coolidge, he had been viewed as a wonder boy. Many in the media considered him the smartest man alive. Hoover knew that the crash was bad, although he didnt realize the earlier crash of 1920 was worse. He didnt understand that the market had experienced a speculative bubble due to excess credit and that bubbles must burst. But he knew he had to do something, so he did. He acted quickly and decisively, and by doing so he turned the crash into a depression. 1. Hoover intervened in business. Hoover called on the railroad industry to prompt them to continue construction. He gathered industry (Ford, GM, Sears, Chamber of Commerce) and unions and cajoled them into keeping wages and employment high, against the prevailing wind of change. He lobbied unions, agriculture, and utilities and won concessions to keep expanding and employing. The industry leaders were inspired to join Hoover, which course reduced the business profit and depleted funds that would have helped keep them afloat and prepared for a business upswing.61 Hoover did all this within a month of Black Tuesday in October 1929. 2. Hoover increased public works spending on roads, bridges, and hospitals and lobbied the governors of states to do the same. The Department of Commerce joined with the

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states in public works programs. Hoover proposed to Congress an increase in the Federal Buildings program of over $400 million, and established a Division of Public Construction to spur public works planning. In 1932, he established the Reconstruction Finance Corporation (RFC) to lend abundantly for public dams, toll bridges, and slum clearance. 3. Hoover passed protectionist legislation, the Smoot-Hawley bill, which raised tariffs on imported goods. He signed the bill in June of 1930, eight months after the crash. Instead of helping America, Europe retaliated with tariffs. Trade declined. Full of panic, people hoarded money in mattresses. Business cut back. Some closed their doors. Banks with few reserve funds failed. People hoarded more money. More banks failed. 4. Hoover assailed the stock market, especially short selling. Hoover railed against the wave of uncontrolled speculation that caused the crash, but when he thought it through, those betting on higher prices certainly didnt want the crash, so he turned against the short-sellers. Short selling is a gamble that the price of a stock will fall. The short-seller borrows shares of stock with a promise to return them in a specified time. He then sells the shares, holds the money, and when the stock drops in price, he buy up the shares again to return them to the owner. The original owner still has the shares of stock, although they are worth less than before, and the short-seller has money that is the difference between the price before and after. Of course, the short-seller may have bet wrong, the price could increase and he would be scrambling to come up with money to repurchase the stock to cover his shorts. Short selling was assailed as practice of betting against progress. Congress took the hint and began investigations to embarrass illegitimate speculators. The stock market became depressed and subsided even more. Later FDR played the class warfare card for the poor common man against the rich elite. FDR called Wall Street businessmen unscrupulous money changers in his inaugural address.

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Someone should have told Hoover that the stock market bubble was really just a pimple. You let it burst, let it drain, wash it out, and let it heal. You dont try to put the pus back in. You dont try to reconstruct it. You dont try to bandage over it in the hopes that it will grow back. Wisely, the longtime Treasury Secretary Andrew Mellon told Hoover to let the problem heal itself, as it had in the crash of 1921. Hoover didnt listen. There is a tendency to fix problems when the best remedy is to let people fix them themselves. Joseph Smiths motto was to Teach people correct principles and let them govern themselves. It is not wise to protect individuals from their mistakes. We need to let karma happen. The Lords plan was to provide a way for individuals to work it out. Hoover, the greatest philanthropist of the 20th century, needed to learn this lesson. Engineers are, by nature, designers and fixers, and most dont understand biological systemssuch as the economy. It is a billion little transactions every day. The economy is an organism with a billion cells, each independently reacting to its surroundings, yet each entirely dependent on its neighbors, interactions, second-order interactions, until the net effect is an organic wholea man walking down the street. Hoover didnt understand the forgotten man, or the principles of unintended consequences of government actions. Or the invisible hand, or the relative size and problem-solving ability of private businesses. He just knew that he had to do something! Later, Hoover decided that a balanced budget was necessary and didnt dare reduce spending. Hoover proposed, and Congress passed, several tax hikes in 1932. The top income tax rates were 25 percent in 1930 but jumped to 63 percent from 1933 to 1936, and predictably tax receipts declined. The rates were increased again to 81 percent in 1940 as WWII began in Europe. After Pearl Harbor attack, it went to 88 percent and topped at 91 percent by wars end.

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After the war, the top rates remained high and had not the U.S. been the sole economic superpower, it is doubtful that the economy could have remained competitive. Rates didnt decline until 1964 and not dramatically until the 1980s, when President Reagan lower the top rates to 28 percent. Hoover was followed by a president who didnt really know any more than he did which FDR proved by not repealing the Hoover policiesbut was convinced that he and his cronies knew how to help the common man by virtue of their party, their good intentions, and their political philosophy. Normally, if a business experiences a drop in sales, it would reduce the price of their product to keep it selling. Then they would reduce costs by cutting back on the workforce through layoffs or pay decreases. Hoover convinced them to avoid pay decreases for fear that these workers would have less money to buy goods. Later FDR made pay cuts illegal. Businesses then laid people off as they quit producing. Banks didnt want to lend to businesses in this predicament. Furthermore, the people with money were holding it until the economy got better. Fear about the stock market was understandable, but that fear extended to banks. Depositors took their money out and hid it away. Without cash, banks had to close. Economist Albert Wiggin wrote at the time:

It is bad policy for a government, or for an industry by concerted act, to try to keep prices permanently above the level, which the supply and demand situation justifies... We must keep the markets open and prices free. It is not true that high wages make prosperity. Instead, prosperity makes high wages. When wages are kept higher than the market situation justifies, employment and the buying-power

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of labor fall off... Our depression has been prolonged and not alleviated by delay in making necessary readjustments. 62

According to economists, typical recessions last about 16 months63, but the Great Depression lasted 16 years. The long shadow of big government intervention paralyzed business activity. Government programs took up the slack by employing workers for public work projects but this took them away from productive employment that might make goods for trade. The newly unemployed stockbrokers needed jobs. They had communication skills and were supposedly good at math. There was a great industry waiting to be bornperhaps television, which had been imagined but not perfected. Perhaps nuclear energy, as the splitting the atom was only a few years away. Perhaps the pH meter, the thermistor, FM radio, fiberglass, nylon, Teflon, Freon, programming languages, the digital computer, and xerography, all invented in America during the 1930s, but their development into marketable products didnt happen until after the war. Perhaps any of the improvements that came out of the 1950stract homes, better automobiles, color television, TV dinners, credit cards, or hoola-hoopscould have been produced decades earlier. It was the response to the crash that brought on the Great Depression. All the usual suspects (Republicans, greed, Wall Street, capitalism, the gold standard, etc.) didnt have the means to turn a crash into a way of lifeonly a strong government could. Milton Friedman later blamed the Great Depression on: the Federal Reserve System for its tepid response in 1930 and 1931 Hoover and Congress for raising the top income tax rates from 25 to 63 percent wage and price controls

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union power to keep wages artificially high the Smoot-Hawley Tariff (a tax on imports)

Austrian economists would quibble about the first point, saying that Fed policy created the bubble and that the tepid response should have been no response at all. The Great Depression wasnt a sign of the failure of capitalism; it was handcuffing the market to prevent it from solving the crisis. Still capitalism was soon blamed for the economy while the mistakes of leaders soon gave them great power over the economy. Bubbles happen when investors bid up the price of a particular good. Crashes occur when investors finally realize that it wont give back the promised returns. Lets use the example of U.S. agriculture in the 1920s. During WWI, Europe became a great market for agricultural goods just as advances were made in tractors, harvest machinery, fertilizers, and seed technology. Prices were so good that 1914 to 1918 became the parity years that farmer wanted to base their income on in perpetuity, although we could call them the bubble years. Then the farm boys came home from Europe and production went up even more while overseas demand faded. There was too much corn, wheat, hogs, chickens, beeftoo much of everything. Prices crashed. Farmers still had debts for their tractors and farms and to survive, they needed prices to increase. What the agricultural crash should have told Americans was that we needed less production, less farmers, and less farmland, which meant more bankruptcies. Only when production fell could the prices rebound, but they would never stay at the 1914 levels because of the technological advances that made food cheaper and easier to grow. In the short term, banks and communities that were dependent on farmers wanted agricultural prices to increase so farmers could pay back loans and buy goods at the local store. This was the basis of political support for agriculture, which was a sizeable portion of the voters.

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Should the government have bailed out the agricultural sector? Could they even if they tried? Keeping more farmers in business would keep the surpluses high. Eventually the government paid them to destroy livestock, and not grow crops, but there we lost both ways. First it costs the government to pay the farmer. Second, the crops and livestock might not have been worth much but they were something and the government just dished out money to destroy wealth. Some venturing capitalist could have built grain bins, stored the ultra cheap grain, and undersold it to flour mills and Kelloggs and General Mills for a decade. The government got involved by setting minimum prices for commodities such as corn, wheat, and cotton, which had the effect of always having surplus food (a good thing) but always having to deal with it. Solving the agricultural crash by government intervention just delayed the inevitable and increased the cost. Now 80 years later we are still solving it. That is the legacy of government trying to perpetuate the bubble of an industry. Just like they suppress wildfire and by doing so make the inevitable wildfires larger and more intense. In the American political system, the leaders usually represent the attitudes of their constituents. According to Sennholz64, the roots of the Depression had been growing in the hearts and minds of the citizens for over two decades. The teaching at universities prior to 1930 was hostile to property rights and enterprise. Citizens wanted policies such as tariffs, labor laws, high wages, high prices, high taxes on the rich, and the distribution of wealth. When the crisis demanded a response the collectivist policies were implemented to the detriment of the nation as a whole and the lower class workers in particular.

History Repeats Itself. (But not exactly.) Todays global financial crisis is similar in many respects. A credit bubble caused by the Fed led to another bubblethis time the

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housing/real estate bubble (encourage by Fanny Mae, Freddie Mac), a crash in the housing market when everyone realized there were too many houses. Financial institutions holding real estate start to fail as their collateral evaporates. The quick response by government officials has made business wary. The crash of 2008 is the farcical version of the 1929 crash with a different cast. George W. Bush played the role of Herbert Hoover in over-responding to the initial crisis and not accurately placing blame. John McCain, a future footnote in history, played Hoover in his final scene where he lost re-election. Barack Obama gets to play a combination of roles including Hoover, FDR, and, from a later era, Jimmy Carter. Like Hoover, he will spend more and tax more. Like FDR, he had a hundred-day honeymoon with a flurry of programs, some of them not really associated with the economic crisis but, as his Chief of Staff said, You never want a serious to crisis go to waste.65 Like Carter, he doesnt appear to understand how wealth is created or the nature of the worlds depots. And like all of the earlier characters, all the present ones believe that government is the solution to every problem. It remains to be seen if President Obama is repudiated after one term (Carter), or if he becomes a de facto dictator that dies in office during his 4th term (FDR). (Of course presidents terms are limited, but that hasnt stopped the Clintons for running for a 3rd term.) To continue the analogy, the roaring 1920s were repeated in the 1990s and 2000s. First with housing in the 1990s the Fed pumped money into the economy. Later they did it again to offset the 9/11 panic. Borrowing money became easy and there was a big investment bubble in real estate and the stock market. In his book Meltdown66, Thomas E. Woods, Jr., described how homebuilders were affected by the artificially low mortgage interest rates that falsely predicted housing need in the future. When the housing prices started to fall because of a housing glut,

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prices fell by 25 to 50 percent. The stock market fell from its 2007 high of 14,500 to a low of 6700 in March 2009. (Isnt it ironic that Century 21 Realty, the largest real estate company in the U.S., was so named? Since its founding over 50 years ago, Century 21 was anticipating a century that would devastate their business.) The stock market rally during the last decade occurred partly because the common man increased investments, just like in the 1920s, but this time it was savings in individual retirement accounts (IRAs), as well as 401k, and 457 accounts. Ironically, these were encouraged with tax breaks from the government. Even federal government employees were put in a system that encouraged investment in the stock market as well as government bonds. The retirement funds were put in large based stock portfolios similar to mutual funds, which bid up the price of stocks, and the gains on paper were fantasticover 20 percent annually. In the 1980s, investment house Merrill Lynch had a TV commercial with a pompous spokesman proclaiming in a know-it-all Harvard accent, We make money the old fashioned waywe earn it! Such memories became especially ironic when Merrill Lynch went belly up in 2008 and it became obvious that they made money by gambling. After all his fixes for the economy, Hoover said in 1932, Hope is just around the corner. He was wrong but it sounds so similar to the Presidents words of today about green shoots and recovery. Unfortunately, both have saddled the recovery with government programs that confuse business. It was the old adage about government that if they cant find a problem, they fix it until they do. Because the analogy between the eras is so haunting, The Great Depression Checklist is provided on the following page.

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The Great Depression Checklist


1. ___A crash occurs where non-expert investors lose money. 2. ___Leaders vilify business. 3. ___Leaders blame greed. 4. ___Leaders demand faith in their new plan, not logic or history. 5. ___Programs to prevent bankruptcy. 6. ___New leaders prosecute former leaders 7. ___Increase in income tax rates. 8. ___Support to unions. 9. ___Wage controls 10. ___Price controls 11. ___Protectionism 12. ___Spending on public works. 13. ___Climate of business fear brought about by government control. 14. ___Orchestrated personal attacks on Supreme Court Justices. 15. ___Collaboration between government and large business. 16. ___Nationalize the energy industry. 17. ___Ignore constitutional constraints. 18. ___Nationalize banks/bank holidays. 19. ___Make alternate money illegal to own. 20. ___Propose additional programs. Repeat. 21. ___Suspend legislative bodies and elections. 22. ___Enter full-scale war as a final resort. A crash occurs where non-expert investors lose money. In the 1920s, many Americans invested their savings in the stock market although they had no experience in it. They did it because everybody was doing it and reaping untold gains as the market rose. When the crash came, most of the amateur investors pulled their money out. In todays crash, there were many investors in houses who entered the market with little money down. Although normally not the type to buy homes, they did so because everybody else

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was doing it and sub-prime mortgages had easy terms. In addition, there were speculators or house flippers who hope to get easy money in return. Many 401k investors, who would normally not have invested in the stock market, were encouraged by the government to do so. In summary, todays crisis was supplied by credit from the Fed and foreign investors, and speculation in real estate and the stock markets.

Leaders vilify business. Interestingly, the non-elite President George W. Bush played the card against the speculators on Wall Street, even though he pushed for the TARP money that put millions in their pockets. President Barack Obama said in his inaugural address: Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. 67

Leaders blame greed. As has been said, blaming greed is a little like blaming airplane crashes on gravity. Greed is why people invest money in the first place, and fear of the loss of investment is the counterbalance. Leaders ought to blame the destroyers of fear. Since 2001, fear was eliminated by government guarantees in the housing market. On Wall Street, there was an implied guarantee when the Fed noted that some companies might be too big to fail.68 Candidate John McCains words summarize what sells to the public when he said that American workers are being threatened today because of greed and corruption that some engaged in on Wall Street and we have got to fix it." 69 President-elect Barack Obama placed some of the blame for the current economic turmoil on politicians and regulators who "fell asleep at the switch" and pledged to "crack down on the culture of greed and scheming that's led us to this day of reckoning."70

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Leader Demand Faith in their New Plan, not Logic or History. President Obama said:

Now, there are some who question the scale of our ambitions who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage. What the cynics fail to understand is that the ground has shifted beneath them that the stale political arguments that have consumed us for so long no longer apply.71

Programs to Prevent Bankruptcy. During the second half of 1930, production, prices, foreign trade, and employment continued to decline. On July 29, 1930, Hoover called for an investigation of bankruptcy laws in order to keep failing companies afloat. He attempted to instill business confidence by injuring creditors and rewarding bad decisions.72 Today, the TARP money is being used to prevent failures of banks and businesses. Obama has called for bailouts of bankrupt mortgage holders.

New leaders prosecute the former administration. During the 1930s, FDR administration prosecuted former Treasury Secretary Andrew Mellon and others although they were acquitted. House Speaker Nancy Pelosi, on the eve of President Obamas inauguration, announced that she was open to the prosecution of former Bush Administration officials.73

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Increase in income tax rates. Candidate Obama promised a drop in the lower income tax rate to be financed by an increase in the upper rate. Since the 2008 election and in view of the general recession, he has not proposed legislation to change tax rates; however the Bush Tax cuts will expire on January 1, 2011. 74

Support to Unions. In 2008, one of the problems faced by American automakers was union contracts that paid workers almost double the price of other American autoworkers who worked for Toyota. President Obama received support of almost all unions during election, and in turn, supports abolishing secret ballots in union elections, which some fear would lead to intimidation and union creation. Furthermore, the negotiated reorganizations of GM and Chrysler gave unions a preferred percentage of the company over stockholders.

Wage controls. Federal minimum wage laws are already in place and are indexed to the Consumer Price Index (CPI), so that they will increase perpetually. Austrian economists argue this increases unemployment for the lowest workers, while having no effect on higher wage earners.75 The Obama administration threatened to rescind billions in federal stimulus money if California does not restore wage cuts to unionized home healthcare workers that would save the state $74 million, as it is in violation of the American Recovery and Reinvestment Act.

