Big Brother Loves You!

George Orwell

George Orwell, photo Branch of the National Union of Journalists

“All within the state, nothing outside the state, nothing against the state.” Benito Mussolini

Those who have eyes to see and ears to hear will have noticed the accelerating trend towards interventionist policies and assertive state action all around us. This is not a conspiracy theory circulating on the internet. It is a phenomenon that is now so blatantly obvious that it makes the headlines in the highbrow pro-establishment media: The Economist and the Financial Times are talking openly about the trend towards “repression” and “national capitalism” as if it was simply the latest fashion in crisis management. A century ago, Randolph Bourne pointed out that “war is the health of the state”. It turns out that so is economic crisis.

Politicians, bureaucrats and many of their claqueurs in the media have drawn conclusions that are conveniently in their own interests: to them the crisis is evidence that things cannot be left to the markets, to consumers, to greedy bankers, and the spontaneous interaction of the public. If the state does not regulate and control everything, chaos ensues. We need more government. More control. More regulation. More oversight.  Politicians and bureaucrats need more power.

Conveniently, the public believes it was greedy bankers and ‘unfettered capitalism’ that brought us down. But cheap credit through state fiat money and the systematic subsidization of the housing market are not features of the free market but of politics. The present mess is the result of decades of institutionalized monetary debasement and the accumulation of public debt. These policies have left us with bankrupt welfare states and overstretched banks, yet none of this has diminished the enthusiasm of politicians and bureaucrats to give us more of their medicine.

G7 Finance Ministers, anno 2008

G7 Finance Ministers, anno 2008 (Photo: IMF)

Let’s not forget that it was politicians and their central bankers, with the intellectual support of ambitious but misguided economists, who got rid of the gold standard. They considered the gold standard an inconvenient monetary straitjacket that was best replaced with a system of limitless fiat money under central bank control. Limitless money allowed unrestricted bank credit creation and state deficit spending. Once that system was in place, it was politicians who accumulated all that public debt and issued the deluge of unfunded and unkeepable promises that pit large sections of society against one another. And it is the central bankers who happily funded this gigantic debt bubble for decades with cheap credit.

IMF headquarters

Headquarters of the IMF

After 40 years of fiat money the world is in a deep and deepening financial crisis. Excess levels of debt, weak and overstretched banks and distorted asset markets – all of this marks the inevitable endgame of a system based on persistent monetary debasement. But politicians and central bankers are merrily undeterred. “Nothing that cannot be papered over with more paper money!”

Authoritarianism needs ever more authorities

So the problem is not with the policy establishment but with us, the masses. We need to be controlled better. Mr. Martin Wheatley, inaugural head of the UK’s new Financial Conduct Authority, told the Financial Times last week that his agency will “step into the footprints of investors – who cannot be counted on making rational choices.” Apparently, we, the consumers and savers, cannot be trusted with our own money. We need someone to tell us what we should or should not buy. But don’t worry. Mr. Wheatley assures us that his interventions into our financial affairs are based on the latest insights of science, namely the latest research in “behavioural economics.”

Part and parcel of this trend is the global fight against cash. Authorities want to monitor and record ALL your transactions. They don’t want you to use cash. Ever more countries restrict the amount of cash you can take across borders (noticed the signs at airports?), and in Italy and Spain, proposals are being discussed to limit the amount of cash citizens can use for individual transactions. “Cash has been a problem for a long time” the UK’s top taxman, Dave Hartnett, told The Daily Telegraph last week. Hartnett wants the citizenry to stop giving cash to their cleaners, gardeners, and to small tradesmen and other potential tax cheats and economic criminals so that they can no longer avoid paying taxes. Hartnett’s vision of Britain is a society of snoops and denunciators. “Households have a duty to ensure that other people do not evade paying their share of tax. The people who are worried about it should use our whistle-blowing line to tell us. We are getting better and better at finding people who receive cash.” Nice touch. A tinge of the former GDR’s Stasi culture for the British way of life?

