In every society, everyone who breathes is a “consumer”—but only some people are “producers”. (For example, we all need to eat, but only some of us actually grow any food.) Children are born “consumers” but most later mature to become producers. If we live long enough to become elderly, we lose our ability to produce and, once again, become “consumers”. All of us are “consumers” who need food, clothes and shelter every day–but only some of us are “producers” able to “produce” more food, clothes and shelter than we personally consume.
More, a majority of American “consumers” borrow currency from banks by means of loans or credit cards that allows them to consume-now-pay-later. These are “consumer-borrowers”.
Only a minority of Americans: 1) produce more wealth than they consume; 2) store their excess production in the form of monetary savings; and 3) sometimes make their savings available to be borrowed by others. These are “producer-lenders”
If only because of non-productive children, sick, unemployed, welfare recipients and elderly, there are always more consumer-borrowers than producer-lenders.
Consumer-borrowers tend to be dependents. Producer-lenders tend to be self-sufficient “independents”.
• Politicians normally cater to the political majority who consume-borrow and therefore favor inflation (which is “good” for borrowers).
However, politicians also know that they dare not kill the “geese” (producer-lenders) that’re laying the “golden eggs” (generating and saving capital) that can be loaned to the consumer-borrowers. In the end, the consumer-borrowers are dependent on the producer-lenders just as children must be dependent on their parents.
However, while politicians openly provide bread, circuses and inflation for the cheering masses of consumer-borrowers, they must also secretly provide a source of funds, tax-breaks, etc. to the producer-lenders to keep them from losing all their capital to inflation, and going broke. Once the producers go broke or are otherwise rendered non-productive, the economy will collapse for lack of more funds to sooth the savage consumers (borrowers) and the consumers will tend to starve or even die.
Politicians must therefore openly favor the majority of consumer-borrowers and secretly favor the minority of producer-lenders. We see this dichotomy in congressmen and senators who openly favor the majority of Americans who are consumer-borrowers but secretly take bribes (“political campaign contributions”) from the wealthy producer-lenders.
But where’s the “line” between favoritism for borrowers and favoritism for lenders? How do politicians know how to properly balance the interests of borrowers against those of lenders?
And what happens if a particular cadre of politicians vote to grant too much favor to one side or the other? Is there a level of imbalance between consumer-borrowers and producer-lenders that, once exceeded, can tip the whole economy into collapse and thereby ruin both creditors and borrowers?
• Inflation encourages and allows consumer-borrowers to rob producer-lenders. Inflation subsidizes borrowers and is sometimes even viewed by borrowers as a right or “entitlement”.
Deflation encourages people to save rather than borrow or even lend. Money saved is usually money not spent. By discouraging people from borrowing and spending, deflation slows the economy, decreases profits, increases unemployment, makes the fiat currency even more deflated (more valuable) and the existing loans less payable.
But the fact remains that both inflation and deflation are a kind of lies and a means to rob people. Given that both inflation and deflation encourage some sort of robbery, both inflation and deflation are immoral.
• Could it be that at least some of the public eventually senses this immorality and therefore refuses to play the fiat currency “game”? Does part of the public understand that, by means of inflation, they’re being led, manipulated, and taught to do “tricks” (borrow and spend fictional currency) much like dogs are taught to do tricks by giving them “doggy treats”?
Is that possible? Yes.
Is it likely? No. I doubt that we’ll ever see a generation that complains about receiving too many “doggy treats”.
Is government currently less able to cause the consumer-borrowers to perform “tricks” (borrow currency to buy a house) with inflation (the “doggy treat” of repaying their loans with “cheaper dollars”) because consumer-borrowers don’t want to live like dogs being “tricked” into stimulating the economy by robbing their creditors?
Again the answer is No. The question presumes a level of honor and integrity in most people that’s a wonderful ideal and a fairly rare reality.
Could it be that the producer-lenders are sick of being robbed, and are quitting the fiat currency game by refusing to lend to consumers who expect to pay their debts with cheaper dollars?
That’s possible. The question sounds like something Ayn Rand might’ve posed in The Fountainhead or Atlas Shrugged. Most people (consumer-borrowers) wouldn’t understand the question. If they did, they’d think it silly or irrelevant. But the real “producers” (who probably make up less than 5% of the population) would understand and just might “shrug off” their heretofore “duty” of providing for consumers. And if (as Rand posited) the minority of producers simply quit producing for greedy consumers, we could have a social collapse because the consumers are as just as dependent on the producers, as those clothed in tuxedos and evening gowns at a gala are ultimately dependent on the farmers in their dirty bib-overalls.
Or maybe its already too late for the producers to protest. Maybe, the producer-lenders are now so nearly broke from providing for the consumer-lenders that they no longer have savings to lend—unless those “savings” are just freshly-printed fiat dollars recently provided by the Fed.
Whichever answer (or answers) explains our current economic condition, it appears that the economy has slowed because:
1) consumers are unwilling or unable to borrow;
2) lenders are reluctant to lend to ordinary consumers and prefer to lend to major corporations; and/or
3) producer-lenders are finally so broke, that they can’t afford to lend their own currency to consumers.
• All three answers point to a single conclusion: the ordinary consumer-borrowers have become unable or unwilling to borrow. They are therefore less able to maintain their previous standard of living and are tending live lives of lower income levels.
That’s consistent with a diminishing middle class and growing lower classes.
Does answer #3 (producer-lenders have gone broke) explain why (since the Great Recession of A.D. 2008) the Federal Reserve printed trillions of fiat dollars and basically gave them to the “too big to fail” banks? Did the Fed suppose that decades of inflation had left those banks too broke to lend? Did the Fed try to compensate for the loss of many of our “producer-lenders” by giving banks “free money” to lend?
Was Fed’s QE strategy was intended to “stimulate” the great unwashed (consumer-borrowers) to borrow and spend? If that strategy failed and the consumer-borrowers are substantially refusing or unable to borrow, what strategy remains for the Fed to “stimulate” the economy?
Increasingly, the answer appears to be None.
It may be that the central planners in Washington DC have finally given away so many jobs and so many entitlements, and gone so deeply into debt that the real producer-lenders of this society are financially and perhaps spiritually exhausted. And, when I refer to “producer-lenders, I don’t mean the top one-tenth of a percent of our society. The super-rich are just as big a bunch of parasites as the welfare queens on the South side of Chicago. When I talk about “producer-lenders,” I mean people who produce more than they consume. They could be brick layers, carpenters and inventors. They are as likely to live at the lower levels of our economy than the top. But they are people who work hard for a living, live within their means and seldom, if ever, borrow currency to buy a new hat.
If our producer-lenders are worn out from the taxes, entitlements and regulations imposed by Big Gov-co, then we’re probably heading for a decade or more when the percentage of producer-lenders will once again grow while the percentage of consumer-borrowers shrinks. I don’t suppose that the percentage of real producers will ever exceed 40% of the population. But I also don’t suppose that a society can remain intact if less than 5% of us are genuine producers.
I’m beginning to think of an economic depression as a re-balancing between the producer-lenders and the consumer-borrowers. Producers will regain respect and control. Consumers will tend to go hungry until they figure out how to work, work hard, and thereby become producers.