Price controls. Price controls have been imposed throughout history as an attempt by leaders to control inflation or pacify the public. They have never worked. The most blatant and sinister controls were under the Law of the Maximum during the French Revolution where food prices were set low so the urban populace could afford them; in actuality, farmers would not sell

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food at a loss, and those participating in a black market were guillotined. FDR imposed price controls through NRA and AAA. Later in WWII, price controls were used to divert money to the war effort. After WWII, the lack of consumer meat in the U.S. was due to a low price set by the government. Although Truman considered sending troops to confiscate farm livestock, he abolished the fixed price and meat was available again. In 1971, Nixon imposed general wage and price controls to stem inflation, and once again goods such as oil were in short supply, leading to lines at gasoline pumps. 76 The inflation rate is still too low to propose price controls.

Protectionism. Limiting foreign imports would seem to improve conditions at home, but trade was practiced to make people wealthy. Perhaps the one piece of legislation with the worst set of unintended consequences was the Smoot-Hawley bill of 1930 that raised tariffs on good imported into the United States. Foreign nations, especially Europe, retaliated with tariffs against American goods, resulting in fewer sales to businesses producing for export. The American farmers were hard hit as food prices dropped even more. Today protectionism is not being created directly, but several rules within the massive Stimulus Bill have provisions that restrict purchases from foreign nations.

Spending on public works/infrastructure. President Obama stated in his inaugural address, The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. The TARP bill of 2008 was designed to spend $780 billion, while the American Recovery and Reinvestment Act of 2009 (aka The Stimulus Bill) provides over $800 billion.

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Climate of small business fear brought about by business regulation, investigation, and control. The Agricultural Adjustment Act (AAA) of 1933 attempted to help famers by raising agricultural prices, including government payments to farmers who destroyed or did not grow surplus crops. It was declared unconstitutional by the Supreme Court in 1936. The National Recovery Administration (NRA) self-approved and enforced a set of competitive codes for each industry to help ensure fair competition, down to instructing intra-state chicken retailers how to sell chickens without discriminating for size. The Supreme Court struck it down, but the net effect of these programs was to discourage small business from competing in an industry because of all the regulation. If the current economic turmoil turns out to be inflationary, as many think it will, the regulation of small business and agriculture will probably be the opposite of the prices in the 1930sthe government will try to keep prices low by establishing price controls and limiting exports.

Orchestrated personal attacks on Supreme Court justices that stand in the way of socialist legislation. As the 1930s Supreme Court ruled against many provisions of New Deal, such as the Nation Recovery Act (NRA), the propaganda machine were in full force attacking the justices. National syndicated columnist Drew Pearson and Robert Allens book, The Nine Old Men, offered several pejoratives, and named the anti-New Deal justices, the Four Horsemen, and went so far as to attack the religion (Roman Catholic) of Justice Butler.77 Such defamation paved the way for Roosevelts later attempt to stack the court in his favor.

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There have not been any personal attacks on the Supreme Court lately, but the Court has yet to rule against the Obama administration. It is clear by Obamas first choice for the Supreme Court, Sonia Sotomayor, that he nominates based on identity politics and liberal compassion and not for adherence to the Constitution.

Government/Large Business collaboration. In the New Deal, FDR sought to control the prices and wages of virtually all industries. Government entered into collaboration with agriculture, energy, and industry. In 2008, the government bought significant shares in most major banks. By mid 2009, Chrysler and GM are partially owned and controlled by the federal government. President Obama fired the CEOs of GM and Chrysler, and named a man who admittedly knows nothing about the automobile industry to be the new CEO of Chrysler.78 Obamas proposed healthcare plan will take over the health service industry. His Higher Education funding program will exert Federal control over higher education as it has done with primary and secondary education.

Nationalize the Energy Industry. In the 1930s, the federal government, through the TVA and other projects, competed against private electrification companies that were seeking to electrify the remaining half of the U.S. without electric power.79 On June 26, 2009 the U.S. House of Representatives passed the Waxman bill, and sent it to the Senate80. It regulates carbon emissions of power companies and will impose an energy tax that will be passed on to consumers. Coal and natural gas electric generation, among the cheapest forms of electricity, will be taxed the heaviest with consumers footing the bill.

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Ignoring Constitutional constraints. President Obama supports returning the legally disposed Honduran President Manuel Zelaya, who ignored the Honduran Constitutions limit on presidential terms, which is similar to ours. 81

Nationalization of Banks. FDR declared a bank holiday immediately after taking office. The Federal Deposit Insurance Corporation (FDIC) was formed to insure all savings deposits up to a specific amount, in order to generate confidence and prevent runs on banks. Then banks were allowed to reopen after agreeing to pay the insurance. The Obama administration doubled the amount insured by FDIC, then ordered stress tests for banks in April/May of 2008, the outcome of which was very rosy. Again, this was done to instill confidence in banks, while gaining federal government control. By using TARP funds to shore up banks with troubled assets, the U.S. Treasury acquired minority interest in most of the nations larger banks. When some banks requested they be free to return the TARP funds, the Treasury denied their requests.82

Making alternative money illegal to own. Shortly after becoming president in 1933, FDR seized the gold held by private citizens at a fixed rate through Executive Order 6102; later Congress passed the Gold Reserve Act. The Supreme Court declared it constitutional (Huh?!) and citizen ownership of gold was not legal until 1974. So far, banning gold hasnt happened, but we are only a year into the recession and there has not been a run on gold. Expect this to be an issue after double-digit inflation occurs.

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Propose additional programs. Repeat. When one government-spending program doesnt work, try another. Hoover had a second new deal in 1932, an election year. FDR had multiple New Deals, all with the same name. Lets start by counting Bushs first stimulus in February 2008, then the TARP stimulus in September 2008, followed by the Obama stimulus in January 2009, and not counting the Federal Reserve actions to stimulate the economy, and laws to stimulate car sales and new home purchases. There are rumors of a second Obama stimulus bill to be proposed in January 2010.

Suspend Legislative Bodies and Elections. This hasnt officially happened in the US, but it is part of the cycle that happened in Hitlers Germany and elsewhere. The first Hundred Days of the FDR administration with majorities in both houses were known for rubber-stamping all of FDRs proposed legislation without deliberation. Bushs TARP bill was passed quickly without deliberationnever was so much money spent by so few in so little time. Today, the national media makes comparisons between the honeymoon enjoyed by FDR and President Obama, little noting that the legislative bodies have essentially suspended themselves by passing any and all legislation proposed by the president. Congress has defaulted on its obligation to deliberate and pass laws, as James Quinn observed83,

The outrage from the public during the TARP confiscation made it crystal clear to courageous congressmen they didn't want to vote on something requiring fortitude and bravery again. They have outsourced their obligation to safeguard their citizen's tax dollars to unelected bureaucrats at Treasury and the Federal Reserve.

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They have already sacrificed their obligation to declare war to the Presidential branch. What is the point of having a Congress?

Enter full-scale war as a last government program. The Falkland Islands War by Argentina in 1982 was primarily to divert Argentines attention from domestic hyperinflation. Napoleon helped France put the chaotic Revolution and hyperinflation behind them. The USSRs foray into Afghanistan in 1979 was believed to be a distraction to help them forget their domestic woes. It will be sad day if we check this box, because war wont solve depression or hyperinflation, but it will put everybody to work and get their minds off of the lousy economy.

By my count, we have 11 of the 22 points on the Checklist fully checked, and another 6 points partially checked. Of course, as we have seen, some of the points may be checked on numerous occasionssome frequently. In any case, the Checklist may be helpful in understanding the Great Depression and the fix the problem philosophy that only makes the patient maintain his illness.

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Chapter 7. Demographics and IOUs.

Social Security is a government program with a constituency made up of the old, the near old and those who hope or fear to grow old. After 215 years of trying, we have finally discovered a special interest that includes 100 percent of the population. Now we can vote ourselves rich. P.J. ORourke84

What if the 2008 global financial crisis had not occurred? What if our manufacturing base had not gone overseas in the 1990s? What if our trade with other nations was in balance instead of deficit? What if quasi-government lenders Fanny Mae and Freddie Mac had not created the housing bubble? What if the Fed had not lowered interest rates to enable them? What if home equity borrowing hadnt existed? What if the total U.S. private and public debt was zero instead of $52 trillion? What if the bailouts didnt occur because we didnt need them?

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We would still be facing a financial crisis. The crisis would be brought about by demographics, or the makeup of our population. The impending crisis was not caused by the increase in American population from 1948 to 1962, or the Baby Boom, it was the drop in birthrate when the Baby Boomers had more abortions and fewer children. The rise in their life expectancy didnt help either. The elderly live longer and increasingly burden taxes with Social Security, Medicare, and Medicaid. These programs are $110 trillion in IOUs for which there has never been any savingsthere is no Social Security lockbox. The federal government has loaned the last 75 years of payments to itself with no savings to pay them back, and now they are in a position where they are committed (although not required) to pay. The benefits for the aged were based on the premise that there would be more children and grandchildren to pay for old-age benefits than there would be grandparents and greatgrandparents to collect them. When Social Security was young in the 1950s, there were 7 men and women of working age to every person over 65. In other words, a 5-player basketball team with 2 men on the bench supporting one coach who cant run or shoot but is kept around to argue with the referees. By 1980, the team was down to 5 players, which means the bench players had left, (a few adjustments to the system were passed by Congress in 1983.) The 5player team has been stable for about 30 years but now the Baby Boomers are starting to retire. The loss of players was anticipated to begin in 2017 as Boomers left the team for coaching jobs. Unfortunately, the 2017 problem came 8 years early, and now the team is down to 4 players our power forward just fouled out. In 10 years, the shooting guard will leave and 3 players will be left supporting one coach. Then in 2029, the team will be down to 2 playersa center, a guard, and a small forward with one leg cut off.

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Can 2 workers support one Social Security recipient? Actually, it is 2 potential workers because the Treasury numbers used here counted all the people age 20-65, although they must have known that some mothers stay at home and raise children, some men are students or are unmotivated to work, what with the one leg and all. A more reasonable estimate is 2 workers to every Social Security recipient in 2030. But this is only a prediction of the futurewhat if things turned around? The recent Social Security Administration Report85 has made a comprehensive list of the factors that would increase or decrease the costs of Social Security.

Higher Social Security Costs are Caused by: lower fertility rates (less babies that will grow into workers) increased life expectancy (geezers who wont die) lower immigration (foreigners go back home to jobs and quit paying taxes) lower productivity (government style jobs where you just show up) higher consumer price index (CPI) (which is bound to happen soon) higher unemployment (which is happening now), and lower real interest rates (rates adjusted for inflation, also happening now)

In normal times, those seven factors would interact and average themselves out to keep the SS program solvent. Unfortunately, all of the above factors are happening in 2009, which means we have already fallen off the demographic cliff. We are now just waiting to hit the ground. Or, in the case of the basketball team, we are showing up to play with only two players.

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Our government has a very few options to deal with this. First, it could default on all social security paymentswhich is not likely given that the citizens still vote. Second, it could offer retirees a one-time buyout. Third, it could ignore the problem in hopes that it will go away this is the policy in place for the last 40 years. Fourth, it could let inflation happen and pay the recipients in devalued dollars by manipulating the official inflation rate so that retirees will see their pensions erode. The last option is the policy they appear to have adopted.

The History of Social Security Social Security was proposed by FDR, passed by Congress, and signed into law in 1935 although it did not begin payments to retirees until 1940. FDR was insistent that it be funded by a payroll tax so that workers could feel ownership and an entitlement to the program. He was right in a perverse sort of way, like letting prisoners own their own ball and chain. Had Social Security just been lumped into income taxes, workers might care as much for it as any other government handout program. But because we pay for it on a separate line, and because the Social Security Administration sends us a yearly statement outlining your benefits at different retirement ages, it feels like we own it. In truth, there is nothing to own but a promise from a government that it will pay you (with money that it takes from you.) Social Security is often called a Ponzi scheme after Charles Ponzi, who, 90 years before the recently convicted swindler Bernie Madoff, took money from investors, never made any investments, and paid the first investors huge returns with money from the later investors. Then Ponzi paid the later investors with even later investors. The scheme worked as long as he had new investors all the time. But when caught, they threw Ponzi in prison for fraud, and predictably all the money had vanished by then. Charles Ponzi only served two years in prison,

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after which he returned to his native Italy and became a top economic advisor for socialist kingpin Benito Mussolini. If history is a guide, it would appear there might be a future for Bernie Madoff in the next Obama administration. Economists and political writers from both sides of the political spectrum86, 87 have called Social Security a Ponzi scheme, although the Social Security Administration and others have refuted the label, and defended Social Security as a pay as you go plan, which I think are the precise words Charles Ponzi used. The Social Security Administration blames demographic cycles, saying:

since population demographics tend to rise and fall, the balance in pay-as-yougo systems tends to rise and fall as well. This vulnerability to demographic ups and downs is one of the problems with pay-as-you-go financing. But this problem has nothing to do with Ponzi schemes or any other fraudulent form of financing; it is simply the nature of pay-as-you-go systems.88

In other words, dont worry, be happy. Pay no attention to the man behind the curtain. One could almost agree with the logic of the rise-and-fall cycle, except that the fall is in fertility and the rise is in life expectancyboth of which make it a fall-and-fall cycle. Perhaps the Social Security Administration is banking on a cyclic swing where the elderly would die off as maternity makes a comebacka bizarro world where the abortions performed only during the last trimester of life, or after age 58. President Obama has already provided us with the necessary logical framework to implement last-trimester killings through the earnest search for common ground in the pro-choice debate:

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Maybe we won't agree on abortion euthanasia, but we can still agree that this heart-wrenching decision for any woman is not made casually; it has both moral and spiritual dimensions. So let us work together to reduce the number of women seeking abortions patricide; let's reduce unintended pregnancies old people. (Underlining and strikeouts are minelogic is Obamas.) 89

Dark humor about the problem makes the subject of abortion a little easier to discuss, which we must because abortion is the unspoken black hole of the demographic problem. In the U.S. during the 35-year period from 1971 to 2005, there were 46 million abortions.90 In other words, there would be more than 46 million more work-aged people in 2025 in the absence of abortion. If we count the aborted babies potential children and grandchildren, the number would easily match the 63 million people estimated to be over 65 in 2025. Roughly speaking, there would be one extra person on the team to support the coach. And yes, a female fetus saved from abortion in 1980 could easily be a 45-year-old grandmother in 2025.

Ten Lies About Social Security 1. This law represents a cornerstone in a structure which is being built but is by no means completed--a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy--a law to flatten out the peaks and valleys of deflation and of inflation--in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness. Franklin D. Roosevelt, August 14, 1935. (An obvious untruth.) 2. A lid on Social Security tax. "Beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay."91 1936 Government Pamphlet on Social Security. (The rate now is over double that, and the highest annual payment is over $15,000.) 3. Social Security is a good investment. What you get from the Government plan will 117
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always be more than you have paid in taxes and usually more than you can get for yourself by putting away the same amount of money each week in some other way.92 1936 Government Pamphlet on Social Security. (Payments will always be less than taxes if you die early, and only briefly did payments outperform private investments.) 4. We will get our money back. The Supreme Court has established that no one has any legal right to Social Security benefits. The Court decided, in Flemming v. Nestor (1960), that entitlement to Social Security benefits is not a contractual right. 5. There is a Social Security trust fund from which they will pay your benefits. Recipients are paid from payroll taxes, and any excess payroll tax money is borrowed by the other government expenditures; no trust fund exits. 6. Employer contributions are half of the payroll tax. (But it is taken directly the cost of hiring an employee and would go to the employee otherwise.) 7. You can retire with full Social Security benefits at age 65. (Only if born before 1943; otherwise there is a sliding age up to 67. Remember, Congress can change benefits.) 8. You do not need to have a Social Security number to live and work in the US. (The Social Security Administration had this statement in a law, but the same law required a Social Security number.) 9. Demographic and revenue projections. (The Social Security Administration reports these projections which are not to be trusted because they are only guesses.) 10. SS will be solvent through 2017no, wait, 2016. (Since it is not solvent in 2009, it is not likely to reverse the 7 factors of solvency anytime soon. Stayed tuned for the latest updates.) Solving the Social Security Crisis There are two basic ways to make Social Security solvent, according to Professor Robert Clark of North Carolina State University who chaired a national panel on Social Security's financial status. The two are: raise taxes or lower benefits.93 Both are politically impossible. Lowering benefits could come by replacing Social Security with another system that means tests benefits.94 Means testing is a euphemism for the process of only giving benefits to those who could not provide the benefit themselves. That way, only the poor will get handouts. If that isnt a reason for grandpa to fly to Las Vegas and put all his savings on a roulette wheel, I dont know what is.

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Can we raise taxes to support future Social Security? It will probably be tried, but there will be limits. Right now, Social Security and Medicare take 15.3 percent of income on the first $102,000 of wages (Thats right, professional basketball players get a tax break as they head into the higher brackets.) It takes about 5 workers to come up with a income to give to the retired person, which is where we are now. (By the way, even the Social Security Administration doesnt believe its own fiction about the employer contribution being anything but a tax on the worker.) It may be reasonable to give 15 percent of your wages to old people, widows, and orphans, but what will happen when the ratio is 1 to 2? That is 40 percent of your wages going to Social Security taxes. In addition, Medicare, the national medical insurance for the elderly, will cost as much as Social Security payments within 5 years and is being expanded to include prescription medicine. In other words, workers will be paying the medical bills and for prescription drugs to keep retirees alive and drawing on the monthly pension that workers pay for. That will be nice of those workers. No wonder politicians want full control over distributing medical treatmentsthat way they can keep the system solvent by keeping treatment prices low. When health care becomes scarce, more people will die while waiting in line, and magically, the Social Security problem will be solved. Otherwise, what will the average Joanne Worker do in 2029 when faced with the burden of taxes and the guilt of wishing everybody elses grandma were dead? She could become a zombieher financial body dead but still walking. She could find a government job, since she owes her soul to them anyway. The end result will be that Joanne and her fellow workers will lose their motivation, imagination, and work ethic. Or they could join a tax revolt and start throwing tea bags into the bay, followed by aristocratic congressmen.