The beauty of a big state is apparent to Mr. Hartnett: “Tax provides the funding to run the country.” Really? No, I don’t think so. It is rather Mr. Wheatley’s irrational savers and Mr. Hartnett’s tax-avoiding cleaners, gardeners and shopkeepers who are running whatever is still functioning in this country, the productive, independent middle class, who are able to and do look after themselves and their children, but who are also forced to fund the largely parasitic class of self-deluded authoritarians with their wasteful government projects.

Decent citizens don’t use cash. Cash is used by tax-cheats, terrorists, drug-dealers and child pornographers. Once this is established it will be a short step to severely restricting or even banning the withdrawal of cash from bank accounts. As all banks will soon anyway be mere branches of the ever-expanding central bank, which prints the money to keep the nominally private banks alive, all transactions will then be just electronic bookkeeping adjustments at the state central bank. All financial transactions will then be entirely transparent to the authorities. “Irrational” behaviour can be identified early and – eliminated.

Whatever you may think of Julian Assange’s Wikileaks, it is deeply troubling how quickly and easily this organization was crippled by Visa and Mastercard cutting it off from its donors. This gives you a taste for where we are going.

Fiat money and central banking are incompatible with free banking, with a system in which banks are independent capitalist enterprises. But more than that, fiat money and central banking are incompatible with capitalism and a free society. Central banking is central planning.

Hey, who is boss?

The bureaucracy is annoyed. The public is not giving it enough credit for its excellent management of the economy. The public is still pessimistic and concerned about banks and the overall direction of the equity market. Okay. So the government just stops them from acting on that pessimism. Show them who is boss:

In France, Spain and Belgium the government has ruled that shares of financial companies cannot be shorted. In Italy you are banned from shorting any stocks. Shorts on stock indices are banned in Italy, France, Belgium and Spain. Is this arbitrary? Of course it is. But the real measure of power is if you can use it arbitrarily. Make it clear to people what you, the government, likes or dislikes. Then you ban what you don’t like.

Mises in his library

Ludwig von Mises; photo by

Government is not voluntary association, contractual cooperation and trade. “Government is essentially the negation of liberty” (Ludwig von Mises). “Everything a government does rests on the use of force. No law actually is a law unless it is backed by the threat of force.” (George Reisman). And a government that is digging itself an every deeper economic hole will, in its growing desperation, apply force ever more readily. Count on it.

But what does the sovereign do, the democratic masses? Well, they obey. Like obedient sheep they stand patiently in line at airports in the UK, the USA, and elsewhere, calmly watching their six-year olds being padded down by security personnel. And they happily pay their Starbucks Coffee and the pack of cigarettes (as long as we are still allowed to smoke somewhere) at Tescos with their debit cards, or buy everything on the internet, leaving for whatever they do a perfect paper trail, a seamless record kept forever. “It is so convenient. And I have nothing to hide.”

And, naturally: “the government is here to help, so why not cooperate with the government? After all it is still a democratic state.” Every four to five years each of us has an opportunity to cast a vote of infinitesimally small importance to decide which of two gangs will get almost unlimited power over the ever growing state apparatus, and this, it seems, is to many sufficient compensation for handing over control of their lives and property to others. Stimmviehvolk is how an incredibly prescient Friedrich Nietzsche described them more than a hundred years ago: voting cattle.

Prosperity through money printing

Ben Bernanke

Ben Bernanke (Photo by U.S. Federal Reserve)

The persistent debasement of money in the modern state fiat money system is an obstacle to the smooth operation of the market, the production of wealth and the growth in prosperity. It keeps the middle class in bondage as its efforts to save and gain financial independence are constantly undermined by the official policy of inflationism. But the central planners and central bankers and their apologists among journalists and economists tell us that it is exactly the other way round: “Prosperity through monetary debasement” is Big Brother’s slogan, and he has spokespeople with outstanding academic credentials to explain this absurdity to the masses. In November 2010, MIT and Princeton man Ben Bernanke, the U.S. government’s money-printer-in-chief, wrote this in the Washington Post when explaining to the less educated why creating $600 billion out of thin air and messaging yields on government debt down was a clever policy:

“Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Well, that was 14 months ago. As it turns out, manipulating the economy by artificially lowering rates (lowering rates not by saving but by simply printing money) has not started a virtuous circle. Such manipulations come with nasty unintended consequences, and after a few decades of such a policy the accumulated unintended consequences far outweigh whatever short -lived growth blip money debasement may have manufactured otherwise. None of this has anything to do with healthy growth and a functioning free market economy.

