To Buy or Not to Buy? Treasury Bonds. Whose side are you on?

[galtgulch]

This article appears on the Campaign For Liberty site. It was written by Serenity Wang and her picture is there with a factoid that she passed the orals of the Mises Institute with flying colors.

<<<"Death by Treasuries

By Serenity Wang

Last month, in an article on LewRockwell.com, Thomas Eddlem proposed an internet campaign against the purchase of bad federal debt, urging Americans to "shut off the debt spigot by cutting up the federal credit card." Eddlem is right, of course. And here are a few more reasons why one should not buy or hold any federal debt.

Because U.S. Treasuries are perceived as a low-risk investment, Treasury sales have gone up in the wake of the recent stock market crash, as evidenced by the decline in Treasury yield. At a time when government economists and financial media talking heads are bemoaning the "credit crisis," the government itself is gobbling up an ever larger proportion of capital investment.

If one invests in the private sector, there is at least some chance that the investment will be put in productive use -- to build factories or purchase equipment, for example, that will increase the productive capacity of the economy in the long run. Money lent to the government is at best wasted. More likely, it is spent on government programs and "economic stimuli" that will hamper the market corrections that must take place before any real economic recovery could occur.

Thus, government borrowing takes resources away from the productive sectors of the economy and puts them in the hands of central planners in Washington, reduces real capital investment, and impedes economic growth. Moreover, because the normal corrective forces of the market only minimally affect the government (whose available resources are not limited by its productivity or its ability to satisfy consumer wants but only by its ability to extort and steal), government spending results in misallocation of resources on a scale that no private firm could possibly cause.

The view that Treasuries are safe is a misconception based on unwarranted faith in the government. The U.S. government, like the rest of the U.S. economy, is over-leveraged. But, unlike private individuals, the government has not cut back on spending. And, unlike private individuals, the government does not produce. This means that the government must take from the rest of society in order to support its spendthrift habits and repay its debt. Given that the Federal Reserve's expansionary monetary policy has wrecked the U.S. economy and the supposed growth over the last decade has turned out to be artificial, there really is not much wealth left for the government to take.

Today, the national debt amounts to more than $35,000 per American citizen. If one considers the U.S. government's unfunded liabilities (Social Security and Medicare), the number becomes unfathomable (over $300,000 per household over the next 75 years). Currently, the government rolls over its debt (i.e., uses new debt to pay back old debt), but once the world ceases to buy more federal debt (either because it runs out of capital or because it wises up to the U.S. government's Ponzi scheme), the government will be faced with two choices -- repudiate its debt or massively inflate the money supply. Neither of these bodes well for holders of government securities.

The economic implications of excessive government borrowing are grave. But the ethical implications of lending to the government are even graver. The purchase of government securities is an ethically questionable form of investment. Economist and historian Murray Rothbard points out the fundamental difference between private and public debt transactions:

"The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future."

When one lends money to the State, one funds an institution whose only mechanism of action is coercion. When one buys Treasuries, one enables the most powerful and destructive empire in human history.

The projected federal deficit for FY 2009 is $1.75 trillion, an astronomical figure. Of the $3.94 trillion budget blueprint, $513 billion goes to the Department of Defense, with $75.5 billion for the wars in Iraq and Afghanistan. An additional $42 billion goes to the Department of Homeland Security. This is money that goes towards the killing of innocent people abroad, the occupation of foreign countries, and the expansion of an increasingly intrusive police state at home. An additional $9.5 billion (total drug control funding minus the amount allocated to the DoD and DHS) has been requested to fund the horrendous War on Drugs, which has resulted in the imprisonment of nearly 100,000 people in federal prisons, of which, according to a Department of Justice study conducted in 1994, about 36% are non-violent offenders.

Countless lives have been destroyed by the U.S. government's wars, and countless more will be destroyed if the Empire is allowed to continue. Obama has pledged to escalate the war in Afghanistan without completely withdrawing from Iraq. He might invade Pakistan, and, of course, nothing is off the table with regard to Iran.

To fund these wars, the federal government has three sources of revenue: taxation, inflation, and debt. Taxation is essentially armed robbery. The citizen is given three choices: a- hand over the money, b- get locked up in a cage, or c- resist, the likely outcome of which is either option b or death. Inflation, a mechanism by which the Central Bank redistributes wealth from the average person to the politically well-connected, is theft. Both taxation and inflation involve coercion. (In the case of inflation, coercion comes in the form of legal tender laws, which forces individuals to accept fiat currency as legal tender and grants the Federal Reserve monopoly control over the money supply.)

The average American does not have much control over how much the government will tax or inflate (but this does not mean that he shouldn't continue to educate others about the evils of the IRS and, even more important, the Fed, and to fight for the abolition of both institutions). But the average American can choose not to buy government securities.

The existence of choice also means that anyone who voluntarily funds the U.S. empire through the purchase of government securities must confront the death and destruction caused by the myriad government programs and endless wars.

Contrary to Alexander Hamilton's claim that the national debt is a "national blessing," government borrowing wastes resources and makes private individuals complicit in the government's crimes. If anything, government debt is a national disaster, one that we should begin to combat.">>>

www.campaignforliberty.com 6Mar 6AM 105836, 10PM 105909

Victor Hugo: "No armies can stop an idea whose time has come."

Edited March 7, 2009 by galtgulch

[Brant Gaede]

The impossible quest for moral purity in a mixed economy gainsaid by one's need to protect oneself from the wealth destruction of inflation. Nothing like ideologically hogtying oneself before getting thrown into the river.

--Brant

[BaalChatzaf]

Contrary to Alexander Hamilton's claim that the national debt is a "national blessing," government borrowing wastes resources and makes private individuals complicit in the government's crimes. If anything, government debt is a national disaster, one that we should begin to combat.">>>

www.campaignforliberty.com 6Mar 6AM 105836

Victor Hugo: "No armies can stop an idea whose time has come."

Without massive public debt the U.S. could not have fought WW2.

I would have ended up as a cake of soap on some Nazis sink and you would have ended up speaking Japanese and German part of the time.

There are times when it is right to do the wrong thing.

Ba'al Chatzaf