Can you Support The Troops and Support The Federal Reserve?
In this blog I will attempt to show you that two commonly held American beliefs are actually completely incompatible. They stand in direct opposition to each other and can not be reconciled. This post is intended to help you question your own thought process so that you may come to a better understanding of the interrelationships of economics, liberty, monetary policy, and foreign policy. None of these things exist in a vacuum and, as I'm about to show you, some institutions harm people in other institutions.
"Support the Troops" even if you don't support the war is among the most widely held beliefs in America. Another widely held belief, often shared by the same people, is that the Federal Reserve is a necessary institution. Monetary policy and financial regulation must be conducted by a central authority. These two positions are actually in direct opposition to each other. The efforts of the Federal Reserve harm the very troops Americans "support."
Defining Americans' "Support the Troops" slogan
In order to engage this line of reasoning, we must first decide what Americans mean when they say "Support the Troops." To be honest, this is a gray area. I don't know what each individual really means when they say it. Do they support warfighters as a rule of thumb? Do they believe that the troops provide for their liberty, and so they must be taken care of? Do they believe that the troops are making great sacrifices? Or do they just say it because they would rather just repeat the slogan rather than face a backlash of criticism for appearing to not support the troops? I honestly can not say what each individual American believes. However, I must start with the basic premise that Americans "Support the Troops" and do not support any action that would bring harm to American troops through no fault of their own. This harm must include any negligence by thir superiors, any wrongful prosecution, undue economic hardships, or any violation of contract by the federal government. I think we can all agree on that these situations would be things Americans who support the troops would find unfavorable.
When a young person enters the military, they enter into a voluntary contract (assuming no draft is in place, which is a form of slavery and a wholly separate issue.) The contract is for a specific time limit. The pay is lower, on average, than their civilian counterparts, particularly among the officer corps. The difference, however, is made up in housing, medical, and educational benefits. These benefits can be quite extraordinary. The remaining equilibrium of recruiting is made up through the relentless pro-State propaganda that brings in a small fraction of patriotic young people (the number is higher during times of war) and the depressed economic conditions in the country (the number is higher in a depressed economy.) All of these factors contribute to the make up the initial pool of available men and women that agree to the terms of their first contract.
Things get a bit more complex when the servicemember decides to get out or enter into a second contract. With the average contract being 4 years for enlisted and 6 years for officers, a second contract makes the likelihood of being a "lifer" a much greater probability. A "lifer" is the military term for a career servicemen. Career soldiers are important to the service, as they represent the knowledge of previous experiences and the leadership to instruct the new generation. Regardless of your support of military institutions in general or warfighting in general, if you "Support the Troops" then you will understand that the "lifer" is an important competent of military competency.
The contract decision for a "lifer" then is quite different for the decision of a new recruit. The lifer now has experience and perhaps a technical skill that can be useful in the private sector. They have completed a higher education, in general, than the recruit. In order for the government to "negotiate," they must offer something more. The bargaining chip employed here is retirement. After 20 years, the government will provide a generous pension to all servicemembers. This is a desirable agreement, and usually puts the second enlistment soldier over the top. Once a soldier does eight or ten years, it is very likely they will do the final half of their career to earn their retirement. Once again, labor equilibrium is found.
(Side note: I got out after 10 years. I'm a different bird.)
But what if that promise of retirement was not all it's cracked up to be? What if that retirement benefit was destroyed through a reduction of purchasing power? Would you be willing to support policies that purposely destroyed the government's ability to fulfill its financial obligation to the soldiers you support?
The Benefit of Inflation
Inflation is defined as a persistent rise in prices. This is the modern definition, however it is not the only definition. Persistent price increases happen for a reason. Here we must distinguish between the fluctuations in commodity prices (think oil last year) and real persistent increases over time, which is a purely monetary phenomenon. Persistent price increases occur from currency devaluation, an increase in the amount of currency avaialable relative to the market need. This is the classical definition of inflation. We refer to it as "printing money out of thin air, " a cute euphemism for the practice of bringing about inflation.
Supporters of big government, and the Federal Reserve, point out a very obvious benefit of a moderate policy of inflation. Debts contracted by the goverenment can be paid back more cheaply if the currency used to pay back the debt is less valuable than the currency received. If the government borrows $100 over 10 years, and then devalues the currency by 3% per year, while the rate of interest is 2%, the government makes a "profit." (I use quotiation marks because the idea of profit here is completely different from the profit earned in the private sector. It's a separate discussion but if you wish to delve into it further hit me up in the comments section.)
Certainly many Americans will agree that stiffing the Chinese on money we have borrowed to finance our government is a great idea. (Sarcasm only partially intended.) Unfortunately, the Chinese are not the only people the American government has obligated to repay. Not only have they promised Social Security benefits to generations of workers, but they have also promised a definite standard of living to American career soldiers in exchange for their service, as I explained above. Had they not engaged in this negotiation, there would be fewer career soldiers. It is part of the give-and-take market process that determines the labor force.
This money is owed to the people serving. It is owed to the troops you support. Would you feel comfortable knowing that the government must violate this contract? That it has no choice? The reason that it must violate this contract is because the Federal Reserve engages in a practice of inflation and has done so for the 96 years of its existence.
Much ink has been spilled on the Federal Reserve, inflation, the dollar losing 96% of its value since the Fed took over (with the directive to protect the dollar), fiat money, and fractional reserve banking. I am going to assume that if you are still reading, you have a solid grasp of the basics. The point of this post is to help you see the interrelationships of these institutions and for you to see that these two beliefs: Supporting the Troops and Supporting the Federal Reserve, are incompatible.
The Federal Reserve destroys the purchasing power of military veterans. This point is irrefutable. It has done so for 96 years. Should the Federal Reserve bring about mass inflation (persistent double digit inflation), veterans will not receive the puchasing power of their obligation from the government at the level they were promised. This is a violation of their property rights. It is unethical. Please do not "Support the Troops" and turn a blind eye to this fact.
This is a blog post and not an academic paper. I don't have time for the latter. I can think of many objections, and can adress them here, or I can let you make the objections and I will address them in the comments. I'll take the latter path to save me some time.
I hope you are all having a profitable year.
David in Qatar
Note to Facebook friends. Due to time constraints, I've had to take a break from FB. I've deactivated my account, but did not delete it. Work has been very busy and I have had to prioritze some things. Responsibility sucks, doesn't it? Hopefully things will settle down soon.