But it is important that those in positions of authority do not admit that they are clueless. They never make mistakes. Their policy is never wrong. They simply need to do more of the same – and then even more. As I write this, the Fed is, of course, preparing another round of quantitative easing, and so is the Bank of England. And the ‘economists’ on Wall Street and the City of London cheer them on.

The debasement of paper money certainly continues.



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  1. Lizzy says

    Great article and a reason why everyone should study history. One comment and a question…
    1. High taxation fuels the cash economy and there is little government can do because neither party has an incentive to admit to it. I have seen this living in the UK and France. It is common in France to buy a house for a low stated price, then in the presence of the attorney, hand over an envelope of cash to make up the real price but minimize capital gain to the seller. There is a phrase for it – sous la table – that is, under the table.
    2. Second, what do investors do? Gold is an option but what if you want an on-going rate of return/dividend. My answer has been rental property.

    • says

      Lizzy, as to your question. It is a difficult one. I would say that in a depression//currency catastrophe he wins who loses least. Wealth preservation is the number one goal. Gold and to some degree silver — these are my assets of choice, although their role is mainly preservation of purchasing power. I am skeptical as to rental property. Here is a new meaning to ‘location, location, location’: Where do you want to own it? All these states are going bust. A lot of private wealth is presently in real estate. For the state, this is low-hanging fruit: The state will tax it – look at Greece. Also, will you have tenants when the crisis gets worse? Can you adjust rents as quickly as inflation rises? Would the state stop you from adjusting your rents and ‘exploit those poor tenants’ in an inflationary environment? — I don’t think I would be comfortable owning rental property anywhere in socialist Europe but I could be wrong.

  2. says

    Well put.

    I predict it will not be long until the following become criminal offences:

    1. Paying more than a certain amount in cash for a transaction (initially perhaps £50,000 but the figure will not be index linked);

    2. Paying cash if there are grounds to believe that the recipient will not pay any tax due in respect of the transaction;

    3. Employing an illegal immigrant.

    Indeed 2. is arguably already an offence under existing Money Laundering Regulations. Although those regulations were brought in for the ostensible purpose of catching the proceeds of crime, they are scandalously broad and vague in extent.


    • KevinR says

      David, £50,000? Try a lot less.
      In the UK it is already not possible to buy a new car for cash.
      Money-laundering laws in Britain have virtually outlawed the
      use of cash for very many transactions.
      If Britain follows Italy, I suspect the upper limit for cash will
      become around £500. Eventually it’ll be zero and we’ll all be
      forced to use electronic debit cards for tracking purposes.

  3. Sam Buker says

    Spot on post, Detlev, as usual. You paint the problem with rapid strokes, always starting from the true “fiat” root of the matter. Absolutely agree with you about the “cash” situation. Most sheeple can be tricked into thinking the elimination of cash will be for their “convenience” and ease.

  4. Joe coghlan says

    Detlev I think that you might well go down as one of the great Austrian thinkers; certainly of this generation. I’ve read your book and this blog regularly. The way that you take the thinking of the great libertarians and clearly apply it to our current situation has completely changed my thinking on political economy.

    Unfortunately you probably won’t receive the widespread recognition that you deserve any time soon. The establishment and those in its pockets will for a long time shun you as a radical ( as Andrew marr described you). Maybe when the entire system falls to pieces you’ll be recognised. However my deep fear is that they will find another way to suggest that the state is the answer and that if we had only done things slightly differently we’d all be just grand.

  5. says

    David, in the UK it is very illegal to employ an illegal immigrant. We small employers are expected to be 24/7 internal immigration policemen, ever since the John major government ordered it !

    A brilliant article, Detlev. However, I know the Spaniards will simply ignore any limits on cash transactions – ever heard of ‘B’ money ? It stops Spaniards starving.