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The Money-Equals-Wealth Fallacy of Social Security. If you believe that the lack of a Social Security trust fund is the problem and that providing money for Social Security is the remedy, then you agree with P.J. ORourkes tongue-in-cheek comment that we could all vote ourselves millionaires. Remember the first lesson of economicsits about distributing goods and services. Money is not wealth but a means to trade. Still the politicians and media all address the Social Security fund as if it were a money problem. Assume there are two groups of people in the country of Lusitaniathe Workers and the Retirees. The Retirees are half the size of the Workers, but through their age and industry and luck, they own twice the money. Soon they decide that they can quit working and spend their nest egg paying Workers to make goods and deliver services. If Retirees were small, few would notice the drag they cause the economy. Workers would seem to be in a position to get richer, because they are making all the goods and services, but the Lusitanian Parliament passed a law that requires 40 percent of the Workers income to be given to the Retirees. The Workers are livid but what recourse do they have? They cant quit paying taxes or they will be thrown in jail. They could leave Lusitania for another country, which would put even more drag on the Lusitanian economy with fewer Workers to support Retirees. Or Workers could raise the prices of their goods and services, thereby devaluating the Retirees nest egg. Inflation, or devaluating the currency, is a logical answer for a situation where one group holds the money and another group holds the goods. In fact, it is the only solution to the situation. It doesnt matter how much money is in retirement accounts, trust funds, land, or precious metal, it does not change the fact that in 20 years there will be 2 working-aged people for every retiree. The economic question is how to distribute the scarce goods and services to retirees while having enough money to live on. What will Joanne Worker think when she has to

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work while her baby is in day care, and over half her paycheck goes to taxes to support retirees? Maybe she will wish Mom hadnt aborted her baby brother. It was unavoidable that as the Baby Boomers retire, financial catastrophe would intensify in the years leading up to 2017. Even if the recent financial meltdown hadnt decreased the retirement accounts, something else would have. And the worst is yet to come because we are still years away from the bulk of the Boomer retirements.

Practical Solutions. For retirees, the real question is: How can elderly people with limited income obtain goods and services. Inspired by Dr. Clark, I will provide more than money solutions for the elderly: Never retire. The elderly can keep working until they die. Perhaps they can have a day or two off beforehand to help arrange the funeral and settle the estate, but only if they die on the weekend. Pay it off and scrimp. The elderly can struggle through it by paying off big-ticket items (house, car, heart surgery) before they retire, and hope to have enough to pay the utility bills, groceries, gas, property tax, sales tax, and income tax on the Social Security check. (Thats right, Social Security payments are taxable income.) Enjoy the basement apartment. The elderly can move in with their middle-aged children, who are preferably in the medical profession. The more children Grandpa and Grandma had, and the nicer they were to them, the easier this will be. The grandparents become the daycare providers while Mom works. Similarly, the elderly could give their house to their children which would save them a rent payment, while the children work to

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pay the utility and grocery bills. If the family health insurance plan includes all persons under the same roof, Grandma can get health coverage in the bargain. As unpleasant as these solutions may seem to the Baby Boom geezers, they are typical for mankind throughout history. Only pride gets in the way of working and relying on children, but then again, some people would chose the first option and work themselves to death.

Demographic solutions. There is another way to solve the problem by going back to the culture of the 1950s when people had more children and died sooner. We could start by reducing the number of retirees. Im not for loading them on cattle cars headed east, but we could shut off power for air conditions in Arizona and Florida retirement communities, then hours later drop pamphlets from helicopters explaining the Social Security/Medicare debacle and outlining simple and painless ways to do the honorable thing. Or it might be more humane to send them medical marijuana with their Social Security checks and hope they go joy riding on their golf carts. Another demographic solution would be to increase the numbers of workers, hence the tax base. Well start by banning abortion and increasing adoption of foreign babies. Hollywood is seldom right in the culture wars, but the practice of adopting foreign children by starlets Angelina Jolie and Madonna is a cause to get behind. It wont help for 20 years, but its a start. Then we should remove teenage labor laws, which were really meant for demeaning sweatshops. Think about it: if a teenage boy can run a game controller he can already do most computer-aided work or drive a crane. If an adolescent girl can talk on the phone and design a facebook page, she can compete for the outsourced telemarketing and advertising jobs. And the teenagers can start paying Social Security taxes. Now if we only had a way to adopt foreign workers and make them the children we never had.

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I thought one up: we should sell the American Dream. We can start by removing immigration restrictions and charge for citizenship. We should look for candidates among the youth in Asia. Instead of requiring a test and an oath, we should ask for check, cash, or money order. We could offer them a house complete with a lipstick-red Chevy Volt and a pink American baby, and for the first 10 million men, a shot at the 10 million single American women between the ages of 30 and 44.95 Now would be a good time to start, since 10 million houses in America are empty, and especially since China has 20 million fewer women than men 96 and the men are getting restless. There are myriad stories of foreign spouses of Americans having difficulty immigrating to the U.S. as the Immigration and Naturalization Service (INS) puts up delays and roadblocks. This ought to be reversed into a policy of recruiting women to immigrate if they are mothers or expecting mothers, and requiring immigrating men to be married to the aforementioned pregnant women or promise to become a husband and father within a year. Talk about your green card! I cant wait to see the movie. Sadly, the Social Security problem is a demographic problem and Congress wont be able to solve it. It has been called the third rail of American politics after the electric rail of trains that would fry anyone who touches it. Dr. Clarks solutions of raising taxes or lowering benefits are basically off the table. Ask a President who knowsGeorge W. Bush stumped for Social Security reform in 2005 and was frozen out by both political parties. Having failed at reform, Bush then asked Congress to pass the prescription drug bill for the elderly that makes the Medicare problem worse. Congress obliged. Raising taxes has its limitations both politically and economically. Lowering benefits is impossible because of the political clout of the retirees through such groups as AARP. This

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impasse has been the status quo since Social Security was last reformed in 1983. President Obama knows this and has promised not to lower Social Security benefits, although he suggests imposing higher income taxes on the rich to make up the shortfall. (It seems the Presidents solution to everything fiscal is higher taxes on the rich.) As has been shown in the Great Depression, when you tax the rich, they quit making incomeafter all, they are about the only ones who can afford not to work. Politicians will maintain the status quo and let double-digit inflation lower benefits when the CPI-adjusted Social Security payments wont keep up with prices. The CPI is a government Jedi mind trick masquerading as an inflation statistic. It has been modified to substitute lowpriced goods for high when the price rises. In other words, when the price of steak goes up to $10 per pound, you eat more hamburger at $2 per poundand government waves its CPI hand and says, No inflation to see here, just keep moving. As inflation takes off in the coming decade, the Social Security payments will be worth less and less. The $1500 monthly check will be like receiving $150 in todays dollars, but the government will claim they paid you back every cent. The elderly will probably spend it in one day of grocery shopping and then splurge on the early bird special at the local diner. At that point, the retirees could go take a break from working at the daycare or McDonalds and go down to the bay and search for tea bags for tomorrows breakfast.

We Boomers are in a tight spot, having inherited a pickle with government-funded oldage pensions and health care; this is because: We didnt have enough children. We believed the lies about Social Security.

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We believe that money equals wealth, i.e., that money can solve the problem. We ignore demographic solutions, such as more children, more youth employment, or more immigration.

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Chapter 8. Bailouts and the Printing of Money

Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law. Are they not the supreme legislators? In fact, economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics. Ludwig von Mises97

Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and misapplying the wrong remedies. Groucho Marx

The bursting bubbles in 2008 were good! First, houses were overpriced and overproduced, and the price of a house was about to get cheaper. Second, the stock market was about to get more efficient, as shoddy incompetent investment firms were about to be vaporized for their bad judgment. Third, the quasi-government lenders Fanny Mae and Freddie Mac were about to be found out for the bad loans they had made, saving taxpayers billions while demonstrating that their model of every American owning their own home was wishful thinking and financially unsound. Fourth, cars were about to get cheaper as GM liquidated them in order to survive; furthermore, GM was about to sell off inefficient operations and the displaced autoworkers and mechanical engineers were about to start over in other smaller companies that would be dedicated to building a more efficient automobile. Fifth, the recent high

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cost of energy had caught the attention of entrepreneurs and engineers who were about to innovate and invent. These were all good things for the economy and the common man! The recession was not the problem; it was the solution! But politicians looked for trouble and found it everywhere; now America owns the problemnot owned up to it but embraced it and made it last. They have bought and paid for it with trillions that we dont have. This is not new; ever since the first Federal Reserve note was printed we have been in the era of overspending. With TARP and the Stimulus bill, we have spent money propping up banks and houses, and car factories that were doomed to fail. Whats the fun in that? Americans want contradictory things. We want our personal congressman to bring home the bacon, but we hate Congress because there is too much pork barrel spending. We want government to spend, but not to tax. Thus we have gotten what we asked for. During the good times of the 1990s, Congress could have paid down off the $4 trillion in debt, but Congress spent the peace dividend in the 1990s, and it must have been one heck of a party. We dont remember what Congress bought, but that just means it really was one heck of a party. The 1990s are hazy; all we remember was OJs trial, something about a president lying about a mistress on the bridge to the 21th century, the invention of the internet, and Florida voting for hanging Chad. When Republicans took over Congress in 1994, Newt Gingrich tried to implement their 10 promises of the Contract with America, but reducing spending was not achieved. Edward H. Crane of the libertarian Cato Institute, stated, ... the combined budgets of the 95 major programs that the Contract with America promised to eliminate have increased by 13 percent.98 In the end, the congressional Republicans were not fiscal conservatives.

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Then came President George W. Bush, who responded to the 9/11 attacks with a call for more consumer spending. Soon we embarked on the Iraq War in 2003, which seemed expensive over 600 billion dollars since then, but we spent just as much in 2008 with one bailout. It was the domestic spending that was out of control during the Bush years. In his last year in office, Bush introduced a $3 trillion federal budget with a $400 billion deficit. The final numbers were, of course, worse than predicted. In February 2008, the Congress approved Bushs $168 billion economic stimulus plan to help stave off economic recessioneach family received $1200but the stimulus didnt slow help the economy. On March 14, 2008, the Fed Chairman Bernanke negotiated a purchase of investment giant Bear Stearns Merchant Banking by JPMorgan Chase, after the Fed offer $29 billion in nonrecourse loans to shore up the questionable real estate assets. The sources of their bad assets were primarily defaulting mortgages approved by the government. On July 30, 2008, The Housing and Economic Recovery Act of 2008 was enacted to fix the subprime mortgage crisis, offering to guarantee up to $300 billion in mortgages for subprime borrowers. It was meant to shore up capital and restore confidence in Fannie Mae and Freddie Mac Jump starting the economy. In September 2008, the American International Group, Inc., or AIG, had its rating downgraded and quickly ran out of cash. Fed Chairman Ben Bernanke loaned them $85 billion as a stopgap, until Congress increased the loan to $182 billion, reasoning again that the company was too big to fail. Interestingly, even though the Treasury had negotiated the loan that included bonuses for top executives, public outcry led Congress to embarrass AIG through congressional hearingeven though the $165 million received was one-thousandth of their entire bailout.

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Fed Chairman Ben Bernanke and his mentor, Milton Friedman, believed the Federal Reserve did not respond quickly enough after the 1929 crash to increase the supply of money. A response to slowdowns should be a quick influx of money by whatever means possible, which earned Bernanke the nickname of Helicopter Ben, from a 2002 speech in which he referenced Friedmans claim that money could be dropped from helicopters to stimulate the economy. In response to the housing and stock market crashes of 2008, Bernanke has pumped hundreds of billions of dollars into the economy to avoid the Feds purported mistakes in 1930. Unfortunately, in the years leading up to 2008, Bernanke repeated the Feds errors of the 1920s and expanded the credit that created the bubble. In September 2008, U.S. Treasury Secretary Henry Paulson and Fed Chairman Bernanke visited President Bush with a proposed a plan for the U.S. Treasury to acquire mortgage-backed securities. They told President Bush that there was a problem with commercial paper (money) not flowing out of banks due to their bad housing assets. They suggested dire consequences for business if money were not given to the financial institutions to lend. Bush agreed. Both presidential candidates left their campaigning to return to the Senate to help formulate the bill. Public opinion was doublethinkpolls showed a majority of the people wanted the government to provide billions, but also that they didnt want them to spend taxpayer money. The House initially panned the bill but the Senate passed a newer version and sent it back to the House. If you are wondering about the constitutional prohibition of spending bills originating in the Senate the Senate was clever enough to tack it on to a different House bill that was before them. The returned bill, loaded with pet projects for house members, passed on October 3, 2008. The same day, President Bush signed Emergency Economic Stabilization Act of 2008 into law, creating a $700 billion Troubled Assets Relief Program (TARP) to purchase failing bank assets. Ironically,

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Paulson decided the money should really be spent on acquiring bank stock, putting the government on the road to nationalizing banks. What if? What if President Bush, a self-proclaimed free market advocate, had a responded to Paulsons request by saying one of three things, Could you all explain this too-big-to-fail horse puckey one more time? Dyouall think this is the first time a bank failed? Lets foreclose and have an auction! Hank, Im sorry of what might happen to your old buddies at Goldman-Sachs, but in Texas we dont throw good money after bad. Dont fret, yull still get your government pension. What if Senator John McCain, who had for years been grooming his image as a maverick who stands up for the little guy against his political party (and against George W. Bush in particular), had addressed the American people with words such as, The Treasury Secretary says Wall Street is in a mess because of bad real estate investments and they want you, the taxpayer to pay for it in the amount of $4,635 per worker. Uncle Sam does not bail you out of bad decisionspork, pork, and pork. This is exactly the type of pork spending and pork earmarks that I have been fighting against my entire political career, which started before most of you porkers were born. I am going to stand up against the Bush/Obama conspiracy that wants more earmarked pork. McCain would have changed the debate and distanced himself from the unpopular Bush, which he had been attempting to do the whole campaign. He could have demonstrated his grit against Washington insiders and wrested the populist mantle from his opponent. He may not

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have won the election, but would have shown himself to be a man of deeds, not promises. He could have made Obama look like a spendthrift, a panderer, and a machine politician. In the end, McCain was not the peoples maverick he pretended to be. His maverick tendencies consisted of voting with the Democrats occasionally. And he did just that one more time with the TARP bill. Then, to have it both ways, he criticized the particulars of the bill. Barack Obama said little but supported the bailout; perhaps he feared that McCain would balk at the bill and he didnt want to get too committed or give Bush too much credit. Of course, Obama was fortunate that it all played out so well. During the entire campaign he had been insisting there was a Bush recession, and now the crisis was proof positive. He kept his bowl right side up and won the election the next month. Summary of Events of the Global Financial Crisis We became a service economy and outsourced our production overseas. Developing nations produced goods, sold them to us, and financed us for more buying. This produced a credit bubble. The Federal Reserve lowered the interest rate, increasing the bubble. Congress politicized the loan industry to garner political support. Fanny Mae and Freddie Mac made mortgages to unqualified buyers. Easy credit increased real estate prices. Inevitably, real estate prices fell. Many of the loans failed. Banks and Investment Firms were left holding billions in bad housing debt. The Treasury and Federal Reserve said some companies may be too big to let fail. Thus they offered to guarantee economic mistakes.

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Smart banks quit loaning money to stupid banks with lots of debt. Now in a recession, smart banks werent sure any loan was safe. President Bush and Congress authorized $800 billion in TARP funds. It didnt help the economy, but it helped Barack Obama get elected. Treasury Secretary Paulsen used TARP to buy stock in banks and investment firms. President Obama and Congress voted another $800 billion as a stimulus package. It hasnt helped the economy, but it may help Democrats get re-elected. The Federal Reserve announced they will buy Treasury bonds (print money). Congress passed bills that quadrupled the 2009 annual deficit to $1.8 trillion.

Philosophically, Barack Obama is an interventionist into free marketsit is hard to imagine any aspect of our economy where Obama hesitates about government participation. Naturally he would support massive spending in a bailout supported by a lame-duck republican president. The TARP bailout had vocal critics, many of them investors and economists. The outspoken Jim Rogers said:

It's astonishing, devastating, and very harmful for America and American citizens. It means we're in for the worst recession since World War II, as well as higher long-term interest rates, higher inflation, higher taxes, a weaker dollar and substantially lower stock prices.99

The clamoring for a government bailout was nothing new. Henry Hazlitt produced a template in 1946 that he called, Saving the X Industry,

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The lobbies of Congress are crowded with representatives of the X industry. The X industry is sick. The X industry is dying. It must be saved. It can be saved only by a tariff, by higher prices, or by a subsidy. If it is allowed to die, workers will be thrown on the streets. Their landlords, grocers, butchers, clothing stores, and local motion pictures will lose business and depression will spread in ever-widening circles.100

If ever there were an industry that should NOT be a candidate for a bailout, it would be the financial industry because their primary purpose it to determine economic priorities, such as where resources should go, for what, and how much. Bailing them out is supporting their bad economic judgment instead of the wisdom of sound financial firms. While supporting the X industry produces an overabundance of X goods or X services and distorts a section of the economy; supporting the financial industry produces excess financial stupidity and distorts the whole economy. If the doctor is woozy from an overdose of painkillerswho will diagnosis the patients? But TARP was not the end of the bailout era. President-elect Obama proclaimed Keynesian spending as a proven remedy and a moral necessity. He announced, There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy. But the free market economy wasnt dead, it was doing precisely what the consumers were voting for, which was pay less for houses and pay off debt. In response to Obama, over 300 economists signed an advertisement by the Cato Institute to disagree.

