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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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The Empire’s Dollar Debacle


Neo-cons often complain that the American people haven’t made any sacrifices as part of President Bush’s much-vaunted “war on terrorism.” For his part, President Bush likes to say that he opposes tax increases to fund his military adventures in Afghanistan and Iraq and the ever-growing expenditures of the military-industrial complex.

Both the neo-cons and President Bush are speaking falsely.

Take a look at what has happened to the dollar during the past 5 years, that is, during the time that President Bush embarked on his out-of-control federal spending spree. The dollar has plunged some 50 percent against the Euro. Why, it’s even plunged 50 percent against the Brazilian real, if you can believe that.

Now, some neo-cons would undoubtedly say that this is just one of those things that happen to countries from time to time. Like terrorism, they would say that the plunge in the value of the dollar is unrelated to the federal government’s policies.

They are wrong. Just as the federal government’s foreign policy is at the root of foreign anger and hatred toward our country, the federal government’s monetary policy is at the root of the dollar debacle. And it has been the monetary policy that has provided the money to fund the president’s imperial overseas policies.

Contrary to what the neo-cons might claim, the federal government is not an independent fountain of wealth. It primarily gets its money from taxation, borrowing, or by printing the money. When President Bush embarked on his massive, uncontrolled spending spree after 9/11, he had those three choices: raise taxes, borrow the money, or have the Federal Reserve just print the needed money.

Not surprisingly, the president chose the last two options, which enabled him to play the role of the anti-tax man. The federal borrowing crowded out the credit market, sucking massive amounts of savings into the federal imperial machine. The ongoing mortgage debacle, where credit dried up, was one consequence of this massive drain on capital. Another consequence is that the Chinese communists are now one of the federal government’s major creditors.

The third option has also been utilized. The government’s central bank, the Federal Reserve, has been printing money to finance the president’s spending spree. The beauty of this option, from the standpoint of the president, is that the average American has no idea that the federal government is behind the dollar debacle. He just thinks that prices are rising at the grocery store naturally. He does not see that rising prices are a necessary reflection of a constantly debasing currency.

Suppose a European vacation cost a family $10,000 five years ago. That same vacation today would cost $20,000. Double. That’s the cost of out-of-control federal spending. That’s the cost of empire.

And even if someone says, “Oh well, I didn’t want to go to Europe anyway,” he cannot escape the costs of the dollar debacle. Commodity prices have been rising across the board for the past five years. If you don’t believe me, just ask anyone who shops at the grocery store. That’s what happens when a currency is being debased by politicians and bureaucrats.

Do you see now why governments everywhere love being in charge of the money supply? It enables them to print money to their heart’s content, without having to risk the ire of the citizenry through tax increases, Do you see now the tremendous benefit, from the standpoint of politicians and bureaucrats, of having a central bank — a Federal Reserve System?

As Americans continue to reflect on the ongoing debacle in Iraq and Afghanistan, it is important to keep in mind that there is a way out — through the rejection of the neo-con vision of empire and intervention and the embrace of America’s founding principles of republic and nonintervention. As part of that reevaluation, Americans would be wise to reflect also on what the federal government has done to our money, not just in the past 5 years but also for the past several decades.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.