Why, with a federal debt of $14 trillion to $20 trillion, does the
U.S. dollar remain the strongest of world currencies? Whether from
a perspective of financial analysis or common sense, this makes no
sense. So why is it the case?
The U.S. dollar, like the currencies of all major nations, is a fiat
currency — it has no intrinsic value. Nothing underlies its value
other than the government’s decree that it must be accepted in
exchange for tangible goods and services.
One would think the euro, the mark, the frank, or the pound would
be right up there with the dollar in terms of strength. None of these
currencies is tied to a national debt anywhere near that of the U.S.
The U.S. debt, after the almost $8 trillion added in the past six months,
amounts to approximately $60,000 for every man, woman, and child in
the nation. Annual interest on the debt adds $3,000 for every man woman
and child. This should make markets shun the dollar, yet they don’t.
The answer is really quite simple. It is based on two well-known
but rarely related facts. Those who control our financial system —
the U.S. Treasury, the Federal Reserve, and the Internal Revenue Service
— pretend, and actively work to make us believe, that the dollar is
strong because the world believes in the dollar. This is partially
true. What is left unsaid is why the world believes in the dollar.
The first fact underlying the dollar’s strength is that the
U.S. is the most productive country in the world. Its citizens, through
their freedom to innovate and profit from their hard work, have created
prosperity unmatched in history. We have increased the standard of
living not only for ourselves but for the world. In short, no country
comes close to matching U.S. innovation and productivity.
The second fact underlying the dollar’s strength is that the
U.S. has the most efficient and efficient tax collection system the
world has known.
The value of the dollar is based on the belief that the federal government
has access to a productive work force and can confiscate as much of
our work effort as is necessary to sustain the value of the dollar.
In short, the American worker no longer works for himself or his family
but for the government. Historically, those in such a relationship
were considered indentured servants or slaves. Today, we are simply
It is difficult for people who pride themselves on the belief they
are free to accept that this is true. However, it is true. Those who
would like to believe it is not should ask themselves if there is any
limit on what government can take of what they earn? Is there any limit
on how much the government can take from the estate of a deceased person?
The answer is no.
The federal government has been on a spending binge for the past 50
years. It has amassed unprecedented debt and has guaranteed that debt
with our future productivity and a confiscation (tax) system more efficient
than any in history.
At the same time that our government has engaged in uncontrolled spending,
it has imposed hundreds of thousands of pages of rules, regulations,
and mandates on business and industry. The consequence has been to
reduce efficiency, impede productivity, and add costs to everything
we buy. A huge part of those costs provides no benefit to consumers.
In short, government is destroying American productivity. Intentionally
or not, it is killing the goose that lays the golden egg.
Today, government is the largest employer in our country. On January
3, 2009, President-Elect Obama announced that he intended to increase
federal employment by 600,000. The cost to maintain the payroll and
benefits of this behemoth consumes more than one-third of our entire
gross national product. This cannot be sustained. The party is coming
to an end. Soon we will learn we are no longer simply citizens but
indentured taxpayers — more accurately stated, we are slaves.
A Voice from Fly-Over
A Voice from Fly-Over Country is copyright (c) 2009 by Robert
L. Hale and the Fitzgerald Griffin
All rights reserved.
Robert L. Hale received his J.D. in law from Gonzaga University Law
School in Spokane, Washington. He is founder and director of a non-profit
public interest law firm. For more than three decades he has been involved
in drafting proposed laws and counseling elected officials in ways
to remove burdensome and unnecessary rules and regulations.
See a complete biographical sketch.
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