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Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.101

Why doesnt borrowing and spending solve the crash after the bubble caused by borrowing and spending? Common sense tells us that eventually the bill will come due and be higher than before. Also, this is the 4th and worst category of spending where someone spends anothers money on someone else and it leads to corruption. The Obamas spending bill was introduced within hours of his inauguration and passed the House within daysthe congressional republicans sought to slow down the process by a procedural rule to have the entire bill read. Speed-readers were called in which made a mockery of the legislative process as well as Obamas campaign promise to post and deliberate over every spending bill. On February 17, 2009, Obama signed the American Recovery and Reinvestment Act (Stimulus Bill), which combined tax breaks, public works projects, education spending, health care spending, and

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welfare benefits that totaled $787 billion. If interest on the borrowed funds is added, it will cost almost 1.2 trillion. By March 9, 2009, the stock market fell to 6440. Blackstone Group LP CEO Stephen Schwarzman said 45 percent of the worlds wealth had been destroyed102although I think he meant money, not wealth. The Congressional Budget Office (CBO) estimates103 that the federal budget will produce a $1.8 trillion deficit in 2009, which is four times the previous record set in 2008. The U.S. government debt was $10 trillion in May 2009, but was soon to have another $1.8 trillion added. Then another $2 trillion the following year. The Government Accounting Office (GAO) projected that the U.S. federal deficit will stabilize at 100 percent of GDP (currently $14 trillion) for a decade before the real crisis occurs as Medicare and Social Security cost begin overwhelming the budget. Medicare and Medicaid payments were forecast to exceed revenue in 2008 and Social Security in 2017104. Unfortunately, the assumptions were wrong by 9 years; the unemployment caused by the recession has already resulted in less taxable income and more retirees.105 As discussed in the last chapter, the Society Security tax shortfall began in January 2009.

As large as the federal debt is, it only counts Treasury money; it doesnt count the money that the Federal Reserve is pouring into the economy to lend to the government and big banks. Nor does it anticipate large increases in the interest payments on the federal debt once the interest rates rise. In 2008, interest payments were only 6.6 percent of all federal spending because interest rates were at all time lows. Once interest rates start to increase, the debt servicing payments could easy triple. The GAO sees that as a major crisis later in this century,

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but later may be sooner. The CBO sees similar worries on the horizon, and makes comparable estimates for future unemployment, GDP, and spending.106

It is not that Congress is fiddling while Rome burns; it appears that they have ordered the gasoline. The question of how to pay for the debt and IOUs has not been directly addressed by Congress since 1983, even though it has been evident that changes would need to be made when the Baby Boomers started to retire. In reality, our government has never been interested in balancing the budget. The President and congressional Democrats want to spend more money on Heath Care legislation that they hope will reduce costs by increasing coverage and the Waxman bill that will cost energy users another trillion dollars over the decade. Since President Obama has insisted on pay-as-you-go federal spending that will be matched by federal income, massive tax increases are inevitable.

Where were the checks and balances? What could have stopped a century of deficit spending culminating in our crisis? The Austrian School economists suggest the twin solutions

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of the gold standard coupled with abolishing the Federal Reserve. Government, then, would not have the power to inflate currency and overspend. The monetary allegiance of the citizenry would be to gold and silver, not the concept of a dollar that reads In God we trust, but really means, Federal Reserve has a monopoly and you better agree. Since the Constitution is often hailed for its checks and balances, we might wonder where else we went wronghow could Congress and the President agree in such short time to spend so much bailout money without reading the bill that authorized it? Usually we would hope for a presidential veto, especially when his party differs from the Congressional majority. Evidently not when facing an emergency financial meltdown, or the worst economy since the Great Depression. Perhaps a majority of U.S. states would have stopped the quick bailouts if they had the power. Collectively, the leadership of each state could have slowed the process down so that cooler heads could have prevailed and realized there is no sense throwing money down a rat hole. It is a shame that the states dont have a check on the rash power of the federal government, because that was how the nation was designed before the 17th Amendment. The Senate was to be the States House, and check the spendthrift tendencies of the Peoples House. The two senators of each state were elected by the state legislatures and answerable to them. Had the state legislatures communicated their displeasure with the overspending, the senators would have been compelled to follow their lead or lose their job. What about the Supreme Court as a check on bailout spending? Im afraid the modern courts respond to government pressures and the presidency. A recent example is the lawsuit brought by the Indiana Pension fund to try and slow down the sale of Chrysler to Italian automaker Fiat that was planned by the White House.107 Fiat threatened to nix the deal if it didnt

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happened quickly, and court ignored the interests of bond holders in favor of the interests of somebodyIm not sure who is going to make off like a bandit in this deal. If the taxpayers have an interest in Chrysler through their government, then we are crazy for being taxpayers. The Supreme Court believes in doing what they think is right, not determine constitutionality. Had they agreed to listen to the case, they might have heard an appeal to the Constitution that protects property (bond-holding pension Funds) over the Presidential right to broker business deals (there is none.) While it could take volumes to elaborate the many failings of the Court, Robert Bork has explained how the Supreme Court has assumed control of power over social issues such as school busing, abortion, sodomy statutes, private property, the death penalty, and elections, without any mandate or check by other government branches.108 Without a government of checks and balances, we have no rule of law but of men. We are left with popular politicians with no obstacles to their passion for re-election that masquerades as compassion for the electorate. The trouble with democracy, as the founding fathers knew, was that a majority of the people is occasionally wrong. The other problem was that a majority could try to change the laws to benefit themselves. According to Alexander Tyler over two centuries ago,

A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy. 109

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Im not sure what largess is but it sounds ominous and decadent, like a congressional committee bringing in a large vat of lard. A recent column in The Economist110 described the decline of the U.S. as a world power through fiscal irresponsibility, although it is likely that this new-and-everlasting worldview will become common knowledge in the near future.

Some central banks have adopted (via quantitative easing) a policy of creating money to boost markets that also has the convenient side-effect of funding budget deficits. That is just what opponents of fiat money feared would happen in the long run. The same old dilemma will eventually occur. Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. (Italics mine.)

When the crisis has finished playing out, someone else will be holding the wealth and dictating the rules. Some investors have anticipated this ploy, as evidenced recently by the increasing Treasury bond yields. If the trend continues, and it will if investors think it through, the cost of financing the government will rise in a vicious devils cycle: higher interest rates means more borrowing which means even higher interest rates.

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What America has just done with the massive bailouts is an economic sin and everybody knows it. People I talk to about the bailouts know that you cant get something for nothing. They know that every free lunch has a bill that comes due. They even know that you cant print trillions of dollars without some consequenceotherwise we would have done it long ago.

Private Debt. If you are angry and frustrated at the federal government, you havent heard the half of it. Of the $52 trillion in total U.S. debt, only 14 trillion comes from federal, state, and local government. The other $38 trillion comes from private investment by businesses and individualswith individuals holding the most debt. Averaged for each American, that is over $100,000 of debt. Of course, companies that are re-capitalizing owe some of the debt, but much is due to home mortgages, both primary and secondary mortgages; the latter popularized as home equity loans. One way of looking at the debt is to compare total U.S. debt to the Gross Domestic Product (GDP). Normally, this oscillates around 150 percent, but it grew to 250 percent leading up to the Great Depression, finally falling back to 150 percent by the end of WWII. Beginning in the mid 1980s, the ratio increased back to 250 percent in the 1990s, but then began the ascent to 375 percent, where it stands as of March 31, 2009.111 This is not a credit bubbleit is a credit mountain. In order to reduce the debt, personal and business savings must increase, which in turn keeps unemployment high and wages low. According to the bearish Comstock Partners, because debt is being paid down, it will keep unemployment high and the recession around for years to come.112 They dont see inflation as a threat because the money pumped into the economy is being used to pay down debt, not to buy goods. If that could happen for a few years, it may keep

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inflation down and the currency stable, but that may be a best case scenarioa flat recession. The alternative is that inflation will speed up.

By relying on the government to solve problems, we are complicit in the following sins: We embraced bailoutsthus trading the restructuring of our economy for enormous debt. We wanted government to spend but not to tax. We have given up on Constitutional checks and balances and replaced them with popular government. Private debt has exceeded government debt and our consumer purchasing is to blame!

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Chapter 9. The Calamity of Hyperinflation

The first panacea of a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; a permanent ruin. Ernest Hemingway

The coming hyperinflation of the currency is a way to cheat on our debts to individuals and other nations. We can blame the massive consumer debt on Federal Reserve for lowering the interest rate to allow the housing bubblethe Fed has a long role in inflating the currency that began with the printing of fiat money. Second, Congress and the Presidency have continued to overspend which injects money into the economy. Third, the demographic crisis has produced large IOUs that could be paid off with cheaper dollars. And, fourth, there is the U.S. trade deficit that resulted from our willingness to borrow-and-spend coupled with the worlds willingness to manufacture and lend. The four motives (consumer debt, government debt, demographic IOUs, and trade debt) will tempt us to resort to hyperinflation. It will be as easy as moving some numbers from one account to another, and the alternate of creating wealth sounds like hard work. It is ironic that the first crisis of the 21st centurythe attack on the World Trade Center would be successfully countered militarily, but that world trade itself would be in danger within the decade; principally because the world is beginning to question the wisdom in recognizing the U.S. dollar as the global reserve currency. The Russians have repeatedly called for a new reserve currency, and China and Europe are looking for an alternative.113 Speaking in 2005, prior to the global financial crisis, financial analyst Richard Duncan warned,

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Hyperinflation, a run on the dollar, or both, could result from out-of-control monetary expansion. After all, there is a risk that if cutting interest rates to zero does not prevent deflation, and revving up the printing presses just a little does not prevent deflation, the hubris may compel policymakers to run the printing press at full speed until deflation does give way, regardless of the consequences. Once again, an economic crisis caused by too much monetary expansion and characterized by asset price bubbles and excess capacity cannot be cured by yet more monetary expansion. 114

Duncan proved prophetic in predicting the cut in interest rates to zero that has not prevented deflation. And that revving up the printing presses a little has not brought us out of recession. Now we can wait for policymakers to run the presses full bore.

The Dollar as Reserve Currency. International trading worked well when there was an agreed-upon reserve currency of gold, but then Europe got into World War I, and England wanted to buy U.S. goods but had run out of gold. They ended up in debt to the U.S., who, due to WWI and Germanys 1920s hyperinflation, owned most of the gold. After WWII, the Bretton Woods conference determined that the U.S. dollar, backed by gold, would be the reserve currency. But in 1971, as inflation took off in the U.S., there was not enough gold to back the dollar, and President Nixon removed the gold backing from the reserve-currency dollar. Everyone held their breath, but because there was no good alternative, the dollar remained the international reserve currency.

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The danger has always been that the U.S. could pay off its reserve currency debts and government debts with fiat money that is simply printed with no value behind itand every creditor nation knows this! It called monetizing the debt and it is simple; the Federal Reserve takes an IOU from the U.S. Treasury and puts a number into the Treasurys bank account. If the Fed continues to print money, the day will come when the dollar is renounced as the worlds reserve currencynot because the nations will want to, but because the dollar will be worth so little that every nation holding promises for dollars or trading dollars will see it lose value every dayand they will have no choice but to quit using dollars to trade with. Already there is a Brazil, Russia, India, China, (BRIC) organization dedicated to trade among themselves without using the dollar while searching for a new reserve currency, perhaps a petroleum currency or the old fashioned precious metals. Europe will begin demanding payment in Euros and perhaps even peg the euro to commodities such as oil or the traditional gold.

(A dollar today buys the same as 18 cents did back in 1970.)

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Paying Off Debt with During Inflationary Times. Lets try a little thought experiment about paying off debts. Suppose you make $100,000 per year after taxes, yet you had incurred a debt of $300,000. By devoting all of your income to the debt, you could pay it off in approximately 3 years. That would require you to eat out of a dumpster, wear the same clothes, and live in a cold, dark, house, so instead, you finance the debt at 5 percent interest over 10 years, which costs you merely $38,852 per year. You would still have $61,148 to live on. Thats $10,000 for groceries, $10,000 for utilities, $10,000 for clothes, vacations, and other household expenses, $10,000 for transportation, $10,000 for charity, and you still have $11,000 for a down payment on a Lexus. Now what would happen if the interest rate doubled to 10 percent? Your payments would climb to $48,823 per year, an increase of almost $10,000. Nearly half of your take-home pay would go to the debt. You now dream of a used Hyundai. Now lets assume it doubles again to 20 percentan interest rate that was typical after the Carter Administrationor is commonplace now on credit cards. Your yearly payment is $71,557 and you have a mere $28,443 to live on. You cant have the new car for at least 10 years and you go around turning down the thermostat. You wake one morning and see that nearly three quarters of your earnings are tied to the debt and decide to go back to bed. You think of leaving it all and starting new. Maybe changing your name and joining the French Foreign Legion. Or take a short drop with a sudden stop, like at the end of a hangmans noose. You might note that the example had an interest rate that was not locked in when low, yet this is precisely what the U.S. Treasury is doing at this time, selling short-term (10 years or less) bonds. This strategy will produce increasingly higher interest rates as confidence wanes which will make it harder to borrow money.115

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In case you didnt realize it, this example represents the federal government who is now in debt over $11 trillion, or 3 years worth of income. Interest rate on the national debt is currently low, but Congress and the Fed are doing all the things to make it rise, i.e., going further into debt and monetizing it. It is as if Joanne Worker got her credit card bill and realized it was more than she could pay, and her boss told her he was cutting her income by a third (tax receipts are down one-third from last year116), and her Mom called to say she was having an operation so Joanne will have to support her for two decadesand Joanne responds to the bad news by calling her credit card company, increasing her credit ceiling, and quickly buying a new car and getting plastic surgery. Anyway you look at it, this behavior is idiotic. This is called, Hurry up and spend it before it is gone, and is now our nations policy. The GAO estimates our national debt will double in 5 years from $9 trillion in 2008 to $18 trillion in 2013. With the present policymakers, the policy will be to print money to pay off the debt. The reasoning is that inflation will be higher than the interest rate and it will lower the debt. To modify the earlier example, you make $100,000 per year after taxes but due to inflation you get 20 percent cost-of-living raises each year. That would be $20,000 the first year ($120,000 income), then $24,000 the second ($144,000 income), then $28,800 the next ($172,800 income) and after four years you are taking home twice as much ($207,360 income). Everything you buy costs more, except your debt, which is now only a year and a half of wages. The problem with adopting this sin at a national scale is that by lying, pretending, and stealing, the sin is compounded and we all end up millionaires with nothing to buy. The temptation to devalue your money is probably just too hard to resist, according to early economist David Ricardo, who noted back in 1817:

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Experience...shows that neither a state nor a bank ever has had the unrestricted power of issuing paper money without abusing that power; in all states, therefore, the issue of paper money ought to be under some check and control; and none seems so proper for that purpose as that of subjecting the issuers of paper -money to the obligation of paying their notes either in gold coin or bullion.117

Bernanke started monetizing the debt early in 2009, as the Fed began lending money to the U.S. Treasury. Actually, it is not lending, it is printing, or in this electronic aging, typing in money. Creditor nations such as China have a lot to lose. Printed money has not stimulated the economy, because the supply of money on hand is not the root of the problem. Money is not wealth. True, some Wall Street workers were saved, but to the surprise of the rescuers, banks are not lending more and consumers arent spending more. Lending by banks was evidently based on the measured risk of the ability to pay, not on the banks balance sheet that have been doctored to look better than they are. In May 2009 the bank regulators changed the accounting methods for real estate assets from mark-to-market value to whatever fiction they use nowand, presto change, the balance sheet for the banks looked a lot better and their stock prices rose. This was deemed a great success and the problem appears to be solved, but as the real estate is liquidated by defaults, it still is worth what it can be sold forwhat people will pay. Nobody knows this better than mortgage-holding banks, which are choosing to pay down their debt rather than lend their profit. The printing of money gives the appearance of increasing wages, gaining stock prices, rising house prices, etc. It gives us the illusion of prosperity. But it disregards the factors of

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wealth creation and will ultimately lead to the devaluation of the dollar.

How to Ruin a Currency 1. Move from a production economy to a service economy. 2. Increase the nations trade imbalance. 3. Introduce more money through higher budget deficits. 4. Lower the interest rate to near zero to create and maintain a bubble. 5. Repeat. Why wouldnt I get out of the dollar? said Jim Rogers in an interview, Bernanke is giving every signal that we should get out of the dollar.118 Inflation is currently still below 10 percent only because the economy is still in recession. According to prognosticators such as Duncan, inflation will begin in earnest when consumers, who are now cautiously saving and paying down debt, begin to realize that money is not wealth in fact, their savings will buy less every week. The printing of money without increasing production will eventually catch us with us as individuals start spending money, only to find that the goods are scarce. Consumers will bid up the price of goods with their dollars and continue bidding. We are starting to see this as oil prices rise again after 2008s monumental rise and drastic fall. If other goods follow oil, the consumer will get the message that holding dollars whether in the bank, in a mattress, or in Treasury bondsis a losing bet. When will inflation take off? The short answer is when bond prices increase and the interest rate rises. This could happen as soon as fall 2009, but maybe as long as a decade.