  6. says

    [Apologies to Detlev for hijacking the thread]

    “David, in the UK it is very illegal to employ an illegal immigrant. We small employers are expected to be 24/7 internal immigration policemen, ever since the John major government ordered it !”

    You are quite right. It is an outrage really. The only saving grace is that although an employer is already automatically liable for civil penalties if he employs an illegal immigrant (irrespective of whether the employer was aware that the employee was an illegal immigrant), a criminal offfence is only committed if the employer has actual knowledge that the employee is an illegal immigrant. So ignorance remains a defence to any criminal charge (though not to a civil penalty). However, I would not be surprised if the criminal offence is changed in future to remove the requirement of knowledge. This has already happened under EU law as regards the employment of Romanians and Bulgarians who lack the relevant authorisation documents.

  7. vance says

    What the system is after is not ‘money’- ‘money’ is their worthless paper/electronic scrip, rather they are after your equity. Equity in labour, your business, your house, even your pension, even your credit card limit.
    The system prints the empty fiduciary media units/dollars/euros, (like imagine glass soft drink bottles which cost 6 cents to make) then waits for you to fill the empty bottles with something valuable like equity (Like a bottle of soft drink with product in it is now worth 300 cents). An ATM will give you worthless 3 cent notes- you have to ‘pay it back’ with sweat equity.
    This all has to be paid for eventually, but to harvest the scam ruthlessly and effectively you need a Vesuvius of legislation and the rank growth of bureaucratic wickedness.
    As the Bible says, if people are not lovers of truth God will send more delusions. (2 Thess)
    We’re in this mess because basically we didn’t object to it.

  8. Christopher says

    The point is that we are all parasites on the state because we have to be. I have nothing to sell and so must live off the system as well as I can. Some skilled tradesmen have talents that they can sell for cash, like builders and carpenters. But I have nothing.
    Fiat money may be unreal money but it pays for me to eat.
    Would Detlev schlicter have us all starve.

    • says

      Christopher, what I want is entirely immaterial. This is not about me. Ask yourself what is going to happen. If you rely on the state and the state relies on the printing of money to support you, then you rely on a scam. All I am doing is telling you why this scam will unravel. It is already beyond repair. It is already unraveling. Whether you like it or not, the money you receive will buy you less and less over time. The state that you rely on is going broke. Either you won’t get paid because the state is bust, or you will get paid in paper tickets of ever diminishing value. Probably, a combination of both is going to happen. Reality is not optional. Change your strategy! (By the way, I don’t know you but the idea that you have no talents and nothing to contribute, I frankly cannot believe.)

  9. wesley mouch says

    Great article as ususual, Detlev. I was the one who gave Jim Puplava a heads up about your work. Good interview there. I was wondering if you would comment on the role that fractional reserve banking plays in our current predicament in addition to the problems with fiat money.

    • says

      Wesley, many thanks for pointing Jim Puplava in my direction. I really enjoyed the interview with him. He gave me a lot of time to make my points. Much more than I normally get in radio interviews. And he certainly knew my book very well. His questions were excellent.
      As to fractional-reserve banking (FRB), I agree with most Austrians that it is a banking practice that is disruptive for the broader economy. Even when money was still essentially gold, FRB introduced an element of ‘elasticity’ into monetary affairs, and as I explain in my book, it is the elasticity of the money supply that makes our monetary system unstable and unsustainable. Inelastic money is good money for a functioning market, elastic money is not needed, suboptimal and disruptive. Having said this, I do not think, as some Austrians do, that FRB is fraudulent or that it would simply not exist in an entirely free market. Furthermore, I want the state completely out of money. So I would not even give the state the right to ban FRB. It is probably correct when people say that some form of FRB will always exist. But in a system in which the market chooses what is money (and I think that an entirely free market would most likely go again for gold!) and in which the state plays absolutely NO role whatsoever in monetary affairs (no central bank, no legal tender laws, no lender of last resort, no state deposit insurance), FRB would be relatively contained. Would it cause cycles? Most likely, yes, but not on the scale that our system of perfectly elastic money under central bank control does. If you ask me what I would choose as the one reform that was needed to get us back to sound and functioning money, I would say it is this: Get the state out of money and banking completely. It would not be, have the government reintroduce and ‘manage’ a gold standard, and it would not be, have the state ban FRB.

