Thursday, May 18, 2006

Gouge, Gouge, and Gouge Again!

Governments are stupid.

They are really stupid. But how governments often reveal their stupidity is in the way they finance themselves. For they do it by three gouging measures:

  • Taxation

  • Borrowing

  • Inflation
Usually in that order.

But instead of being really sophisticated and cleverly managing a blend of all three, governments tend to go for gouging on one measure; they then get hit by political pressure; they then gouge on a second measure, and then onto the final measure, before eventually coming back to the first again, after having replaced a sacrificial executive component. Here's the program model:

  • A population is disgruntled with a government. In order to survive, the government realises it has to change its executive, in the same manner that a master criminal often has to change his identity.

  • Once the government has changed its executive, via the tedious process of a democratic election, one of the rules is that the bright-eyed hullo clouds, hullo sky clod-hoppers who comprise the new executive body, must come in with a promise not to raise taxes.

  • This executive then immediately raises taxes. Usually under a deep surrepticious layer of cloaks and daggers.

  • They get away with this, for a bit, because they'd promised not to raise them and people were foolish enough to believe them.

  • Following Lincoln's dictum about not fooling all of the people all of the time, however, the political pressure mounts and the new executive has to slow down its gouging on these surrogate tax rises.

  • It now starts borrowing, generally using the excuse that because the economy has slowed down, more investment is required. Obviously, they never mention the reason the economy slowed down was because of their increased tax pilfering, because that would simply frighten the horses!

  • Obviously, borrowing today is taxation tomorrow, with added interest, but who cares about tomorrow!

  • This increase in borrowing, the second gouge, is usually accompanied with promises of capital investment strategy, and long term cycle repayment, even though we all know the borrowed cash is simply to be fed straight down the maw of the Guardian-reading classes, who need brand new Saabs and brand new second homes in Portugal.

  • Eventually, after squeezing out the productive sector's ability to borrow and invest, in the real sense of the word invest, the political pressure mounts again and the government is forced by voting movements to curtail this burgeoning growth in borrowing. Curses.

  • So now they're really in a hole. With a voracious need for ever-increasing government spending to feed the maw of the unproductive Guardian-reading sector, what do we do now, Clive?

  • Fortunately, from Clive's point of view, growth in the productive economy has slumped again, due to his grabbing of all the available investment funds on the bond market, so, first, play up the message that you're looking at ways to stimulate the economy, hypocritical crooks that you are.

  • Second, start bragging about how you have heroically kept inflation down to record lows for several years (by the heroic process of only increasing the money supply at 2.5% faster, each year, than the productive sector of the economy grows).

  • Then promise that, whatever happens, you will be pegging inflation back at all costs, with further such heroism.

  • Then, obviously, you get your central bank to start inflating. It's a no-brainer, really. If you get caught, just say you were pump-priming, as is recommended by Mr Galbraith et al.

  • Though now you get into a bit of a hole. Because inflating is really addictive, in the manner that opium farming in Afghanistan is really lucrative. A little bit of inflation is nice; hardly anyone notices. So you quickly give in to the feeling that a lot of inflation is even better; it certainly buys a lot of Saabs, as any NHS doctors' car park, in this country, will tell you.

  • Until of course, the people who generate all of this wealth wake up and notice. House prices start ramping up as the increase in the money supply is fed into the property sector, and then general prices start rising too, faster than wages may rise, as money borrowed on rising house prices feeds in. And now your executive is screwed. This doomed executive cuts back the inflation, in a desperate bid to cling to the fiction of power, which creates systemic Cold Turkey habit kicking effects throughout the productive and unproductive sectors of the economy, plus you now have no means of feeding the truly powerful maw of the Guardian readers. And so the government decides to replace the executive again, in a hilarious scam called a general election.

  • And guess what the new executive promise? Oh yes. No more taxes!

  • Joy. This new executive may decide to replace Guardian readers with Telegraph readers, but in the end, it's still the same old maw.

  • Just as an aside, at some point in the cycle some kind of war must be initiated with some Johnny Foreigner, the further away the better. This is the only way the cycle can be maintained, because given a choice between security and freedom, most voters will opt for security, thus giving you an excuse for more taxes at the start of the next loop.
So where are we now in the cycle? Well judging from this article I read this morning, we're just about to head into sector three.

Who needs The General Theory of Employment, Interest and Money by Mr Keynes, a favorite amongst Marxists, when you have AngloAustria to provide you with such cogent examples of how government really works.

Actually, I started out by saying I thought governments were stupid. Of course, I was wrong. The way they keep fooling their enslaved societies, who are dim-witted enough and brainwashed enough to think democratic elections change anything other than the outer skin of the Vampire, means that it is we the people who are the truly stupid ones. Well done the state education system! It wouldn't have been possible without it.

Welcome to the pleasure dome.

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