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Because we live in a world of fiat money, and because of projected debt, the U.S. will enter an era of double-digit inflation worse than the 1970s. Then the U.S. will be faced with a decision: Will we continue down the inflationary road? The way to get off the runaway train is clear, but painful, and will be discussed more in the next chapter.

Future Expectations. When the dollar falls, it will fall hard. In the early 1990s, I visited parts of the former Soviet Union, and listened to stories how the cooperative and state farms disintegrated quickly once it was known that they would eventually break up. The farm workers were not fools. They were told to keep working on the farm until an orderly transition was made, but the first time they saw someone take a farm-owned shovel home, they grabbed whatever they could find before it was gone (such as seed, fertilizer, furniture, tractors, implements, and storage buildings). The expectation of the future every man for himself, led to the immediate every man for himself. There will be a similar fate for the dollar. When it is expected to be worth 10 cents in a year, it will be worth 10 cents in a week. Some of the signs of the hyperinflation will be when U.S. leaders move their money to gold or Swiss francs. The first reporter that scoops the story of a Treasury Secretary moving most of his money to Swiss bank accounts will herald of the end of the dollar. But in the meantime, let me introduce a scenario. What would you do if you had $10,000 to spend and you knew that in one year the price of everything would double? Of course you would get busy buying goods that would store, such as canned and dry food, clothing, medicine, and fuel. Now imagine that you knew that the price of everything would double in one month, in other words, inflation increases by 20 percent each week. You would lobby your boss to pay you

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weekly or daily if possible. You would arrange all your purchases to be done on the same day you get paid because they could cost you 10 percent more tomorrow. Saving any money, even for a week, would be throwing it away. You would spend half of your time arranging for purchases and trying to get the seller to lock in his price. If you took your car to a mechanic you would want to lock in the price up front. And the mechanic may want you to pay up front so he can buy the parts before they increase. You may hoard a few items like a case of cola or a container of gasoline so you can bribe the mechanic to finish the job in a hurry. Instead of working to produce, your attention would be turned to beating the system. It is doubtful you would invest in wide screen televisions, a hamburger grill, iPods, silk gowns, sports cars, lottery tickets, fine liquor, etc. In other words, necessary goods will be worth more than luxury goods. Unemployment will increase even more, especially from businesses based on luxury. Workers locked into a fixed wage will choose to be unemployed. When the people think like thisin terms of daily tradingthe dollar will be as good as done. So the government will enact wage and price control legislation to slow down the fall. Here too, there will be a crossroadwill people accept the regulations, risk imprisonment by cheating, or fight? To adapt would mean becoming poor and bartering locally for necessities. Workers may leave an unproductive or unprotected business, and move in with other family members. They could grow gardens, make and mend clothes, gather fuel, ride bicycles. They could hire out as day laborers for bartered goods. This would be difficult for our generation, but it is how our grandparents made it through the Great Depression. To fight would be understandable, yet destructive. Mobs could single out a business to blame and riot to destroy it. There will be chronic shortages of power and fuel, but hopefully we will not riot against the energy companies whose prices are controlled by government, and

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whose energy we will desperately need. Mobs could storm the government buildings and loot them, but would probably find little but laptops and lunch rooms with microwaves and empty refrigerators. Mobs could attack the state capitols, but they should remember that the governors and president are only a phone call away from bringing in the helicopter gunners. Hyperinflation leads to unrest, and it often leads to strong and heavy-handed political leaders. It brought about the worst slaughters in the already bloody French Revolution as people were guillotined for trading on the black market because the fiat money had failed. It brought about the rise of National Socialism in Germany in the early 1930s. It led to a military junta in Argentina in the 1980s, which declared war over the Falkland Islands to divert attention from the disastrous economy. Wars dont increase the amount of goods and services, unless you are talking about goods that explode and services that kill. War only produces full employment while burdening the people with rationing. If the war is unwinnable, the country leaves in disgrace and returns home to find it in shambles. In 1987, the Soviet Army left Afghanistan, only to find things were bad at home. In 1917, the Russian army returned home to revolution. My greatest fear is that, after returning home from our drawn out wars in Iraq and Afghanistan, and possible future wars in Iran, North Korea, and Eastern Europe, the U.S. military will return home to an uneasy peace.

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Chapter 10. Americas Economic Endgame

Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothingwhen you see that money is flowing to those who deal, not in goods, but in favorswhen you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against youwhen you see corruption being rewarded and honesty becoming a self-sacrificeyou may know that your society is doomed Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence.119 Ayn Rand.

The turmoil in America will come as the dollar continues its descent. When will the dollar end? The exact timing depends on multiple factors such as foreign investors, interest rate, political will, military options, and the availability of an alternative currency. But the day will quicken as debt increases along with ever-growing taxation and government regulation over money. Ayn Rands quote above is pertinent about the future day when civilization vanishes with the value of money. After the collapse of money comes scarcity. Hunger makes men desperate. Rioting follows, then looting. Marshall Law and the curfews of a police state. Disease becomes rampant. Men become more desperate. Mere anarchy is loosed upon the world.120 In the meantime, we can watch for certain events and decisions that are typical of nations in decline perhaps the most prevalent attitude deception is that government is the solution. 152

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The Dollar will continue to be worth less. The real cost of excess government spending on TARP, the stimulus bill, and bailouts will be borne by those holding dollars. Almost everyones wages will be higher, but not as high as prices, thus the real wages will shrink. This is nothing newthe dollar has been devaluating for most of a century. What will be new is the rate at which it will decline.

Unemployment will remain high. Economic slowdowns are often measured by the unemployment rate, and the governments response to the collapse of 2008 has been to spend money in non-sustainable industries such as infrastructure and more government. Ordinarily, the restructuring during a recession causes employment to rise, but the Great Depression of the 1930s had several peaks of high unemployment. The rate in May 2009 stands at 9.4 percent, and it could easily double before the recession ends, especially since the bailout and stimulus plans that were designed to decrease unemployment have not stopped the rise. Two reasons unemployment will remain high for a decade are, first, that there will be too little business expansion, and second, minimum wage laws will continue to limit employment. Just when the country will need more people working in the medical profession and agriculture, price controls on healthcare and food will discourage the expansion of jobs in these fields.

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U.S. Unemployment Rate seasonally adjusted. 121 (Crosshatched areas represent recessions.) U.S. will face a choice of fixing the problem. When inflation gets over 10 percent a year the American public may be so used to it that they will hardly voice opposition. When it gets over 20 percent, the wage earners will begin an outcry. By then the recession will be over but not the unemployment or suffering. The President will impose wage and price controls, and then he will clamp down on the growing black market trade and praise the shortages as a sacrifice for America, while we experience the empty grocery shelves and lines at the gasoline pumps. He will make an appeal to the electorate that at least he is taking charge and doing something, that the recession is the failure of capitalism and greedy businessmen, and that prosperity is just around the corner if we pay taxes and invest in green power, the new GM, and other government-run industries. It is likely that Ron Paul or a similar free-market candidate will run in the 2012 election. He or she (because Sarah Palin may be a front-runner) would speak out against the Bush/Obama spending that will double the national debt in the next 5 years to almost 20 trillion. Hopefully, he

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or she will explain Austrian economics and the reason inflation is nearly out of control. Whether such a candidate can secure the Republican nomination in the beauty contest of national politics is questionablethere would be several obstacles, such as being portrayed as a friend to the rich, a cold-hearted enemy of the common man, a member of the lunatic fringe, a crazy free-market advocate, or an opponent to retired people. He or she may touch the third rail of politics and proclaim Social Security and Medicare as boondoggles. He or she would need to recruit the young who can hear the waterfall coming in the river ahead. The 2012 election, or perhaps the 2016 election, will be a referendum on the two economic paths. The election may hinge on whether a candidate can offer a clear and believable alternative to the economics of bailout, government control, and inflation. It wont be enough to say that you could manage the economy better; the candidate will need a roadmap for cutting the debt, reducing spending, and fixing the economy. The way to fixing a national economy is no mystery. It is the same as fixing a personal economy. Work hard. Produce. Scrimp. Save. Invest. Treasury Secretary Andrew Mellon successfully implemented it in response to the 1920 recession. The British in Hong Kong used it after WWII to set the basis for their economic miracle. Financial commentator Martin Hutchinson described the way to fix an economy using parallels from history.122

Hutchinsons Recipe on How to Fix a National Economy 1. Adopt policies for higher interest rates to slow down borrowing. 2. Drastically reduce government spending. 3. Allow the failure and liquidation of marginal businesses. 4. Adopt anti-inflationary measuresincluding abolishing the Federal Reserve.

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5. Encourage manufacturing and energy production. 6. Insure free trade among nations. 7. Eliminate labor laws that keep unemployment high. Abolish minimum wage laws, and union favoritism, and enhance teen workers. This is the proven way to turn around an economic collapse. Furthermore, it is exactly what a family or business would need to do. If you and your family were in debt beyond your ability to pay, you would put a plan together that would consist of the following options: How to Fix a Family Economy 1. Quit borrowing. 2. Drastically reduce spending. 3. Quit doing things that lose money. 4. Dont take promises as payment. 5. Make something to sell. 6. Have a garage sale. 7. Put everyone to work.

Unfortunately, working your way out of a recession sounds like punishment. What fun are the above measures when we could simply spend our way out of it? Will the free-market candidate be able to convince voters that trade and free markets are the natural state of a free people, and going against them with bailouts, nationalization, protectionism, and debt leads to waste, inefficiency, business inactivity, hyperinflation, and enslavement? Will he or she be able to sell the idea of a new federalism, a limited national government, and de-regulation?

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The U.S. will continue to spend and inflate. Even if a new President could bring a limited government philosophy into office, he would face opposition from Congress and the media who would fight for the common man, never considering that the common man will be the forgotten man who will suffer the most from inflation. Voters may be convinced that tough budget trimming measures are good for the country, but they would rather insure that their own income keeps rising, their social security pension is safe, and government will take care of them. They could easily reject freedom in favor of a nanny state that would look after their needs.

Triumph of the Paternal State. Why would we embrace the nanny state? Because of who we are becoming. The changing U.S. demographics will have more retirees and single mothers than ever before, which will mean more poverty. Soon half the children will be born out of wedlock. Even more children will be lacking a parent because of divorce. A third of the men will have never married. The family as a unit of society will be declining. The single individuals will be dependent on government to take the place of family by becoming breadwinner, nurturer, transporter, healthcare provider, insurer, and employer. They will know they can vote to bring about a utopia where our leaders are also our caring parents. A place where everybody shares and shares alike. Where all wants are taken care of. Where there are no worries. Where every individuals physical, biological, and emotional needs are provided. Where money and markets disappear because everything exists in abundance. Where politics are not necessary because everyone thinks alike. Where a justice system is not needed because all are mandated equal. Where religion is distilled into one word, love, and is so integrated into society that organized religion is unnecessary. Where outdated religious and

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social trappings have melted into multiple serial relationships that are expected to come and go by chance. Where all the people live life in peace. Woo-hoo Just imagine! Im writing sarcastically, in case some young dreamer reads the above paragraph and starts to write a song about it. Such a state would be a hell, according to the poet Hlderlin, who wrote, What has always made the state a hell on earth has been precisely that man has tried to make it his heaven. 123

Taxes will increase. Income tax rates will go up in 2011 when the Bush tax cuts expire but that is just the beginning; almost everything involved with the state and federal government will require a fee. Tobacco taxes were recently raised (June 2009) and look for increased taxes on consumption. People who resist, or find ways around taxation will be treated as enemies unless they belong to a political special interest group. A businessman who cuts corners will be labeled an enemy of the state. Regulators will increase. Suppose your family doctor prescribes a certain medicine or procedure, and performs it without approval of the Medicare Board, he may be called on the carpet for fraud and wasting valuable government resources (all hospital facilities will be government owned.) If he performs it outside of the government facility, he may be reprimanded for malpractice. Companies and individuals may consider becoming non-profit entities that can avoid some taxes while keeping their wages. Sure it would eliminate them getting windfall profits, but by then so will the tax code.

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Food wont be cheap. Due to our trade imbalance and the falling dollar, foreign investors will find they can bid on the produce of American agriculture. The competition from Asia (China, India, Indonesia, Korea, etc.) will drive up food prices in America, even though most of money we spend on food doesnt go to the farmer but to the processor and retailer. China alone will have four times our population and more sound money with which to buy meat and grain. The American farmer is aging, and some have left for countries with fewer government restrictions, such as the Texas farmers who are growing melons and lettuce south of the border. When food prices increase dramatically, anticipate price controls on food and restrictions on exports. These measures will be justified as making food affordable, but will have the net effect of making it scarce because agriculture is a human endeavor and growers wont sell for a loss. Small farmers will hold back their produce from the general marketplace and sell to individuals; if this is made illegal, then black markets will emerge. If the state confiscates produce, they will reduce production in the same ratio. Large farms will either shut down or unite with the government to ensure survival and to help abolish the small independent farms, probably in the name of food safety and the environment. Bartering will be practiced more as people exchange goods and services for food, especially meat. Protein will be hard to find. Pets will become scarcer.

What to look for now. The Federal Reserve will continue to monetize the U.S. government debt and bailouts. Our government deficits will outgrow projections, which are frightening enough. We are in the Bailout Period, which may last until 2010 or the 2012 election or longer. This is the calm before the storm. We are spending the bailout money, but the debt isnt due yet.

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Watch the bond market. In the fall of 2008, the Federal Reserve dropped the interest rate to effectively zero, where it is today. Eventually, as fewer investors bid on 10-year Treasury Bonds, the interest rate will increase. That will reflect the true market rate, and it will show the level of investor confidence in the U.S. governments fiscal policy. Fed Chairman Bernanke may continue to buy Treasury Bonds (or government debt) to keep the interest rate low, but once the confidence is gone, the rate will go up in spite of him. Inflation will then take off as panic sets in. There is no exit strategy to the inflationary bailout period! Bernanke has promised he will take money out of the economy to slow it down, but it is not known how he will do this. If he lets the Treasury bond prices float as the market dictates, the government will need to start paying higher interest rates to finance over $15 trillion. If the interest rate increases to 20 percent, that will cost $3 trillion a year in interest payments alone. That is as much as the federal government takes in. Again, there is no exit strategy. If Bernanke takes money back from the quasi-private banks to reduce the supply of money, then that too will increase the interest rate. Perhaps he thinks that because banks are increasingly government-owned and controlled, the Fed will be able to dictate the terms of loans including interest rate. Significantly, trying to manage the banking system will impede loans to legitimate businesses. It is hard to imagine the Fed raising interest rates to a level above the anticipated inflation rate to control inflation like in the 1980s, which would crimp the government budget because they could only afford interest on the debt. Perhaps Bernanke will devise a plan to charge banks and individuals a high interest rate to check inflation while the U.S. government will get low interest loans from the Fed. This would keep the government solvent but would discourage private investment and production and keep unemployment high.

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The end result is more government, more taxes, more debt, more unemployment, and less freedom. The federal government cannot balance its budget without drastic cuts in military, government services, Social Security, and Medicare. Not even if the interest rate is zero. Not even if we find a new oil reserve. If spending cuts were made so that the federal budget were to get back in the black and we started paying off the debt, it would still take a decade of sacrifice and put half of all government employees out of work. The toughness of this choice makes it hard for any popular leader to accomplish, or even consider.

Social Security and Medicare. Payments will continue into the near future, straining the federal budget imbalance. Eventually, this IOU may be renounced, but in the mean time the CPI rate will be massaged so that Social Security payments will never keep pace with prices. The real income and wealth of retirees will decrease. Medicare and Medicaid will be the elephant in the room that nobody will mention. Demand for services will increase as the Baby Boomers age. Medicare boards, or their replacements, will ration fewer lifesaving treatments. Prices will be mandatedlowering cost is the real motivation behind the government-run healthcare, or the single payer system. History has repeatedly demonstrated that price controls lead to shortages. Doctors and nurses will be overworked and underpaid, pressuring many to quit. More patients will die waiting for treatment. More lawsuits and lower wages will discourage would-be health-care professionals just when we will need more. There will be a second system for the wealthy with private doctors and facilities, if they are still legal. If left alone, this market would grow, but it will be susceptible to government oversight and eventually be taken-over or made illegal. A small fraction of

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healthcare would remain privateperhaps in Mexico or private homes. government ignoring the rich who participate. Medicines would be delivered through a black market. When the dollar declines to the worth of wallpaper, so will Social Security and Medicare payments. Inflation is an easy way to fulfill the letter of the law in repayment of debt. Like a Ponzi scheme, it will leave retirees with the same wealth that Bernard Madoff left his investors.

Currency Restrictions. As inflation speeds up and price controls are enacted, more people will quit using dollars, which wont buy anything without standing in line. They will turn to more stable forms of money such as gold and silver, or the euro, or a new currency that will emerge. At first, the government will oppose this by making currency exchange illegal at anything but a fixed exchange rate at the approved institution. Still, things will be worth what they are worth. During the last stages of hyperinflation, the government may quickly print a few hundred trillion dollars and pay off all their debts with worthless money, then introduce a neo dollar that will be backed by something real, or at lease pseudo-real. They will tell us the neo dollar is redeemable in oil, or silver, or gold, but will unclear on how any single person could redeem it. None but the most partisan utopians will believe it, but the others will have no choice.