      • Vance says

        Detlev, may I ask why you think FRB is not fraudulent? Also, whether money was State regulated or purely energized and regulated by market forces on a gold standard, how would one verify the gold was actually there to back any inelastic money? Who would guarantee the vaults contained the gold? The discredited carpet baggers who got us into this mess?
        Isn’t the need for inelastic money linked to other needs such as a return to a rule of law, justice, a limited State where people have a real say in what happens to them?

  10. Peter says

    Detlev, I just wathced your interview on Sky News with Jeff Randal. Excellent 7 minutes to sum up how the current fiat system is operating. I’m eagerly waiting to receive my copy of Paper Money Collapse. Keep up the great work!

    However, even my common sence is saying that you are right, I’m somewhat puzzled how many Ph.D level “famous” names are preaching how the money printing is actually the only thing that can save us and austerity (read living by the means) is the worst thing that governments could do.
    For example these two posts from project syndicate (I very much appreciate if you have time to read them):

    This makes me puzzled. Why all these “intelligent” academics are always praising the loose money system and the worst thing that can happen us is (for example) deflation. My intelligence is saying totally opposite, sharing your views. However, could you reveal your thoughs about this issue, this very much puzzles me. What is motivating these academic to think this way? Are they smarter than me and that’s why I can’t understand the virtue of money priting..?

    • says

      Peter, I am fairly busy at the moment. I will see if I have some time later on to look at these links. However, I guess I know what they say. Skidelsky (Lord Skidelsky) is an admirer of Keynes and his biographer. Let me give you a short answer: You are right, they are wrong! Trust your own reason! And by the way, two or three generations ago, every established economist would have shaken his head in disbelief at such nonsense. Mainstream economics has been running up an intellectual cul-de-sac for the past 70 years – and we are all paying the price! These economists have been talking this rubbish all their lives. Don’t expect them to change their tune now. When the crisis has played out, these guys will be forgotten.

      • Joe coghlan says

        If look at basic psychology, conformation bias plays a part. Once you’ve learned something for 7 years, especially using advanced mathematical tools and models you are unlikely to look for reasons your entire philosophy is wrong, especially when evidence points in that direction. You are more likely to spend more time researching and developing mathematical analysis tools to prove that you are correct, all the while taking yourself further away from the reality of the situation.

        You will read many articles, in the economist especially, that sound technically plausible in support of paper money and further money printing. On closer inspection these will miss the point or just ignore the true effects of credit expansion.

  11. David says

    Detlev, greatly enjoyed your book and insights. What I’m interested in is how you see this playing out. Essentially the superset of most likely outcomes and their triggers. Isn’t it simply either massive inflation and currency destruction or very large interest rate rises as investors start to realise that the debt they’re owed is about to be diluted by inflation. But what will trigger this realisation? I would have thought that the only way out of this is for all/most countries with huge debt to grow at large rates. Has anyone attempted to calculate what sort of growth rates are required to keep this balancing act going, and whether this is realistic? And if not realistic shouldn’t the general level of interest rate being demanded by holders of debt be going up rather than just for the Euro ‘peripheral’ states (and even their interest rates are going down due to the ECB’s money-printing).

    Part of the reason I ask these questions is that while intuitively I agree with you and my pure intuition says printing money is not real so how can it ever solve a real problem, but at the same time markets are rising and there are shoots of optimism in the USA. Is this pure delusion and what are the most likely triggers to start the endgame?

