During a March 17 address to the nation in response to the COVID-19 outbreak, President Trump asked people across the United States to work from home, postpone unnecessary travel, and limit social gatherings to no more than 10 people.
On March 27, Trump signed a stimulus package of over $2 trillion dollars to provide relief to an economy near collapse. The aid package includes handouts and loans to individuals, small businesses, and other distressed industries.
Despite Trump’s “having created the greatest Economy in the history of our Country,” when the markets tanked, massive and immediate government intervention was the only thing left to forestall a total collapse. So, why can’t the greatest economy in the world handle a temporary shock without needing trillions of dollars injected to stay afloat?
The Federal Reserve is to blame, along with its vicious and continuing war against savers.
Because of inflationary monetary policy, people have long been forced to select among three undesirable options: save and lose at least 2% in purchasing power every year, spend on immediate goods and services to get the most out of current purchasing power, or speculate, seeking through investments a return that exceeds what inflation devours.
With businesses and individuals defaulting on their rent and other obligations only days into the collapse, the problem is clear: Few have any savings. And why should they, when that implies saving money at negative real rates of return? American businesses and individuals are so overleveraged that once their income goes away, even briefly, they are in many cases left with nothing.
Fiat money is thus especially pernicious in the way it harms its users. To some, small 2% losses can go easily unnoticed, year to year. Over 100 years, the loss of the dollar’s purchasing power has been well over 97%.
And who can save for emergencies when you’re being forced to work and spend more — simply to maintain the same quality of life?
With the Fed slashing short-term rates to zero, the Federal Reserve note has been further destroyed as a method of preserving savings. And negative nominal interest rates could be coming next.
Inflationary economic policy, absent the guardrails of sound money, has created a situation with an obvious and deadly conclusion: that many people lack the savings to protect themselves against downturns. This situation isn’t necessarily the fault of the people, but rather the fault of a system in which discouraging and punishing savers is a crucial policy.
The Fed, the U.S. Treasury, and the White House are trying to reassure the public that everything is “under control,” that “the U.S. economy’s fundamentals are still strong,” and that the economy will skyrocket once COVID-19 is sorted. What if they’re wrong?
Maybe the greatest monetary experiment in history is coming to an end. Maybe sound money can still save the day, but we must not waste any more time in restoring it.
J.P. Cortez is the policy director of the Sound Money Defense League, an organization working to bring back gold and silver as America’s money.