Price Controls. Roman Emperor Diocletians Edict of 301 A.D. was made with his back against the wall.124 Circumstances were desperate. Inflation was rampant. Both the military and civilian government was huge. He needed to get control of the currency, so he was faced with a choice of drastic cuts in government spending or inflating the currency by coining money. Why didnt he cut the government? It was probably similar to our day when the leaders fear the voice

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of special interest factions should any program be cut. After all, the emperor was the chosen one whom the people expected to make life better. He may have been fearful of a large segment of the population who would be unemployed military and looking for trouble, much like the report by Homeland Security Chief Janet Napolitano suggests for our day.125 Diocletian decided to impose set prices on everything in the empire because he understood that a partial freeze would not work. Neither would a partial penalty, so the death sentence was imposed. Of course, he did it all for the common good and the survival of Rome. Naturally, the Roman economy got worse with shortages, black markets, and riots. Within three years he was forced to abdicate, and the empire limped along until Constantine took the nation to war and invigorated the empire by adopting a new religion. The infusion of hope was short lived. Rome fell to the Goths within decades.126 Similarly, price controls were adopted by Chiang-kai-Shek in China shortly before he lost power. Ditto for South Vietnam before it fell to the communists.127

What will happen to American Hegemony? The collapse of the dollar will be accompanied by a loss of prestige and power in the world. Military forays into Iraq and Afghanistan may be cut short, leaving the region more unstable than before. If military spending is cut back, look for the sale of personnel or weapon systems to countries that could paysuch as China. The loss of military might would create a power vacuum for nations to compete for the role of World Superpower. Alternately, the U.S. military may be hired to solve more skirmishes. Japan and South Korea could buy a war against North Korea. Saudi Arabia and Dubai against Iran. Europe against the pirates of Somalia. Venezuela could hire us to take over Honduras. The U.S. could be

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the worlds rent-a-cop for awhile, but eventually, the U.S. military will not be inspired by mercenary means and wonder who and what they are fighting for.

How the Nephite Civilizations Ended. Civilizations fall apart from within. They have pride that they cannot fall. They trust in the power of their possessions, currency, and military. In their pride, they try to solve all the problems of the human condition through compulsionmore laws and more penaltiesbut they end up killing the goose that lays the golden egg. They are cynical, assuming that all others are motivated by crass greed, and then begin to distrust each other. They cast doubt on the integrity of their institutions. They pass legislation to guarantee a minimum level of wealth to appease the populace, but it leads to debt and general poverty. Then they face a failing economy, famine, and revolution. Fights break out on a small scale then on a large scale. When the central government collapses, the power is seized by military bands and tribalism is the result. Soon serfdom and servitude follow. Turning to the Book of Mormon as an historical guide, the first fall of the Nephite civilization occurred in the days of Mosiah in the second century B.C. We can assume the Land of Nephi was overcome by the Lamanites, probably through a series of wars (Omni 12). Although the Nephites had been fighting the Lamanites off and on from at least 570 B.C., it appears that the Nephite culture itself succumbed and only Mosiah and his followers escaped to Zarahemla with their written history, where they merged with the Mulekites and revived their civilization anew around 230 B.C. Reclaiming the Land of Nephi was the vision of a group of Nephites led by Zeniff about 200 B.C. (Mosiah 9). Obtaining permission from the King of the Lamanites, the people of Zeniff had an uneasy peace as they were surrounded by Lamanites with a cultural predisposition to

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plunder. (Mosiah 9:12). But the strength of the Nephite armies kept them relatively safe until under Zeniffs son Noah, the border security became secondary to the extravagant public works projects and lifestyles of the ruling class. A yearly property tax of 20 percent was used to support the rulers gluttonous way of life while military funding was minimal. The trial and execution of the prophet Abinadi began a small uprising, and soon the government lost the popular support. Their civilization was soon overrun by war, placed in bondage, where the taxes were increased to 50 percent, and they plotted an escape from the Land of Nephi to rejoin the larger Nephite culture in Zarahemla. We have a more detailed narrative account of the third time the Nephite civilization fell, from the Reign of the Judges, which began in 91 B.C., through the wars with Lamanites, Zoramites, Kingmen, and Gadianton Robbers, until they adopted a governor with dictatorial powers (3 Nephi 3:1). Ultimately, the assignation of their chief judge in 29 A.D. precipitated a collapse into tribalism. Throughout the 120-year Reign of the Judges, there was an ever-present counter political party of king-men who sought to restore a monarchy. They rejected rule by law and favored a Lamanite/Gadianton system of alliances, favors, and graft. When their last leader Jacob succeeded in overthrowing the judges, he found that only a minority wanted to join the monarchy, and the rest chose tribalism as the last refuge for society. According to the narrative,

They were divided into tribes, every man according to his family, kindred and friends; nevertheless they had come to an agreement that they would not go to war one with another; but they were not united as to their laws, and their manner of government, for they were established according to the minds of those who were their chiefs and their leaders. But they did establish very strict laws that one tribe

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should not trespass against another, insomuch that in the some degree they had peace in the land; nevertheless, their hearts were turned from the Lord their God, and they did stone the prophets and did cast them out from among them. (3 Nephi 7:14)

Four years later, the prophesied calamities destroyed several cities and their civilization ended. Shortly thereafter, the visitation by the white god established a utopian society that lasted approximately 160 years in its pure formor two generations (life spans) of righteousness without racial or cultural divisions. The fourth and last fall of the Nephite civilization began with a great division into classes according to wealth in 231 A.D. (4 Nephi 34). Factions emerged according to different political and religious philosophy and consequently took up the time-honored names of Nephites, Lamanites, Lemuelites, etc. Contention began between the tribes and pride ruled the period. Finally, in 321 A.D., full-scale war broke out and over the next 60 years it was the same conflict with very few intermissions. The war of revenge and destruction culminated in a final battle that ended the Nephite civilization in 385 A.D., followed by the victorious Lamanities fighting among themselves. Nephite civilization followed the prosperity-pride cycle which mirrored their adherence to the commandments, or the natural laws for societal stability. When their morals decayed, they failed to keep their families sound, to enforce rule of law, and to diffuse internal conflicts.

The Take-Home Message. Ignoring the commandments of God has led to sins which have caused the family to decline. The widespread disintegration of the family is taking the

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world economy toward poverty, more state paternalism, and demographic disasters. To skirt these troubles, government will compound the moral/economic mistakes by restricting freedom and creating shortages, famine, and hyperinflation. Social turmoil and chaos will result. The next chapter will discuss the divisions among the people according to their worldview that will, when fully enacted, separate the saints from the world. The prophesied calamities will follow.

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Chapter 11. Great Divisions and Calamities.

Let the heathen be wakened, and come up to the valley of Jehoshaphat: for there will I sit to judge all the heathen round about. Put ye in the sickle, for the harvest is ripe: come, get you down; for the press is full, the fats overflow; for their wickedness is great. Multitudes, multitudes in the valley of decision: for the day of the LORD is near in the valley of decision. (Joel 3:12-13).

In 1995, LDS Church leaders proclaimed that Further, we warn that the disintegration of the family will bring upon individuals, communities, and nations the calamities foretold by ancient and modern prophets, It was no idle threat. The adoption of the worldview that the state is paramount in peoples lives means that the family has disintegrated. It may be helpful to turn to fiction to understand the world culture at the last day. Aldous Huxleys futuristic novel Brave New World128 painted a world where everybody is included in a heart-numbing love fest with the Leader while resorting to the narcotic soma to sleep away reality, and willfully erase the family emotions that accompany death, love, and childbirth. No longer did the people experience the sorrow at death of a loved one, the bonding attraction to a spouse, the excitement and burden of a new child. These highly emotional periods in life are what make us human, yet the Brave New World culture had cut the root of family fidelity. As mentioned previously, 40 percent of American children are born without fathers, and soon this will be half. Family devotions will be replaced by the love of the State, also defined as fascism.129 In Huxleys novel, only John the Savage had familial instincts at the death of his mother. The others thought such emotion was barbaric and senseless to their tidy planned lives.

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Similarly, over a million nanny-state American women want to forget the loss of their unborn children that wee sacrifices on the altar of expediency. John the Savage mourned bitterly, but the disciples of the state fail to grieve the loss of spouses, children, and parents that are replaced by mix-and-match stepfamilies, universal health care, guaranteed employment, unlimited sexual adventure, and old age insurance. Falling birthrates in Europe and parts of the U.S. are cause for concern especially since the birthrates in Italy and Spain are 1.2 births per woman, almost half the replacement rate of 2.1 births per woman. Pope Benedict has brought attention to the problem, which he sees as a lack of love and trust between partners.130 We are seeing the fulfillment of the prophecy that Because iniquity shall abound, the love of many shall wax cold (Matthew 24:12). The U.S. birthrate continues its descent and is now at 2.2 births per woman. Political commentator Mark Steyn has used demographics of European and Moslem populations to predict the end of European culture by mid century, as Moslems immigrate to Europe, have more children, and are not entirely assimilated into the culture.131 Demography is destiny, as the saying goes. The end result of the disintegration of family to the state is the loss of innovation, freedom, and wealth. Freedom of movement is curtailed. Men work for favors and food, rather than money. The currency may be stable, such as the last few years of the USSR ruble, but there was almost nothing to buy.

The Culture Wars Intensify. It is hard to imagine that the U.S. society will endure dictatorial leaders and the freedom-loving populace will revolt. After the 2000 election, a Red/Blue division was discovered between the red heartland and the blue coastal states. But more than that, the map showed a rural urban divide county by county. Red counties were more

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likely to vote for George W. Bush over Al Gore, but also had more income, marriage, and children. The red/blue divide is really a difference in worldview that appears to be dominated by urban versus suburban/rural living. Again, it is not the race, heritage, or even religionRoman Catholic counties can be either red or blueit is the worldview they possess. This suggests that future revolt will not be state by state like the North/South divide the Civil War; rather it will be metropolis/rural within every state excepting those without a metropolis (e.g., Wyoming, North Dakota) and those without rural (e.g., Massachusetts, New Jersey). A red/blue division could easily transform into a worldview division based on a conglomerate of polarizing issues. Like the third century Nephites rebuilding their divisions using the same names of Nephite/Lamanite, this division could take on any number of names.

Cultural Divisions. We are products of our heritage, but we get to choose our heritage. My wifes family emigrated from Wales. They maintained the Welsh heritage of loyalty to land, hard work, and distrust of the English. But in reality, the Welsh line is only one line after five generations in America intermarrying with descendents from England (primarily) and Scotland, Isle of Man, Denmark, and Switzerland. The Welsh line is only one-sixteenth of their bloodline but half of their heritage. They are Welsh-American mostly because they choose to be. There is usually a choice. For example, the Jews in Europe came to look like Europeans and the Jews in Africa like Africans, but they chose to be Jewish. A few of the Jews chose to become Christian, and lost their Jewish heritage. Great divisions have taken place because of these simple choices. The Jews, for the most part, either fled Europe or were killed before and during WWII; it was only the Germans who

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denied the Jews a choice because of the doctrine of eugenics. Only the Germans researched to find the blood Jews, separate them, and begin the holocaust. Conversely, at the final stages of WWII, Hitler called ethnic Germans home from Eastern Europe. It didnt matter if their families had lived in Eastern Europe for centuries; they were about to become anathema to the locals and the advancing Soviet army. After India became a country, it found it could not live in peace with its Muslim population. A line was chosen and there was a great divide as Muslims left India for Pakistan and the Indians left Pakistan for India. It didnt matter that their families had lived there for centuries; the deciding factor was the chosen religion and culture. These three examples of divisions and migrations have all been taken from the last century to show that such migrations have recently occurred and can occur again. Often they are precipitated by a sudden incident. On November 9, 1938, the German used the assassination of a German diplomat in Paris as the pretense for a pogrom against the Jews called Kristallnacht or the night of broken glass, in which Jewish storefronts were smashed, houses ransacked, synagogues destroyed, 91 Jews killed, and over 30,000 Jews arrested and shipped to concentration camps. Moreover, it changed the nature of the Jewish problem in Germany from one of persecution to one of genocide. Most of the 30,000 political detainees were released within months on condition they would leave the country. Such a violent evil was a blessing to those Jews who heeded the clarion call and left Germany.

The Great Division. The late Elder Neal A. Maxwell noted that the division between the Nephites and Lamanites(2 Nephi 5:6) was first spiritual and then geographic.132 In the Last Days,

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a division has been prophesied that will be based on obedience to the words of the Lords servant (D&C 1:14). Speaking of our day, the prophet Nephi saw the split coming,

For the time speedily cometh that the Lord God shall cause a great division among the people, and the wicked will he destroy; and he will spare his people, yea, even if it so be that he must destroy the wicked by fire (2 Nephi 30:10).

The precise time and situation for the Great Division is difficult to predict. Hopefully it will not be caused by a troubled Mormon youth. Perhaps there will be several issues to divide the Lords people. The expulsion from of the saints from Missouri and Illinois was kindled by fear of political power exerted by the Mormons. In 2008, the church was slandered and attacked for its winning political stance against the legalization of gay marriage in California. Perhaps Gay Rights issues will grow and leave the Mormons isolated, but only if other religions abdicate their positions. Perhaps it will be over the abortion issue. Perhaps the large family issue, but todays demographics and empty houses would indicate a need in the other direction. In the past, Mormons were ostracized for polygamy but the re-adoption of that practice seems unlikely under the present political conditions and church leadership, in spite of the Supreme Court decision ruling for sex between consenting adults and the demographic demand for marriage-minded men by millions of single mothers worldwide. Perhaps, like the Jews in the past, the Latter-day Saints will be blamed for hard times simply because they are different, when, in reality, the calamities will be the result of the bad moral culture and economic policies that accompany the breakup of the family.

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Calamity at the End Times of the Gentiles. The Lord himself describe of the end times of the gentiles, of us, in a discourse to the righteous remnants of the house of Israel.

Yea, wo be unto the Gentiles except they repent; for it shall come to pass in that day, saith the Father, that I will cut off thy horses out of the midst of thee, and I will destroy thy chariots; and I will cut off the cities of thy land, and will throw down thy strongholds; and I will cut of witchcrafts out of thy land, and thou shalt have no more soothsayers And it shall come to pass, saith the Father, that at that day whosoever will not repent and come unto my Beloved Son, them will I cut off from among my people, O house of Israel. And I will execute vengeance and fury upon them; even as upon the heathen, such as they have not heard. 3 Nephi 21:12-16.

No we have not heard of it. We are the gentiles, the mighty mighty gentiles. Still the richest society to have ever lived on the earth. We are the proud and strong who shall be overthrown by the weak and simple (D&C 1:19; 35:13). Wont we just get in our cars and escape? The Lord said he would destroy our horses and chariots and cut off our cities. The inability to leave was a fear of mine when I lived in southern California and realized that if more than 10 percent of the cars were to take to the road, then utter gridlock would ensue. Not to mention the unavailability of fuel. Or the uninhabitable nature of the destination. Cant we rely on the military prowess? The prophet Spencer W. Kimball said that trust in military is idolatry. And what good are high tech tanks, helicopters, jet fighters, and bombs, when fighting a chaotic war?

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Furthermore, nature itself will be in turmoil. Enoch saw the day of the coming of the Lord and its prelude of calamity:

But before that day he saw great tribulations among the wicked; and he also saw the sea, that it was troubled, and mens hearts failing them, looking forth with fear for the judgments of the Almighty God, which should come upon the wicked. (Moses 7:66)

In a detailed account given to Joseph Smith, the Lord recounted the vision he laid before his apostles of old and outlined the calamities at the last days.

Behold I speak for mine elects sake; for nation shall rise against nation, and kingdom against kingdom; there shall be famines, and pestilences, and earthquakes, in divers places. And again, because iniquity shall abound, the love of men shall wax cold; but he that shall not be overcome, the same shall be saved. And again, this Gospel of the Kingdom shall be preached in all the world, for a witness unto all nations, and then shall the end come, or the destruction of the wicked; And again shall the abomination of desolation, spoken of by Daniel the prophet, be fulfilled. And immediately after the tribulation of those days, the sun shall be darkened, and the moon shall not give her light, and the stars shall fall from heaven, and the powers of heaven shall be shaken. Verily, I say unto you, this generation, in which these things shall be shown forth, shall not pass away until all I have told you shall be fulfilled. Although, the days will come, that

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heaven and earth shall pass away; yet my words shall not pass away, but all shall be fulfilled. And, as I said before, after the tribulation of those days, and the powers of the heavens shall be shaken, then shall appear the sign of the Son of Man in heaven, and then shall all the tribes of the earth mourn; and they shall see the Son of Man coming in the clouds of heaven, with power and great glory; And whoso treasureth up my word, shall not be deceived, for the Son of Man shall come, and he shall send his angels before him with the great sound of a trumpet, and they shall gather together the remainder of his elect from the four winds, from one end of heaven to the other. (Joseph SmithMatthew 28-37)

To summarize the calamities prophesied for the end of days. Coming Calamities of Modern Revelation 1. End of transportation by horses and chariots 2. Cities cut off; strongholds thrown down 3. Storms and Hurricanes 4. War 5. Famine 6. Pestilence 7. Earthquakes 8. Tempests and seas heaving onto shore 9. The love of men shall wax cold 10. Desolation

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11. Sun shall be darkened, moon turned to blood, stars fall 12. Sign of the Son of Man in heaven

Refuge in Zion. In D&C 45, the Lord revealed to Joseph Smith the destiny of Latter-day Saints during the times of turmoil. After warning of great things, wars in the land, he admonished unity.

