The behavioral fallout of junk money

Back in 2006, with the housing debacle and our current recession/depression/whatever only a cloud no bigger than a baby's hand, a financial commentator named Eric Englund wrote a psychologically astute article about the moral and psychological wages of central banks playing games with national currencies. Titled "Central Banking and the Depreciation of Self-Worth," it was recently republished at Financial Sense.

Right behind owning one’s own body, the second most personal asset an individual owns is the fruit of one’s own labor – with such fruit typically taking the form of money; which is exchanged for food, clothing, transportation, shelter, etc. Accordingly, with the common yardstick here being money, a person’s self-worth, in part, can be measured by earnings power, accumulated savings, and personal net worth.

Let's pause to acknowledge that a person's moral standing can't be measured in money, and that saints are indifferent to their prosperity or lack of it as a criterion of self-worth. Just the same, for most people, their image of themselves is dyed by wealth and poverty. It's human nature, even if it would be better overcome or at least subdued.

With central banks, however, continuously perpetrating the immoral and fraudulent act of fiat inflation, money perniciously loses value over time. When such an important and profoundly intimate self-measuring tool (money) loses its stability, people tend to lose their moral bearings and social decay ensues. And, correspondingly, state power increases – for a while at least – as the populace becomes evermore dependent on state bureaucrats for guidance. ...

For a state to gain in power, it must shift its citizens’ chief allegiance from the family to the state. As aided by the Federal Reserve and America’s public schools, Uncle Sam is winning this power struggle for loyalty – for now. When mothers and fathers are economically and financially illiterate – thanks to public schools – then the Federal Reserve’s siren-song of easy credit becomes irresistible. Profligate parents do not serve as economic and moral anchors for the family. Instead, they reach a stage of permanent adolescence in which they are more likely to teach their children to play a video game than to teach children how to read, write, do basic math, and lead a virtuous life. 

As a quick sidebar, you can even detect those "adults" who have reached permanent adolescence by their driving habits – such individuals drive as if they are in a NASCAR race or playing an auto-racing video game. In a household "run" by adolescent-adults, parents redefine their roles as that of a child’s best friend. A house, additionally, is no longer a home but more of a hangout. With family bonds weakening, and state power increasing, it is no wonder that the Homeland Security Act, the Patriot Act, and NSA snooping have only received a collective shrug of the shoulders.

Which came first, the adolescent-adult or the government fiscal manipulation? As with most such questions, neither really; it's a self-reinforcing feedback loop. The more that alleged grownups act like teenagers in the high school hallway, the greater the temptation for the Fed, legislators, and government agencies of all stripes to behave like the school principal. And the more they do, the more chronological adults slough off responsibility for themselves and their families. As long as it's legal -- or in some cases, as long as they can get away with what they want to do -- who cares? If it were wrong the government would stop it. If they mess up, the Great Father in Washington will make them whole.

Englund argues that bad money management at the highest levels of government affects sexual morality, citing Otto Friedrich's study of 1920s Germany. And when central bank fiddling of the economy bears its bad fruit, the results can be catastrophic not merely in some abstract sense but in destroying people's will to live. 

We are far enough away in time, and until recently were far enough away in spirit, from the 1929-1939 Depression that financiers jumping out of skyscrapers seemed like a quaint slice of history, like Cato slicing his wrist at the fall of the Roman republic. But there was nothing funny about it.

Historian William K. Klingaman conveys in his book, 1929: The Year of the Great Crash, that – as related to the stock market crash – asphyxiation by gas was the most common method of committing suicide, yet there was considerable variety. He states:

The wife of a Long Island broker shot herself in the heart; a utilities executive in Rochester, New York, shut himself in his bathroom and opened a wall jet of illuminating gas; a St. Louis broker swallowed poison; a Philadelphia financier shot himself in his athletic club; a divorcee in Allentown, Pennsylvania, closed the doors and windows of her home and turned on a gas oven. In Milwaukee, one gentleman who took his own life left a note that read, "My body should go to science, my soul to Andrew W. Mellon, and sympathy to my creditors."

While visiting New York, at the time of the great crash, Winston Churchill saw the broken body of a man who had jumped from a building and plunged fifteen stories to his death. Later, a notable suicide took place on Friday, November 8, 1929 when J.J. Riordan, president of the County Trust Company, took a pistol from a teller's cage at his bank, went to his home in downtown Manhattan, and shot himself.

So far, we can be thankful that the Whatever It Is we are experiencing hasn't led to many suicides. Perhaps that's only because our culture is less bound to moral codes than that of the '30s. Then again, we haven't yet arrived at the phase of demented "money printing" that is widely expected as the only way for the government to deal with a national debt that can never be paid off in "real" money.

History, clearly, has shown that money, a human construct in and of itself, has a powerful affect on the human mind. Hence, it logically follows that the central-bank–induced depreciation of the dollar – a fiat currency – goes hand in hand with the social decay we see all around us. We must learn from the German experience. To help reverse this decivilization process, we must abolish the Federal Reserve and establish a 100% gold standard – in effect, a counterrevolution. And then perhaps, once again, we will walk amongst a people who live by the Golden Rule.

When a nation runs on paper currency that is worth whatever the government says it's worth -- the definition of "fiat currency" -- it tends to distort all other values, perhaps devalue values themselves. Not just economies but people can only thrive when they are backed by more than the dictates of politicians.