    • says

      The system is on thin ice. What will trigger the collapse and what the tipping points are going to be, nobody knows. I still stick with the general and rough outline of events that I provided in the book. Via the website I hope to give an ad hoc assessment of current developments – a sort-of commentary in real time as things unravel. Making any detailed predictions now is impossible. The future is unknowable. However, the possible options for this system are now severely limited in my view. That economies will simply grow out of these problems is completely unrealistic. Policy is actively obstructing the dissolution of imbalances. Policy is, for example, desperately postponing the liquidation of unsustainable debt (via default), and policy is in fact adding new imbalances (such as more public debt) every day. Please see my latest blog: “Aggregate nonsense”. There are, of course, always pockets of functioning capitalism in the world. That is what keeps us alive. But that the private sector will make all this mess generated by governments and central banks go away, that private sector growth will be so strong as to eradicate all the policy errors, and smoothly make everything good and forgiven again — sorry, I cannot see that.
      Softish growth or outright recession will continue. Central banks will continue to print. QE3, QE4,….QEn. The public sector will run large deficits. This year, next year, the following year…. The game changes when government bonds become a hot potato. What happened to Greece and Portugal will happen to others eventually. When this hits the big countries, the system is in trouble. It will then become clear that the central banks are not only underwriting the entire fractional-reserve banking sector (which is what they are already doing today) but also the state spending in the major countries. Then fiat money becomes a hot potato.
      As to occasional bouts of optimism, those come and go but don’t last. Of course, when you pump a lot of money into financial markets some things are bound to go up. Big deal. If some people want to base their optimism on it, be my guest. It’s foolish.

  12. Phil Haslam says

    This is all so late . . anyone with half an eye open could have seen this inevitability by 2008. Nothhing more than a heavy bandage to wipe over the complete corruption of the so called ‘state’. We’re completely blind to the real motives that lay well behind the vail of secrecy that’s as much a part of our supposed freedom as anything. Since 2008 I’ve been shouting from a dumb place for people to wake up. Intellectuals and graduates are just fodder created by the system with no real understanding of how to critisize and see through the milaize because the system itself only allows for a level of critism that’s covered in the curricullum. Anything beyond the systems’s own allowance doesn’t get into the library and definately doesn’t feature in an exam paper. Fear runs the day where jobs, security make sure you fit in. Why do you think protests are now widespread. Yes . . all true but even this won’t get the publicity it deserves because at the centre of disinformation lies a media totally controlled by the market place and a state system that dovetails right into it’s crotch. Media is the key but no-one sees it . . no-one does a thing and it’s all so obvious. You could change everything with 15 minutes of decent debate on public tv but it won’t happen. The answer . . a completely new system that by passes the existing regime which is sown up no matter who or what you vote for. Centre yourself and those who know and fight to create a new realm. Wait for the response and invite anyone to talk openly, transparently. Intent soon becomes obvious in a public environment. At the moment . . every intent is hidden behind an alice in wonderland politic of the imagination that’s rife with corruption and based on nothing more than a lie. It has been for a century but only now is it possible to see it for what it is. That’s far too late to even bother changing it.

  13. says

    Great article indeed!

    Personally I think the only way for sheeple to understand how bad the situation on this planet has become, is for them to starve. Yes, that’s harsh, yes, that’s nasty but it’s the truth. How else would they get off their sorry bums? Especially in Germany sheeple can’t do any thinking anymore (based on historical facts, I actually wonder if they ever could!). It’s sad to say that it IS POSSIBLE for history to entirely repeat itself tomorrow. Have the sheeple learned anything from history? The Roman Empire? The German Empire? The French Empire … ? NO. Look at the hategame that has started between Greece and Germany. See how easy it actually is to put hate in sheeple’s minds? How difficult do you think would it be to come up with “solutions” such as Germany had during the 3rd Reich? Sheeple always need a scapegoat, they don’t want to hear that in reality THEY ARE RESPONSIBLE and NOONE ELSE.
    So therefore at this point, we can only hope that by the end of March the ENTIRE system collapses and people actually start seeing how bad off they actually are. And hopefully we will end up with enough PEOPLE to build something new.

    Anyway that is just my PERSONAL opinion, what do you think? Is there any realistic hope? If yes what? We certainly can’t count on the sheeple…

    Another question: What do you think of solutions such as the ones offered by the Zeitgeist Movement and the other groups advocating a Ressource Based Economy? I would be glad to hear your opinion on that!

    P.S. Reading your blog is always interesting! Thanks for the articles.


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