And with one heart and with one mind, gather up your riches that ye may purchase an inheritance which shall hereafter be appointed unto you. And it shall be called the New Jerusalem, a land of peace, a city of refuge, a place of safety for the saints of the Most High God; And the glory of the Lord shall be there, and the terror of the Lord also shall be there, insomuch that the wicked will not come unto it, and it shall be called Zion. And it shall come to pass among the wicked, that every man that will not take his sword against his neighbor must needs flee unto Zion for safety. And there shall be gathered unto it out of every nation under heaven; and it shall be the only people that shall not be at war one with another. And it shall be said among the wicked: Let us not go up to battle against Zion, for the inhabitants of Zion are terrible; wherefore we cannot stand. And it shall come to pass that the righteous shall be gathered out from among all nations, and shall come to Zion, singing with songs of everlasting joy. (D&C 45: 65-71).

Enoch also saw in vision this day of gathering before the Second Coming,

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and righteousness and truth will I cause to sweep the earth as with a flood, to gather out mine elect from the four quarters of the earth, unto a place which I shall prepare, an Holy City, that my people may gird up their loins, and be looking forth for the time of my coming; for there shall be my tabernacle, and it shall be called Zion, a New Jerusalem. (Moses 7: 62)

The gathering to Zion is a necessary precondition for the reunification of Enochs Zion with the Latter-day Zion, and Second Coming. While saints are now gathered in stakes of Zion throughout the world, the time will come again when the saints will physically gather, either to several locales or one such as the New Jerusalem (D&C 45:66). This may come amid aggressive persecutions and fights that will inspire the gathering.

World Wide War against the Saints. Nephi saw in vision the last days and the future of Babylon or the whore that has dominion over all the earth,

And it came to pass that I beheld that the great mother of abominations did gather together multitudes upon the face of all the earth, among all the nations of the Gentiles, to fight against the Lamb of God. And it came to pass that I, Nephi, beheld the power of the Lamb of God, that it descended upon the saints of the church of the Lamb, and upon the covenant people of the Lord, who were scattered upon all the face of the earth; and they were armed with righteousness and with the power of God in great glory. And it came to pass that I beheld that

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the wrath of God was poured out upon that great and abominable church, insomuch that there were wars and rumors of wars among all the nations and kindreds of the earth. (1 Nephi 14:13-15).

In other words, there will be a great division or polarization between of the saints and Babylon that will occur worldwide, followed by a call to battle against the saints. The Lord will defend his saints, even if it takes fire (2 Nephi 30:10). The war will become a general and widely spaced war among all nations, but the Zion will largely be protected and the only people who shall not be at war with one another. (D&C 45:69) This global turmoil will make way for the Lord to fulfill His covenants that He made to Israel (2 Nephi 14:17) which include the destiny of Israel to establish the ideal community and reign over the earth. Interestingly, Nephi stops describing the revelation of the end of the gentiles, saying he is forbidden because it is the mission of John to write concerning the end of the world. (2 Nephi 14:18-28).

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Chapter 12. Preparations.

In faith well rely on the arm of Jehovah To guide thru these last days of trouble and gloom, And after the scourges and harvest are over, Well rise with the just when the Savior doth come. W.W. Phelps133

And one of the elders answered, saying unto me, What are these which are arrayed in white robes? and whence came they? And I said unto him, Sir, thou knowest. And he said to me, These are they which came out of great tribulation, and have washed their robes, and made them white in the blood of the Lamb. Revelation 7:13-14.

The day of our financial reckoning is at the door, and if we continue on the path of debt and spending, the financial disaster will be the result. The broken moral and economic commandments lay strewn about Babylon, and it looks increasingly like our society is changing into Sodom and Gomorrah and Huxleys Brave New World. Love has waxed cold, and the future is changing right before our eyes. We cannot hope to escape the consequences, and we know the calamities preceding the Second Coming are on the horizon.

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Time of the End. Still, Of that day and hour knoweth no man, no, not the angels of Heaven, but my Father only, (Matt 24:36). In other words, its coming, but we havent calendared it in yet. The Mayans did have the end of the age written into their long calendar. The world didnt end on January 1, 2000, or even on the 11th of September of 2001, but prognosticators are discussing the end of the Mayan Long Calendar on December 21 or 23, 2012, which is said will be the day that signifies the end of an age. How would the Mayans know? Perhaps were the descendents of the Lamanites and built on the ruins of the Nephite/Lamanite civilization? The forthcoming film 2012 will play on the dozens of New Age Books that welcome an age of peace and harmony and natural living. In contrast to the fake hope of the Age of Aquarius crowd, Latter-day Saint scriptures tell that things will get much worse before the Great and Dreadful Day. Of course, the world economy could end in 2012it could end tomorrow. And it is true that the Great and Dreadful Day of the Lord (Malachi 4:5) is getting closer rather than farther. Still, it is not time to panic. After all, things looked desperate in 1939 after a decade of depression, a world full of despots, and a world war breaking out. We are 70 years removed from the beginning of WWII, and the world has not ended but advanced. It is still conceivable that the dreadful day will not come for another century, which would allow the U.S. to falter and regroup, or fracture. Perhaps the declining population of Europeans will be replaced by those of Lamanite descent who have been prophesied to reclaim the American continent (3 Nephi 20:14,22). Among the myriad sins of the Baby Boom generation is the narcissism that leads us to believe it is all about usand so we Boomers may envision the world ending when the

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Boomers life span comes to a close. The Lord is on his own timetable, and evidently He is not in a hurry. The present financial crisis may, after a decade, reassert the U.S. as the global superpower, banker, and cultural dominator. Or maybe the U.S. will mire in a recession that will be worse that the Great Depression. (We dont call them depressions anymore because the term is too depressing.) What if we were to have a Great Recession? Financially, the U.S. is worse off than the 1930s because of the increased debt load and the erosion of our currency. And socially we are worse off because of the erosion of the family and the loss of unborn children. Politically, we seem worse off with ineffective checks and balances and the raucous tone of the political debate. If the left were to score a knockout victory, it could doom the U.S. to state paternalism and stagnation. In his sermon on the Last Days, Jesus compared the servants who were anticipating his coming and those who said that he would delay his coming (Joseph SmithMatthew 50-54). The latter group took to smiting their fellow servants and eating and drinking with the drunken. What a fitting description of our day with political quarrelling and ubiquitous partying! Jesus promised the unruly servants a surprise visit and a portion with the hypocrites. Like many words, hypocrite has changed meaning in our generation to mean someone trying to live righteously. In the original meaning, the hypocrite was not the servant trying to overcome his faults by attending to his duties as commanded, but the servant who was partying while he should have been watching out. If the tribulation at the end of the world is delayed until after the Boomers die off in mid century, we will see a different world demographic, as the family will be a distinct minorityof the ones who get up and attend church on Sunday. The rest of society will be hung over from drugs, sex, and rock-n-roll.

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Who knows? The world economic turmoil may result in an eventual golden age of globalization as the U.S. declines in importance while global trade continues and Babylon grows until every city in the world becomes its own Las Vegas. And just like Las Vegas today, every city would have its own quiet neighborhood where an LDS temple stands. The church might grow seven-fold in a half-century to 100 million people, and still be only one percent of a future world population of 10 billion.

The Sealed, End-of-the-World Book of John. As mentioned in the last chapter, Nephis telling of our day was halted at the point of conflict between Babylon and the covenant people, and Nephi deferred the remainder of the vision of the end of the world to the future writer, John the Revelator (1 Nephi 14:19-22). Readers have understood the book of the vision to belong in the Bible as the Revelations of St. John, which is shrouded in symbolism and mystery. Nephi tells us the meaning of book has been lost (1 Nephi 14:23) In fact, Nephi tells of a new prophecy of John that will come to light in the last days. In verse 22, Nephi referred to the writings of John that shall be of the end of the world, yet he described the writings as if they were part of the Bible, but not in the pure form that they were initially written. Shortly thereafter, Nephi says that Johns prophecies, were sealed up to come forth in their purityto the House of Israel, (1 Nephi 14: 26). In other words, they were not the verbatim account given in Revelations. Fortunately, the preamble to D&C 7 sheds light on the situation:

Revelation given to Joseph Smith the Prophet and Oliver Cowdery, at Harmony, Pennsylvania, April 1829, when they inquired through the Urim and Thummim as to whether John, the beloved disciple, tarried in the flesh or had died. The

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revelation is a translated version of the record made on parchment by John and hidden up by himself. (History of the Church 1: 3536)

Evidently, the apostle John sealed up a parchment record, much like the Dead Sea Scrolls were written on parchment and sealed in jars from the same time period around the first century A.D. Another mention of Johns record is given in D&C 93, which quotes extensively from a lost gospel of John about the nature of Jesus, including Johns testimony; after which the Lord states,

And it shall come to pass, that if you are faithful you shall receive the fullness of the record of John. (D&C 93:18)

This new and full record of John may be the same scripture as Johns pure Book of the End of the World, or it may be another book that corresponds to the pure Gospel According to St. John. In any case, Johns book may be the same that the Lord mentioned to Daniel when he inquired about the end of the worldWhat shall be the end of these things? (Daniel 12:8)and received the following response,

And he [the Lord] said, Go thy way, Daniel: for the words are closed up and sealed till the time of the end. (Daniel 12:9)

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This parallels Nephis explanation that the last vision was reserved and sealed up until the very end. Finally, the prophet Moroni, in his translation of the Book of Ether, paused to mention the future scriptures including the record of John. Speaking for the Lord, he said:

And then shall my revelations which I have caused to be written by my servant John be unfolded in the eyes of all the people. Remember, when ye see these things, ye shall know that the time is at hand that they shall be made manifest in very deed. (Ether 4:16)

While it is easy to interpret, my revelations which I have caused to be written by my servant John as visionary predictions, Moroni may instead be referring to the physical scroll. The phrase, unfolded in the eyes of all people, may refer to the scroll itself; certainly the Dead Sea Scrolls were meticulously unfolded, as they had hardened over two millennia. The phrase, when you shall see these things, may refer to the revealed words on the scrolls. After their unfolding and reading, the timing of their fulfillment may be immediate as stated: the time is at hand that they shall be manifest in very deed. To summarize, there is another record of John mentioned by Nephi, Daniel, and Moroni that describes the end of times; John has sealed up parchment scrolls to come forth at that time, but Joseph Smith received small passages of the book (or another book) through direct revelation (D&C 7 and D&C 93). When the revelations of John come forth, they will doubtless be of great comfort to the Saints who will be in the midst of persecution as the world will be in turmoil. One can imagine that Johns scroll may come as a natural discovery like the Dead Sea Scrolls, and will be unfolded in the eyes of all people (through worldwide communications.) When passages

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of Johns record correspond to the Book of Mormon, Doctrine and Covenants, and Book of Enoch (Moses 7) revelations of the last days, they will confirm the saints faith in the Restoration and be a comfort to them, as they will more explicitly describe the ending events. Meanwhile, the world will discount the findings just as Pharaohs magicians marginalized the miracles of Moses. The saints will better understand their role in the end of days and what to do to stay clear of the calamities.

A Vengeful Savior. Too often in the peace and prosperity of the latter half of the 20th century, we have felt insulated from calamities of war and nature. We prefer a peaceful Lord but that is not the Lord who will return to the earth in glory. Before we get the thousand years of hard-fought peace, there is going to be a cleansing. Is the world ready for a vengeful God? Or will they reject him as not being very nice. The original appendix to the Doctrine and Covenants, Section 133, describes him as angry and vengeful. His garments will be stained with blood like a warrior after battlebut the blood will not be his. This is the day that is in him, (D&C 133:66). Can we handle that? Some find it uncomfortable that the Lord should play the role of an avenger. Too often critics have characterized the God of the Old Testament as tribal, genocidal, racist, and vindictive. He flooded the earth, didnt he? He told the Israelites to kill the Canaanite men, women, children, and even livestock. He described himself as jealousy in relation to other pretend gods. This vengeful God doesnt sit well with many in modern mainstream Christianity as well as the Restored Church. We have been taught that God is merciful, kind, and longsuffering with justice and destruction. We have been taught not to fear the God of Love, but the scriptures talk

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of god-fearing people. Paintings of Jesus portray him as a slender, non-muscular man with almost feminine features such as soft hair and skin. (Nothing like a carpenter.) He holds a lamb or a child. He knocks softly at the door. He lifts your burden and makes it go away. No wonder so many people support a nanny statethey have embraced the idea of a nanny god! Logically, it makes no sense for God to carry all of your burdens because earth life is a school. He only guarantees that his burden of the gospel will be lighter than others. Lets reject the idea of a God who forgives you all your sins whether you try or not. Who predestines some to eternal life and gives them a free pass. Bring on the God of choice and agency! One who doesnt respect people (D&C 1:35), but rewards what they do. A god who isnt afraid to recompense the good and punish the evil. Children dont need a nanny god, or a nanny state, or even a nanny, as the nanny Mary Poppins taughtthey need parents who will converse and put their foot down when needed. In the future the Lord will do terrible things, things they look not for, (D&C 133:43) in his great day of vengeance. His anger will be stronger than when he singlehandedly drove the moneychangers from the temple. This is not to say that our God, who possesses body, parts, and passions (Deuteronomy 4:28), is not loving, merciful, kind. He wept for the sorrow of Mary and Martha (John 11:35) as well as the destruction of the rebellious in Noahs day (Moses 7:29). The Weeping God of Mormonism is a point emphasized by the late LDS essayist and educator Eugene England.134 But He is a double-edged sword, capable of both love and terror. The Lords voice in the Doctrine in Covenants sounds like he isnt taking any guff, Repent lest I smite you by the rod of my mouth (D&C 19:15), but warm and encouraging as well, Fear not little children for you are mine, (D&C 50:41) He possesses anger, vengeance, and garments stained in blood (D&C 133:51), but in the next verse he is described by his goodness and loving

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kindness forever and ever. (D&C 131:52).

Armageddon. Should America falter both economically and militarily in the next decade or two, it will leave the State of Israel with no protectors in the world and few friends. How long will Israel be able to withstand their enemies without a world power party to back them up? It is conceivable that conflict could be avoided for decades, but eventually the always-simmering disputes with its Arab neighbors will come to a boil. According to prophecy, all nations will gather against Jerusalem to battle (see Zechariah 14:2; Ezekiel chapters 38-39) and it is unclear whether the U.S. will join the besieging nations or will still be in existence. Although perceived mythically as the final war between good and evil, Armageddon is geographically a specific location, the Valley of Mediggo in Northern Israel, where a battle between nations of the world and the state of Israel will occur. According to Revelations,

And he gathered them together into a place called in the Hebrew tongue Armageddon. And the seventh angel poured out his vial into the air; and there came a great voice out of the temple of heaven, from the throne, saying, It is done. And there were voices, and thunders, and lightnings; and there was a great earthquake, such as was not since men were upon the earth, so mighty an earthquake, and so great. (Revelations 16:16-18.)

Although the Israeli Army should win most of the early battles, it will have a hard time winning a war in which they are outnumbered 200 million to 2 million. While a detailed account of prophecy of the end of days is not the purpose of this book, lets list the highlights:

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The armies of the world gather in the Valley of Mediggo to fight Israel. (Revelations 16:16)

The death in this valley has no parallel in history. One like unto the Son of man reaps the earth (Revelations 14:14-20).

Jerusalem is besieged. Possibly concurrent with the battle at Mediggo. Two unpopular prophets preach and show power in the holy city. (Revelations 11; D&C 77:15) Presumably this is during the siege and will keep Jerusalem defended.

The two prophets are slain and their bodies lie in the streets as the world rejoices, then the Lord appears to resurrect the two prophets and save Jerusalem from its enemies. (Revelations 11, Ezekiel??)

The two prophets mentioned in Revelations 11 were also explained by Joseph Smith:

Q. What is to be understood by the two witnesses, in the eleventh chapter of Revelation? A. They are two prophets that are to be raised up to the Jewish nation in the last days, at the time of the restoration, and to prophesy to the Jews after they are gathered and have built the city of Jerusalem in the land of their fathers. (D&C 77:15)

It is not within the scope of this book to review and chronologically set the events of Revelation and the Tribulation. That will be the mission of Johns Book of the End of the World, which will lay out the mysteries and the works of God; the hidden things of his economy concerning the earth, (D&C 77:6).

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An End of the World Scenario Consistent with Modern Scripture and Revelation Financial Turmoil. There is a Second American Civil War and the U.S. fractures. Elders of Israel hold up the Constitution of Religious Freedom and help form a

federation of states, possibly along the lines of the state of Deseret. Turmoil grows worse. The world of Babylon blames the Mormons and Jews. The Elders are called home (kicked out) of the Gentile nations. Divisions occur to isolate Mormons. Last of the Jews flee to Israel. Battle preparations are made to fight the Lamb of God. Natural Calamities occur to defend the Saints. War is poured out on all nations. Armies gather for Armageddon while two prophets preach in Jerusalem.

War against the Saints.We have an idea of the great divisions and preparations for war against the Saints and the Jews. We have been told that the Lord would defend the Saints, which may be similar to the days of Zions Camp, when the hundred soldier of Zion formed ranks to fight the Missourians and redeem Zion in 1834 in what has been called the battle of Fishing River. The Lord told Joseph Smith on June 22, 1934 that he would fight their battles (D&C 105:14), and on June ?? as the militia approached, there was a severe rainstorm that ended only after the warring parties had retreated (HC 2, chaps. 5 to 8).

