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Why 95% of Traders Fail

The Moloch State, When Government Safety Nets Break

Politics / US Politics Apr 10, 2012 - 03:37 AM GMT

By: Gary_North

Politics

Best Financial Markets Analysis ArticleThe West's governments are going to default, one way or another. Politicians cannot bring themselves to stop spending money the governments do not have.

The deficits of the major Western governments are now so great as to be irreversible. The governments must now borrow money to be used to pay interest on money already borrowed. In the housing market, this is called a backward-walking mortgage. It invariably spells default. The subprime mortgages were mostly of this type.


The West's largest governments are therefore subprime borrowers.

Politicians no longer speak about politically viable plans to call a halt to these deficits. They speak as though revenues will come from some unknown sources. They talk of reducing the debt-to-GDP ratios in the distant future. This is subprime mortgage thinking. It always leads to foreclosure and bankruptcy. But this fact did not stop lenders, 2002-2007. It does not stop them today. Lenders lend 90-day money to the U.S. Treasury for eight one-hundredths of a percent. "What could go wrong?" Answer: plenty.

THE ETHICS OF THE WELFARE STATE

The welfare state is defended ethically as a system of safety nets. These safety nets are defended as ethically necessary for a good society, meaning ethically good. Intellectuals see business profits as legitimate mainly because profits provide a tax base for funding the welfare state.

These safety nets require constant and ever-increasing funding. They are going to lose this funding. Why? Because of national government bankruptcies.

There is no question that the deficits will produce a series of fiscal crises. These crises will initially be covered up by central bank inflation, but the end result of that policy will either be hyperinflation, which is a form of concealed default, or stable money, which will be followed by open default. There will be a default. The political fall-out of this default will change the nature of Western politics.

The welfare state is going to self-destruct. It is highly unlikely that we will see the complete destruction of the welfare state in any nation, but it will contract on a scale not seen since the fall of the Roman Empire. That is because we have not seen a welfare state as comprehensive as Rome's until modern times.

The bigger they are, the harder they fall.

I know of no studies of the effects of the fall of Rome on the masses of welfare recipients. It took centuries for the system to decline. We know that the central state in 400 A.D. could no longer support the welfare clients that it supported with bread and circuses in the days of Nero. Manorialism steadily replaced the central government in the Western Empire. But for centuries, welfare clients lived and died as clients.

Then the welfare state died. It did not revive until the twentieth century.

THE GREAT DEFAULT

What will make the coming Great Default different from Rome's will be the speed of its arrival and the magnitude of the contraction.

Birth rates have fallen everywhere outside the United States. The number of aged retirees in every Western nation, including Japan, is increasing relentlessly. The number of children born is falling. The end is clear. So is the politics of kick the can.

Unlike Rome, the West's intellectuals have defended the spread of the welfare state by means of a system of ethics. It rests on a variation of the Mosaic commandment against theft: "Thou shalt not steal, except by majority vote." So widespread has this revised commandment been that the electorates in every Western nation will not tolerate its rejection. Yet the economics of the deficits points to the operational failure of the welfare system.

The defenders of the welfare state will then have to explain this widespread collapse of the programs. How did such an ethically superior system fail? How did it lead millions of welfare clients to trust a self-destructive state? How did it mislead so many addicts to government handouts? How did it lead them into a ditch, devoid of skills to compete in the post-default world?

Answer: because the welfare state was ethically corrupt before it was fiscally corrupt. It is based on theft by majority vote.

We have seen what happens to the false messiahs of the messianic state. Western Marxists had a solid though small market for their fat books until the Soviet Union went bankrupt in the late 1980s and shut down in December 1991. Overnight, Marxism lost its academic defenders. They became as invisible as Baghdad Bob did on the day American troops marched in.

The Marxist system had been seen by Western intellectuals as intellectually viable, one of several legitimate perspectives. Then, overnight, it was regarded as a total failure, and – even worse for intellectuals – a fool's quest, a bad joke. Marxism was rejected in theory because of its visible loss of power. The ethics of Western Marxism – in contrast to Marx's rejection of ethics – had always been an illusion. Marxism had always been what Marx had said it was: a matter of power. Defenders who steadfastly had defended Marxism in theory if not in actual practice were no longer willing to do in public. They did not want to be identified with historical losers – losers of power.

