Much blood and sweat have been spent by mankind in the quest for a utopian world.
There’s no question that President Obama has a utopian vision. He’s always telling me how he can take my money and, with his infinite wisdom, build a better world.
Today I want to share my own vision for utopia, and I won’t take a penny of your hard-earned money to achieve it.
In the movie First Contact, Captain Jean-Luc Picard explains Federation economics when Lily Sloane asks him how much the USS Enterprise cost to build. Picard says, “The economics of the future is somewhat different. You see, money doesn’t exist in the 24th century… The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of humanity.”
The Bible teaches, “For the love of money is a root of all kinds of evils” (1 Timothy 6:10). To get rid of these evils, the powers-that-be in Star Trek just abolished money.
But such a thing isn’t possible in today’s society. You see, without money you can’t have prices or price discovery. Without prices or price discovery, resources are allocated in some type of redistributionist scheme created by a scholar or, worse yet, a tyrant. Think socialism and economic planning.
I abhor socialism. I imagine some nanny sitting in a gray, government office building telling me what to do. How to live. Kind of like the way Michael Bloomberg and Michelle Obama are currently nagging us to not eat fatty foods or drink sugary drinks.
When Michelle’s rear-end is smaller than my own, I promise to listen. In the meantime, please keep your opinions about my diet to yourself. (I wouldn’t say this if it wasn’t for her constant nagging and hypocritical lifestyle, because it just isn’t polite.)
The Value of Price Discovery
Price discovery allows us to judge two goods next to one another and decide which good we want to acquire. For example, to patch and repair the hole in my driveway it‘ll cost $600. It’ll also cost me about $600 to spend three days in Las Vegas next week attending the annual FreedomFest Conference. Because I know the prices, I can make better decisions for myself. In the Star Trek economy, I’d have no way of knowing how to compare these two desired goods.
But I’ll take it one step further. What if I want to both repair my driveway and attend FreedomFest. How can I do both? The answer is deflation.
We’re constantly hearing propaganda against deflation. I’m so tired of it. I just had to write this rebuttal.
Deflation is falling prices, and falling prices are good. They’re good for consumers, they’re good for savers and they’re good for a society. The only people hurt by deflation are bankers and those who borrow too much. They always want inflation so they can pay savers back with depreciated dollars.
So what causes falling prices? Development and growth. Just think about our own history. The two periods of the greatest growth in the United States were during the nineteenth century, from 1820 to 1850, and from 1865 to 1900. These two time periods are both connected with substantial deflation. During these periods, prices were sliced in half.
Fast-forward to today, and this is the same reason that the iPhone 4 costs about half of what it used to.
Now inflation on the other hand, is much worse than deflation. It robs wage earners and the poor. The primary cause of inflation is excess money printing. It’s also the primary reason for the growth of income inequalities. The rich have access to borrowed capital and get richer by borrowing money during inflation. The middle class sinks toward poverty as what money they have loses value.
When I think about deflation, I imagine how good I’d feel if I could both fix my driveway and attend FreedomFest for only $600. Instead, I live in a country with a target goal of at least 2% inflation. After 35 years of 2% inflation, my money would be worth about half of its original value.
Of course, if deflation is pronounced enough, prices and wages will converge at zero, and we’ll be living in Gene Rodenberry’s 24th century Star Trek world.
Prices will never reach zero, but if prices declined, we’d all have more goods and services for less money, and the worry and stress of life would dissipate.
Your eyes on the Hill,