“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises, Human Action [1949]
Crisis Now or Total Catastrophe Later?
Recently, amidst a flurry of anti-coronavirus medications, President Trump experienced a moment of clarity. After four decades of nearly continuous credit expansion, he acknowledged that it might be time to halt this trend—and he felt equipped to make that decision.
In a surprising turn of events, Trump took to Twitter to announce the cancellation of stimulus bill negotiations. Moments later, the Dow Jones Industrial Average plummeted by 400 points. Then, after chatting with economic advisors Mnuchin and Kudlow, Trump backtracked.
What transpired during that conversation remains a mystery. However, it’s likely that Mnuchin and Kudlow reminded him that the immediate health of the American economy relies on distributing printed money to citizens and even non-citizens. The long-term ramifications? Well, those could be catastrophic. Thus, Trump urged Congress to approve another round of $1,200 stimulus checks.
This choice represents avoidance of the voluntary abandonment of credit expansion. For politicians, it is a path much easier to follow. Unless Trump wants to jeopardize his election prospects, he cannot afford to tell voters that there won’t be any more free money.
The choice stands starkly: Either we voluntarily abandon further credit expansion now, leading to a crisis, or we continue down this path and face the inevitable total catastrophe of the dollar system later.
For a politician, this isn’t truly a choice. Remember Nero—he clipped coins in 64 A.D. while Rome burned around him. The typical decision made by presidents is to defer the crisis, hoping to offload the ultimate disaster onto someone else.
There’s more to discuss, but first, let’s gain some perspective…
Between a Rock and a Hard Place
In the spring of 2003, a 27-year-old adventurer named Aron Ralston found himself in a dire predicament while canyoneering in Bluejohn Canyon, Utah. During his journey, a seemingly stable boulder tumbled, crushing his right hand and pinning him in place.
With a small rucksack containing just one liter of water, two burritos, and a few pieces of chocolate, plus his climbing gear and a dull multi-tool knife, Ralston had not informed anyone of his whereabouts. He felt invincible—until reality set in.
For 127 hours, Ralston rationed his dwindling water supply and futilely attempted to chip away at the boulder. Gradually, he slipped into delirium, grappling with a grim question: Should he sacrifice his hand to save his life?
Ultimately, Ralston made a harrowing decision. He tourniqueted his arm with climbing ropes and prepared to sever his hand. But when he began cutting through flesh, he confronted yet another obstacle: his bones.
On the fifth day, as Ralston later recounted, he found a semblance of “peace” in the realization that he might die there, becoming one with the canyon. However, the following day, that peace faded.
Faced with the prospect of death, Ralston was overtaken by a surge of determination. He realized he could break his own bones by throwing himself against the boulder.
The sound of his bones snapping was chilling—“like, pow!”—yet to Ralston, it was euphoric. “The detachment had already happened in my mind—it’s rubbish, it’s going to kill you, get rid of it,” he reflected.
After breaking his bones and removing his hand—a process that took an agonizing hour—Ralston miraculously climbed a 65-foot cliff to escape the canyon. He then hiked to safety, albeit without one hand.
America Has an Epic Choice
The United States finds itself at a crucial crossroads, one that transcends the question of who will become the next president, or whether the stimulus bill will total $1.6 trillion or $2.2 trillion.
To summarize, the choices before us are clear: Opt for a voluntary abandonment of further credit expansion now, which would lead to a crisis, or continue with the current expansion, risking an eventual total catastrophe of the dollar system.
This choice involves the whole political spectrum—President Biden, Congress, the Secretary of Treasury, the Federal Reserve, economic advisors, lobbyists, government contractors, Wall Street insiders, pensioners, and social security beneficiaries, among many others.
All are aligned with the push for further credit expansion, even if it ultimately leads to the downfall of the dollar system. Recently, Fed Chair Powell stated, “The US federal budget is on an unsustainable path, [and] has been for some time. [But] this is not the time to give priority to those concerns.”
In essence, we are being urged to sidestep a crisis today to potentially face a total calamity down the road.
This choice is undeniably troubling. Nevertheless, sometimes, as Aron Ralston demonstrated, one must make painful sacrifices to survive. Voluntary abandonment of further credit expansion could be the only viable escape from our current financial dilemma. It’s time to confront the crisis head-on.
Sincerely,
MN Gordon
for Economic Prism