If Marxism had been ethically based, it would not have faded overnight just because its power base collapsed. The true believers would have stayed the course. But Marxism was never about ethics. It was always about power.

So is the welfare state.

The defenders of the welfare state have come in the name of a higher ethics. When the system goes belly-up fiscally, these defenders will face the same sort of existential crisis that the Marxists faced in 1992.

They ought to be able to see that the welfare state is a fraud, a delusion, and an ethical monstrosity: charity with guns. They ought to be able to see that theft is theft, with or without majority votes. But they don't.

So, let us look at something more practical. Let us look at a sign: "Do not feed the dolphins."

"DO NOT FEED THE DOLPHINS"

It is illegal to feed dolphins in the United States. Federal law prohibits this. I do not recall anything in the Constitution authorizing federal laws against feeding dolphins, but I'll let that pass. The fact is, people ignore the law. They love to feed dolphins. In Tampa Bay, tourists are big law-breakers in this regard.

Why shouldn't people be allowed to feed dolphins? Because, marine biologists say, giving dolphins free food addicts them to handouts. People are turning dolphins into welfare bums.

The federal government's fish police see the threat. Handouts destroy the ability of dolphins, who are very smart fish (mammals), to survive on their own. Mothers do not teach survival skills to their offspring. They teach them to live off welfare.

Tourists are creating inter-generational welfare dependence. In a 2009 article in the "Tampa Bay Times," we read this from a biologist employed by the National Marine Fisheries Service. "We are able to document lineage, from grandmother to mother to calf, all following fishing boats and taking thrown-back fish."

Marine biologists, who themselves are being fed by the federal government, understand the threat to ecology posed by welfare economics. It is a bad idea, they say, to addict smart fish to handouts. But the logic of this position is not applied to human beings, who are far more clever than dolphins. What is gospel at the National Marine Fishing Service is anathema at the Department of Health and Human Services. What the government's experts on fish see as a threat to the fish, the government's experts on human beings do not see as a threat to people.

What is the threat? Creating permanent dependence.

LIFETIME DEPENDENCE

Every system of welfare runs the risk of addicting the recipients to a system of handouts. This is why there have always been restraints to this system of outside care and feeding of dependents. The family has always been the main welfare institution. Parents supply children with handouts. In-laws supply in-laws with handouts. We expect those in charge of this system of wealth redistribution to place limits on it. Why? Because they own the resources. Every asset that goes to one dependent cannot be used by the decision-maker to fund something else.

Churches have also been sources of welfare. The Apostle Paul made it clear that such welfare has limits. In a deservedly famous passage, he wrote: "For even when we were with you, this we commanded you, that if any would not work, neither should he eat" (2 Thessalonians 3:10). This could be called workfare. The statement provides a model for all welfare programs dealing with able-bodied adults.

Paul used his own life as an example. He did not accept funding from churches. He was a tentmaker (Acts 18:3). He refused financial support because he knew this would compromise his independence.

Neither did we eat any man's bread for nought; but wrought with labour and travail night and day, that we might not be chargeable to any of you: Not because we have not power, but to make ourselves an ensample unto you to follow us. For even when we were with you, this we commanded you, that if any would not work, neither should he eat. For we hear that there are some which walk among you disorderly, working not at all, but are busybodies. Now them that are such we command and exhort by our Lord Jesus Christ, that with quietness they work, and eat their own bread (2 Thessalonians 3:8-12)

Churches, like families, have limited funds. The deacons are to exercise good judgment in using church funds as handouts. Yet few modern churches have formal training for deacons to give them the judgment they need.

I used to belong to an inner-city church in Memphis. The church's secretary had grown up in the neighborhood. She knew the welfare bums. She would warn the pastor, who grew up in the Bahamas, when one of them showed up, looking for a handout. She knew the distinction between the deserving poor and the undeserving poor.

Alcoholics Anonymous is famous for its 12-step program. It has become the model for other organizations devoted to reducing addiction and promoting deliverance. I wish that all people who have become dependent on handouts of any kind would recite these at weekly meetings.

