Lessons From France

In order to fully understand why the founders so valued human liberty one needs to see that they saw it as not just a moral right but also a practical necessity.

"Laissez faire, telle devrait être la devise de toute puissance publique, depuis que le monde est civilisé.... Détestable principe que celui de ne vouloir grandir que par l'abaissement de nos voisins! Il n'y a que la méchanceté et la malignité du coeur de satisfaites dans ce principe, et l’intérêt y est opposé. Laissez faire, morbleu! Laissez faire!!

(Leave them be, such should be the motto of every public authority, according to which the world is civilized..... A detestable principle that which would not wish us to grow except by lowering our neighbors! There is nothing but mischief and malignity of heart in those satisfied with that principle, and interest is opposed to it. Leave them be, damn it! Leave them be!)"Having thus introduced a measure of order and economy into the workings of the government,"

Legend has it that these words were spoken to the all powerfull French Minister Of Finance under Louis XIV who sought to "help his economy" in ways similar to Obama today.

"Colbert now called for the enrichment of the country by commerce. The state, through Colbert's dirigiste policies, fostered manufacturing enterprises in a wide variety of fields. The authorities established new industries, protected inventors, invited in workmen from foreign countries, and prohibited French workmen from emigrating. To maintain the character of French goods in foreign markets, as well as to afford a guarantee to the home consumer, Colbert had the quality and measure of each article fixed by law, punishing breaches of the regulations by public exposure of the delinquent and by destruction of the goods concerned, and, on the third offense, by the pillory. But whatever advantage resulted from this rule, the disadvantages it entailed more than outweighed them. Colbert prohibited the production of qualities which would have suited many purposes of consumption, and the odious supervision which became necessary involved great waste of time and a stereotyped regularity which resisted all improvements. Other parts of Colbert's schemes have met with less equivocal condemnation.

By his firm maintenance of the corporation system, each industry remained in the hands of certain privileged bourgeois; in this way, too, the system greatly discouraged improvement; while the lower classes found opportunities of advancement closed. With regard to international commerce Colbert suffered equally from lack of foresight: the tariffs he devised protected commerce to an extreme, and under his tutelage enforcement of trade and quality restrictions was draconian, to the point that his technocrats put to death 16,000 small entrepreneurs whose only crime was importing or manufacturing cotton cloth in violation of French law. [1] He did, however, wisely consult the interests of internal commerce. Unable to abolish the duties on the passage of goods from province to province, he did what he could to induce the provinces to equalise them. Currency exchange rates still remained between these provinces despite a policy focusing on the unification of French trade. His régime improved roads and canals. Pierre Paul Riquet (1604–1680) planned and constructed the Canal du Midi under Colbert's patronage. To encourage overseas trade with the Levant, Senegal, Guinea and other places, Colbert granted privileges to companies, but, like the noted French East India Company, all proved unsuccessful. The narrowness and rigidity of the government regulations significantly contributed to this collapse, as well as the failure of the colonies, upon which Colbert had bestowed a great deal of energy and political capital."

Of course, at the end of this period with the help of Louis extravagant spending and wars, France was bankrupt and at the edge of total collapse.

”According to historical folklore, the phrase stems from a meeting c. 1680 between the powerful French finance minister Jean-Baptiste Colbert and a group of French businessmen led by a certain M. Le Gendre. When the eager mercantilist minister asked how the French state could be of service to the merchants, Le Gendre replied simply "Laissez-nous faire" ('Leave us be,' lit. 'Let us do').[3]

The laissez faire slogan was popularised by Vincent de Gournay, a French intendant of commerce in the 1750s. Gournay was an ardent proponent of the removal of restrictions on trade and the deregulation of industry and economic prosperity in France. Gournay was delighted by the LeGendre anecdote, and forged it into a larger maxim all his own: "Laissez faire et laissez passer" ('Let do and let pass'). His motto has also been identified as the longer "Laissez faire et laissez passer, le monde va de lui même!" ('Let do and let pass, the world goes on by itself!'). Although Gournay left no written tracts on his economic policy ideas, he had immense personal influence on the thinking of his contemporaries, notably the Physiocrats, who credit both the 'laissez-faire' slogan and doctrine to Gournay.[4]"

Adam Smith and a number of other British and American writers came to wonder why England, with it's relative lack of resources so far outperformed nations like France and Spain and concluded that the higher level of economic freedom was the reason. Sadly we are returning to the childishly ignorant world of Colbert all over again.

Weimar America 2 : Start The Presses

I want to warn you that there may be a bit of bold type in this post. Even I am still occasionally shocked by the actions of the government, by large numbers and still have the quaint belief that America is still a semi rational nation under the rule of law.

So, in my last Weimar America (yes it looks like a series) post, I warned about the risk of hyperinflation and what might happen if Fed began to "monetise" our ballooning debt by creating money out of thin air. Please tell me they are not doing it, but more and more wise people (the people who predicted this mess, like Peter Schiff, Jim Rogers and many others) are telling me this is what has begun to happen.

"You’ll also find this little snippet in the article, “Most of the money, about $5.5 trillion, comes from the Federal Reserve, which as an independent entity does not need congressional approval to lend money to banks or, in “unusual and exigent circumstances,” to other financial institutions.

Just another reminder that the private, run for profit, Federal Reserve has the printing presses cranked on overdrive in order to bailout Wall Street and the big banks, while the homeowner and the middle class see their savings devalued out of existence.

“If you print money all the time, the money becomes worth less,” warns Diane Lim Rogers, chief economist with the Concord Coalition, but its an empty threat to delirious traders and investors drunk on a record stock market rally after the government pumped more fake liquidity into the bloated bubble.

Veteran investor Jim Rogers echoed the sentiment, predicting the dollar is “going to lose its status as the world’s reserve currency,” adding, “It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.”

A website called Prison Planet might be run by kooks you say, but the story's link is to an article in The San Fransisco Chronicle and quotes major investors and other sources like The Concord Coalition which could hardly called fringe.

"A deficit arises when the government's expenditures exceed its revenues in a particular year. Some estimate that the federal deficit will exceed $1 trillion this fiscal year as a result of the economic slowdown and efforts to revive it.

The Fed's activities to shore up the financial system do not show up directly on the federal budget, although they can have an impact. The Fed lends money from its own balance sheet or by essentially creating new money. It has been doing both this year."

The article also points out that these 8.5 Trillion in obligations and promises represent 60% of America's GDP.

Now one other question might come up. It sounds like other countries like England are also deep in a hole and are doing the same thing. Doesn't this mean that we are OK cause the dollar can't fall against anything if other currencies are falling too? The short answer is that all these currencies will fall against any real store of value like gold or any reasonably sound currency like those of Japan, China and other countries we owe money to.

The whole process is accompanied by constant reassurances that this is a temporary thing, and we will act responsibly in the future even though 60 years or more of U.S. history tell you that is very unlikely. The goal as usual is to kick the pain and hard decisions down the road to another administration or generation.