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The arm of the Lord in those days will include natural calamities such as fire, earthquake, and tsunami. The sea will destroy mighty cities (JD 8:123); Boston and New York have been singled out for desolation (D&C 84:114). Brigham Young taught that the calamities would come after the elders have come home from preaching the gospel to the world, likely an expulsion during the period of division discussed earlier. Young describe the calamities as incomprehensible even to the Saints who had been driven from Missouri and Illinois.

All we have yet heard and we have experienced is scarcely a preface to the sermon that is going to be preached. When the testimony of the Elders ceases to be given, and the Lord says to them, Come home; I will now preach my own sermons to the nations of the earth, all you now know can scarcely be called a preface to the sermon that will be preached with fire and sword, tempests, earthquakes, hail, rain, thunders and lightnings, and fearful destruction. What matters the destruction of a few railway cars? You will hear of magnificent cities, now idolized by the people, sinking in the earth, entombing the inhabitants. The sea will heave itself beyond its bounds, engulfing mighty cities. Famine will spread over the nations and nation will rise up against nation, kingdom against kingdom and states against states, in our own country and in foreign lands; and they will destroy each other, caring not for the blood and lives of their neighbors, of their families, or for their own lives. (JD 8:123.)

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On September 11, 2001, a terrorist act destroyed the World Trade Center in New York City, and the nation was shocked with feelings of emptiness, grief, and uncertainty. As dark and murky as that emotion was, the mood will be darker yet during the time of the tribulations as we see destruction spread throughout the earth. The sky will be darken as the sun loses it light and the moon is darken (Matthew 24:29), probably due to the smoke and ash of volcanic eruptions. The courage to endure will fail men (Joseph Smith-Matthew 33) as it appears civilization is doomed. Many will say that even Jesus is too late.

Preparation for the End of Days. How can we prepare for what is coming? Other books about the collapse of the dollar and the coming economic turmoil offer financial advice about how to survive, such as what to buy and where to invest. While that may be sound advice to avoid the first round of dollar devaluation, like all investments there is some risk involved and past performance does not guarantee future results. Even gold may be subject to government seizure. In the event of wars and natural disasters, such as we have just considered, all bets are off. The most reliable place for your wealth is in heaven, where moth, rust, and thieves cannot ruin it (Matthew 6: 20). Brigham Young prophesied of times when gold would be worthless compared to grain (JD 1:250) and when a man will be more precious than fine gold. (JD 10:295) The Lord has given us direction about what to do in troubled times: hearken to the words of his servants, leave self-chosen idol worship, and flee Babylon (D&C 1). For the last century, his servants have encouraged us to prepare for hard economic times.

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1. Store necessities. Latter-day saints have been encouraged by their leaders to store up a years supply of food, clothing, and essentials as insurance against natural disaster, unemployment, and turmoil. The latest recommendation for provident living suggests we start with a 3-month supply and to circulate it.135 In addition, they recommend we store drinking water, have financial reserves to use for emergencies only, and work on a longer term supplies.

2. Get out of debt and be financially sound. While some debt is a necessary part of business, consumer debt is bondage. This is one topic where the prophets have been clear.136

3. Keep the commandments. The disregard for commandments has got the U.S. into this financial mess. Spending money on the frills Babylon will take away from needed resources and may lead to the disintegration of the family. The most important commandments are to love the Lord with all your heart, and to love our spouses, children, and parents.

4. Watch for the signs of the times. Watch the economic signs such as interest rate, national debt, unemployment rate, and soundness of currency. Plan how to cope with economic hard times. Also watch for the signs of the last days including divisions and chaos.

5. Be engaged in good causes. The work of building Zion will be done by contributing time and money to worthwhile causes including disaster relief, education, and helping the poor.

6. Be not deceived.

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And at that day, when I shall come in my glory, shall the parable be fulfilled which I spake concerning the ten virgins. For they hat are wise and have received the truth, and have taken the Holy Spirit for their guide, and have not been deceivedverily I say unto you, they shall not be hewn down and cast into the fire, but shall abide the day. (D&C 45: 56-57.)

Those who survive the day will receive the promise contained in the next verse:

And the earth shall be given unto them as an inheritance; and they shall multiply and wax strong, and their children shall grow up without sin unto salvation. (D&C 45: 58.)

Our preparation should include patience to know that the Lord is working on his own timeline, and we do not know the day or hour. According to Brigham Young:

Then, do not be too anxious for the Lord to hasten his work. Let our anxiety be centered upon one thing, the sanctification of our own hearts, the purifying of our own affections, the preparing of ourselves for the approach of the events that are hastening upon us. This should be our concern, this should be our study, this should be our daily prayer, and not to be in a hurry to see the overthrow of the wicked. (JD 9:3.)

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Those who prepare both materially and spiritually will enjoy the culmination of Gods covenant with Israel. Although the future is frightening, knowledge of the prophecy can fortify us from fear. When Jesus laid out the future of Jerusalem and the end of the worlddesolation of the holy city, destruction of the temple, scattering of the Jews, wars and rumors of wars, heart failure, scourges, sickness, earthquakes, warthe disciples hearts were weighed down so much that they were even sorry they had asked the question. Jesus quickly comforted them with the explanation, Be not troubled, for, when all these things shall come to pass, ye may know that the promises which have been made unto you shall be fulfilled. (D&C 45:35)

End

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NOTES

Haggai. 2: 6-7 For thus saith the LORD of hosts; Yet once, it is a little while, and I will shake the heavens, and the earth, and the sea, and the dry land; And I will shake all nations, and the desire of all nations shall come: and I will fill this house with glory, saith the LORD of hosts.
2

Amartya Kumar Sen, Poverty and Famines, An Essay on Entitlement and Deprivation (Oxford University Press, 1983) William A. Dando, The Geography of Famine. (NY, Wiley, 1980) Cormac Grda, Famine, a Short History. (NJ, Princeton Univ Press, 2009)

First Presidency and Quorum of the Twelve Apostles of the Church of Jesus Christ of Latter-day Saints, The Family: A Proclamation to the World (Salt Lake City, UT; Intellectual Reserve, Inc., 1995)
6

Spencer W. Kimball, The False Gods We Worship. Ensign, June 1976, 3 Ezra Taft Benson, Cleansing the Inner Vessel. Ensign, May 1986, 4 Sting. "Money's only important when you don't have any."

7 8

W. Cleon Skousen, The 5000 Year Leap, The 28 Great Ideas That Changed the World (Natl Center for Constitutional, 1981, 2006)
10

Amartya Kumar Sen, Development as Freedom (Oxford University Press, 2001)

11

Mirek Topolnek, Transcript of the speech to the European Parliament (Government of the Czech Republic, www.eu2009.cz/en/news-and-documents/speeches-interviews/ 26 March 2009)
12

Amity Shlaes, The Forgotten Man: A New History of the Great Depression (New York, Harper-Collins, 2007) F.A. Hayek, The Road to Serfdom (University of Chicago Press, 1944, 2007) Stanislav Mishin, American Capitalism Gone with a Whimper. Pravda, 27 April 2009. Jim Rogers Interview (http://www.moneymorning.com/2008/08/19/jim-rogers/ 19 Aug 2008)

13

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15

16

Mirek Topolnek, transcript of speech at the EU-USA summit. (Government of the Czech Republic, 6 April 2009) found at http://www.eu2009.cz/en/news-and-documents/speeches-interviews/
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Jim Rogers, ibid. Henning W. Prentis, Industrial Management in a Republic (Princeton University Press, 1943) p. 22

18

19

Richard Duncan. The Dollar Crisis: Causes, Consequences, Cures. Revised and Updated. (Singapore, John Wiley & Sons Asia, 2005) p. 312
20 21

Peter Schiff, The Writing is on the Wall - Read it! The Global Investor, 9 Jan 2008

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27

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Walter Williams. How can it be? (January 14, 2004, http://www.gmu.edu/departments/economics/wew/articles/04/how.html)


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53

Warren G. Harding. Inaugural Address. March 4, 1921. In Inaugural Addresses of the Presidents of the United States. Washington, D.C.: U.S. G.P.O.: for sale by the Supt. of Docs., U.S. G.P.O., 1989; Bartleby.com, 2001. www.bartleby.com/124/.
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Ludwig von Mises. Human Action: A Treatise on Economics (1966) Austrian Institute of Economic Research Report. (February 1929) Margit von Mises. My Years with Ludwig von Mises. (Arlington House; 1976). 31. Rothbard, op cite. Albert Wiggin, Commercial and Financial Chronicle 132 (January 17, 1931) 428-29, quoted by Rothbard, (1963) Justin Lahart, The Great Recession: A Downturn Sized Up. (Wall Street Journal, July 28, 2009) Sennholz, Hans F. The Great Depression. (The Freeman, October 1969) Available at mises.org.

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Rahm Emmanuel, Obamas Chief of Staff, said You never want a serious crisis to go to waste. (http://www.nytimes.com/2008/11/10/us/politics/10obama.html?ref=politics; Nov 10, 2008)
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Thomas E. Woods, Jr. Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. (Washington DC, Regnery Publ., 2009)
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Barack H. Obama. Inaugural Address. Inaugural Addresses of the Presidents of the United States. Washington, D.C.: U.S. G.P.O.: for sale by the Supt. of Docs., U.S. G.P.O., 1989; Bartleby.com, 2001. www.bartleby.com/124/. August 4, 2009.
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R. Charles Moyer and Robert E. Lamy. Too big to fail": rationale, consequences, and alternatives banking. Business Economics (July, 1992) FoxNews.com, Obama, McCain blame economic woes on greed, policy. (Sept 15, 2008)

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Herald Sun, Obama vows to fight 'greed and scheming' on Wall Street (December 19, 2008) http://www.news.com.au/heraldsun/story/0,21985,24822609-664,00.html
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Barack H. Obama. Inaugural Address. Inaugural Addresses of the Presidents of the United States. Washington, D.C.: U.S. G.P.O.: for sale by the Supt. of Docs., U.S. G.P.O., 1989; Bartleby.com, 2001. www.bartleby.com/124/. August 4, 2009.

72

Murray Rothbard. Americas Great Depression. (Princeton, N.J.; D. Van Nostrand, 1963) Bill Sammon. Pelosi Open to Prosecution of Bush Administration Officials. Foxnews, January 18, 2009. Public Law 107 - 16 - Economic Growth and Tax Relief Reconciliation Act of 2001 http://www.gpo.gov/ August 4, 2009 Henry Hazlitt. Economics in One Lesson. (NY; Three Rivers Press, 1988) MurrayRothbard. Making Economic Sense (1995, 2006) Shlaes, op cite, p. 273 AmyThomson and Katie Merx. Whitacre Vows to Learn About Cars as GM Chairman. Bloomberg, 10 June 2009 Shlaes, op cite. House approves overhaul of environmental policy. Boston Globe; June 27, 2009

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Freddy Cuevas and Will Weissert, Associated Press. Police, Protesters Clash in Honduras. June 29, 2009 http://news.aol.com/article/obama-says-coup-not-legal/546931 (August 6, 2009)
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Stuart Varney. Obama Wants to Control the Banks; There's a reason he refuses to accept repayment of TARP money. Wall Street Journal. April 4, 2009
83

James Quinn, If you believe banks are recovering (www.prudentbear.com; May 5, 2009)

84

P.J. ORourke. Parliament of Whores: A Lone Humorist Attempts to Explain the Entire U.S. Government (Grove Press; 2003)
85

The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, (2009, http://www.ssa.gov/OACT/TR/2009/tr09.pdf)
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Cato Institute. "Why is Social Security often called a Ponzi scheme?" (Cato Institute. http://www.socialsecurity.org/daily/05-11-99.html, May 11, 1999)
87

Michael Kinsley. "Social Security: From Ponzi Scheme to Shell Game." Slate.com. December 14, 1996

88

Ponzi Schemes. (Social Security Online. http://web.archive.org/web/2004100120051231re_/http://www.ssa.gov/history/ponzi.html; October 1, 2004)


89

Barack Obamas Notre Dame Speech. Chicago Tribune. May 17, 2009

90

Wm. Robert Johnston. Historical abortion statistics, United States. (http://www.johnstonsarchive.net/policy/abortion/abunitedstates.html; last updated 28 January 2009)
91

The 1936 Government Pamphlet on Social Security. (http://www.ssa.gov/history/ssn/ssb36.html) Ibid.

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Thomas Goldsmith. "He filters politics out of economics of aging." (Raleigh News & Observer. http://www.newsobserver.com/news/story/1278598.html. Nov. 2, 2008)
94

John Attarian. The Roots of the Social Security Myth. (Auburn, Alabama, Ludwig von Mises Institute, 2001) U.S. Census. (http://www.census.gov/population/socdemo/hh-fam/cps2003/tabA1-all.pdf)

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96

James Reynolds. Wifeless future for Chinas men. (BBC News, Beijing. 12 February 2007) Ludwig von Mises, Human Action (New Haven, Conn., Yale University Press, 1949), p. 67. Edward H. Crane. On My Mind: GOP Pussycats Forbes magazine, November 13, 2000 Dan Dorfman. For, Against Uncle Sam's Bailout. The New York Sun, September 22, 2008 Henry Hazlitt, Economics in One Lesson. (New York, Harper & Brothers, 1946) See http://www.cato.org/special/stimulus09/ 45 percent of world's wealth destroyed: Blackstone CEO. Reuters. March 10, 2009 Stephen Dinan. Obama's budget doubles deficit in 10 years. Washington Times, March 20, 2009 Government Accounting Offices. A Citizens Guide to the 2008 Financial Report of the U.S. Government. Kevin Hassett. Recession Bites into Social Securitys Surplus. Bloomberg, March 30, 2009

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CBO. Preliminary Analysis of the Presidents Budget and an Update of CBOs Budget and Economic Outlook, March 2009, (CBO, http://www.cbo.gov/ftpdocs/100xx/doc10014/toc.htm)
107

Hans Bader. Illegal Chrysler takeover: pension funds standing in Indiana state police pension trust v. Chrysler. examiner.com, June 8, 2009
108

Robert H. Bork.. Slouching Towards Gomorrah: Modern Liberalism and American Decline. (New York: ReganBooks,1996)
109

Elmer T Peterson. Daily Oklahoman, (December 9, 1951) 12A. Buttonwood Birth Pains: A new global system is coming into existence. The Economist, May 14, 2009. Comstock Partners, Inc., Special Report. Deleveraging the U.S. Economy. www.comstockfunds.com August 6, 2009. Ibid.

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Anthony Faiola. Fading of the Dollar's Dominance. Other Nations See Opening to Boost Their Currencies. Washington Post June 24, 2009
114

Richard Duncan. The Dollar Crisis: Causes, Consequences, Cures. Revised and Updated. (Singapore, John Wiley & Sons Asia, 2005) p. 225
115

Wes Goodman. U.S> 10-year Notes Advance Following Biggest Loss Since January. (Bloomberg.com, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atBx3ITWdbiY; 28 May 2009.)
116

The federal tax revenue in April 2009 dropped 34 percent from a year earlier. See John Waggoner, IRS tax revenue falls along with taxpayers income. USA Today, May 27, 2009
117

David Ricardo. quoted in The Theory of Money and Credit. (1953) Jim Rogers Interview (http://www.moneymorning.com/2008/08/19/jim-rogers/ 19 Aug 2008) Ayn Rand. Atlas Shrugged. William Butler Yeats. The Second Coming.

118

119

120

121

U.S. Bureau of Labor. (www.bls.gov; July 1, 2009) Martin Hutchinson. The Correct Recovery Paradigm. (prudentbear.com; May 4, 2009) Friedrich Hlderlin. (http://www.famousquotesandauthors.com)

122

123

124

H. Michell, "The Edict of Diocletian: A Study of Price-Fixing in the Roman Empire," The Canadian Journal of Economics and Political Science, February 1947, p. 3.
125

Department of Homeland Security. Rightwing Extremism: Current Economic and Political Environment Fueling Resurgence in Radicalization and Recruitment April 14, 2009, http://www.dhs.gov
126

Robert L. Scheuttinger and Eamonn Butler. Forty Centuries of Wage and Price Controls (Auburn, Alabama, Ludwig von Mises Institute, 2009)
127

Murray Rothbard. Making Economic Sense. (1995, 2006) Aldous Huxley. Brave New World. (London: HarperCollins, 1932)

128

129

Jonah Goldberg. Liberal Fascism, The Secret History of the American Left, From Mussolini to the Politics of Change. (NY, Doubleday, 2008)
130

John-Henry Westen. Pope Says Low Birth Rate Due Mainly to Lack of Love LifeSiteNews.com, April 28, 2006 Mark Steyn. America Alone: the end of the world as we know it. (Washington D.C., Regnery Publishing, 2008) Neal A. Maxwell, Lessons from Laman and Lemuel. Ensign, Nov 1999, 6

131

132

Neal A. Maxwell, These Are Your Days, Ensign, Oct 2004, 2631
133

W.W. Phelps. Now Let Us Rejoice Hymns, no. 3. Eugene England, The Weeping God of Mormonism, Dialogue 35:1 Spring 2002

134

135

First Presidency. All is Safely Gathered In: Family Home Storage. (Salt Lake City, UT; Intellectual Reserve, Inc., February 2007.)
136

Gordon B. Hinckley. Believe His Prophets. Ensign, May, 1992

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