  1. We admitted we were powerless over welfare addiction – that our lives had become unmanageable.
  2. Came to believe that a Power greater than ourselves could restore us to sanity.
  3. Made a decision to turn our will and our lives over to the care of God as we understood Him.
  4. Made a searching and fearless moral inventory of ourselves.
  5. Admitted to God, to ourselves and to another human being the exact nature of our wrongs.
  6. Were entirely ready to have God remove all these defects of character.
  7. Humbly asked Him to remove our shortcomings.
  8. Made a list of all persons we had harmed, and became willing to make amends to them all.
  9. Made direct amends to such people wherever possible, except when to do so would injure them or others.
  10. Continued to take personal inventory and when we were wrong promptly admitted it.
  11. Sought through prayer and meditation to improve our conscious contact with God as we understood Him, praying only for knowledge of His will for us and the power to carry that out.
  12. Having had a spiritual awakening as the result of these steps, we tried to carry this message to welfare dependents and to practice these principles in all our affairs.

The reason why this confession of faith will never be implemented is that we live in the era of the welfare state. The state encourages dependence. It uses funds confiscated from some voters to fund the lifestyles of other voters.

About half of Americans receive money from the U.S. government. (http://bit.ly/HookedOnGovernment). Then there are the tens of millions who receive money from state and local governments. When we count the tax-supported schools as welfare agencies, we see that welfare handouts are the very foundation of modern politics. The theologian R. J. Rushdoony wrote a book on this: Politics of Guilt and Pity." It's free.

THE MESSIANIC STATE

Why should this be the case? Because, as Rushdoony argued, the modern state is messianic. Its defenders present it as the healing state, the savior state. It has replaced God in the thinking of modern secular man.

A state that does not claim the ability to heal, the legal right to heal, and the moral responsibility to heal is a night-watchman state. It does not make comprehensive claims for delivering men, so it does not make comprehensive claims on the allegiance of men. It is limited government, precisely because it acknowledges that it cannot heal.

Rushdoony had another name for the messianic state: the Moloch state. In his Institutes of Biblical Law (1973), he wrote this.

While relatively little is known of Moloch, much more is known of the concept of divine kingship, the king as god, and the god as king, as the divine-human link between heaven and earth. The god-king represented man on a higher scale, man ascended, and the worship of such a god, i.e., of such a Baal, was the assertion of the continuity of heaven and earth. It was the belief that all being was one being, and the god therefore was an ascended man on that scale of being. The power manifested in the political order was thus a manifestation or apprehension and seizure of divine power. It represented the triumph of a man and of his people. Moloch worship was thus a political religion. . . . Moloch worship was thus state worship. The state was the true and ultimate order, and religion was a department of the state. The state claimed total jurisdiction over man; it was therefore entitled to total sacrifice (p. 32).

The defenders of the messianic state have been successful for a century in persuading the voters that the state is benign in both its intentions and its policies. They have made the case for a healing state indirectly. They present the case for the state as the provider of tax-funded safety nets. One special-interest group at a time, the politicians and their court prophets, meaning the intelligentsia, have extended the safety nets.

SAFETY NETS AS SNARES

Tax-funded safety nets are in fact political snares. These safety are not deliberately designed to create dependence, any more than Florida tourists deliberately plan to addict dolphins to handouts, but in both cases, this is the effect. The welfare establishments are like zoos. The animals are well cared for. They are well fed. They are given medical care. What they are not given is liberty.

Welfare clients are smarter than dolphins. They learn how to work the system. Nancy Pelosi's daughter has produced a documentary on professional welfare bums. They were amazingly forthright with her about the nature of their ability to work the system.

If they see that they have become ensnared in a system that makes them dependent on the system, they do not show it. They seem to regard their dependence as a badge of honor, proof of their ability to milk the system. They do not see themselves as people wrapped in snares.

CONCLUSION

I end with the words of the newspaper story on feeding the dolphins.

Federal law banned wild dolphin feeding in the early 1990s, but by then the St. Andrew Bay bunch was hooked. They continue to approach boats three and four at a time. And as YouTube videos attest, people are still happy to provide dinner. "Grab me a minnow, Patty! Feed 'em!" yells a man in one video. "They aren't going anywhere," another man responds. "They'll be here until we stop feeding them."

What is true of formerly independent dolphins is equally true of formerly independent welfare recipients. Nobody seems to care.

The tourists will keep coming to Florida. Washington's checks won't.

"When the bough breaks, the cradle will fall. And down will come baby, cradle and all."

Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

http://www.lewrockwell.com

© 2012 Copyright Gary North / LewRockwell.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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