Democracy, Monarchy and Central Banks

How We Ended up $30 Trillion in Debt [The Daily Reckoning] September 10, 2022 [WEBSITE]( | [UNSUBSCRIBE]( Democracy, Monarchy and Central Banks - No mass democracy, no central bank… - More power than any Roman emperor could ever dream of… - Then Brian Maher shows you why democracy may not be superior to monarchy… [Man Who Predicted Bitcoin Warns: “Don’t Buy Bitcoin!”]( [Click here for more...]( James Altucher first predicted Bitcoin all the way back in 2013… And ever since, he’s been one of the biggest advocates for it. But now, he’s warning Americans that buying Bitcoin could be a big mistake… [Click Here To See Why]( Annapolis, Maryland September 10, 2022 [Brian Maher] BRIAN MAHER Dear Reader , The queen of England’s demise has turned our mind to monarchy — and democracy. English royalty had long been defanged, declawed and demoted. Today’s monarch is but a totem of sorts, an ornament on the hood of an automobile or the top of a Christmas tree. The United Kingdom is a parliamentary democracy. It is therefore subject to all the glories, benefits, advantages, swindles, vanities and preposterousnesses that democracy offers. Is democracy superior to monarchy? We have taken up the question before (see below). Today we take up a related question: Is the profligate central bank the creation of popular democracy? Writer Paul Rosenberg — author of Production Versus Plunder: The central issue here is that central banks were made practical only by the modern version of democracy. Given that “democracy” is a sacred dogma these days, that message can be a hard fit. Nonetheless, the fact is that central banking, and giant banks in general, were impractical until democracy was instituted. You have captured our interest, sir. Please continue: Prior to democracy, loans were undertaken by monarchs, who were personally responsible for their loans… many rulers simply refused to pay loans they had taken. King Philip II of Spain refused to pay back his loans at least a dozen times. Because of this, banking was seriously limited. Bankers developed techniques of dealing with sovereign defaults, of course, but central banking as we know it was more or less impossible. The institution of democracies and republics, however, solved that problem. But how? Under democracy, loans are not debited to an individual, but to the nation as a whole. This device of “public credit” makes all citizens, and their children, responsible for repaying the loan. From the institution of democracy and public credit onward, loaning money to a government gave the banker a legal and perpetual claim against the people. That is, democracy “socialized” the banking system. The citizen stands in back of the loan: The person who signs for the loan ends up bearing almost no responsibility, and gets to spend all the money. Millions of people who never approved the debt are left holding the bag, and passing the obligation to their children. This is how $30 trillion of debt can be piled up on top of an otherwise reasonable populace. Under a monarchy, this couldn’t have happened. Here Mr. Rosenberg cites the poet Percy Shelly: The device of public credit was first systematically applied as an instrument of government... The most despotic governments of antiquity were strangers to this invention, which is a compendious method of extorting from the people far more than praetorian guards, and arbitrary tribunals... could ever wring. Neither the Persian monarchy nor the Roman empire, where the will of one person was acknowledged as unappealable law, ever extorted a twentieth part the proportion now extorted from the property and labor of the inhabitants of Great Britain. Substitute the inhabitants of Great Britain for the inhabitants of the United States — or any other “advanced” nation — and you have the flavor of it. Why haven’t we citizens seized our pitchforks and run the central bankers through? Voting. Voting offers us the illusion of control. The swindle is a self-swindle. Here this Rosenberg fellow cites Mr. John K. Galbraith: When people put their ballots in the boxes, they are, by that act, inoculated against the feeling that the government is not theirs. They then accept, in some measure, that its errors are their errors, its aberrations their aberrations, that any revolt will be against them. Ignorance is bliss, it is often said. There is your proof. Yet as is also said: Ignorance is costly… Below, we republish our reflections on monarchy and democracy. Which is superior? Read on. Regards, Brian Maher Managing Editor, The Daily Reckoning Editor’s note: You open our emails. You follow our research. 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[Click Here To Learn More]( The Daily Reckoning Presents: Is democracy truly superior to monarchy?… ****************************** Democracy vs. Monarchy By Brian Maher [Brian Maher] BRIAN MAHER Today we trample sacred ground… trumpet a message of heresy… and offend the pieties. For we challenge the cherished and soothing assumptions of democracy. In 2001, academic Hans-Hermann Hoppe scribbled a book bearing the soaring title Democracy: The God That Failed. Hoppe’s work is a dart leveled against that holiest of secular divinities. Hoppe’s primary tort against democracy? It wastes. It exhausts its capital. It forever takes the short view. Hoppe uses the economic concept of time preference to nail his point through. A Jill with low time preference delays her gratification until the future. She is disciplined. She is willing to have her cake later — only after she has tended to her duties. But a Jack with high time preference orients toward present consumption. He wants his cake now — and the future can go scratching. Democracy, in Hoppe’s regard, “wants it now.” It is a spendthrift, a profligate, a child at large in a candy store. As the drunkard cannot see beyond the next drink… democracy cannot see past the next election. The problem, says Hoppe, is that democratic leaders do not own the machinery of government. It is theirs on temporary loan. Thus the democratic politician is a mere placeholder. But is that not our system’s cardinal virtue — that power is not permanently lodged in a single vessel? A rotating roster of rogues is far superior to one alone, you counter. Otherwise, the American Revolution was a vast swindle, and the Fourth of July is a blackguard’s holiday. A Prearranged Raid on the Treasury But because a leader under democracy does not own the government apparatus, argues Hoppe, he has no incentive to maximize its value. Instead, he tends to deplete it. His limited time horizon forces him toward immediate gratification. That is, he must get while the getting is there to be gotten. Consider the aspiring democratic official who seeks the franchise of a demanding public. He may feel the tug of fiscal conscience. But should he fail to gratify the crowd’s clamorings, he knows the other fellow will. And our democratic aspirant will lose his election. So he offers up the requisite sweets. If Social Security benefits must increase to sweep him into office, they will increase. Will it take more Medicare benefits, more unemployment insurance, more welfare? Then these you will see. His election represents a prearranged raid upon the Treasury. If the national purse is thin, if the burden cannot be met from existing stocks, then let it go upon the credit card. Is the business sordid? Might it eventually throw the Republic into bankruptcy? Well, eventually is a long way off, he says. Let it fall into the next fellow’s lap. Besides, we’ll simply grow our way out of it. This is the office-seeker under modern democracy. Compare, for a moment, democratic government with a rented automobile… Who Ever Washed a Rental Car? The renter does not own the auto. He, therefore, has no regard for its long-term health. So he over-accelerates the engine. He pummels the brakes. Down its gullet, he pours the lowest-test gasoline. Would he ever check the oil? And who, may we inquire, has ever run a rental through a wash? Here Hoppe applies the theory to democratic government: It must be regarded as unavoidable that public-government ownership results in continual capital consumption. Instead of maintaining or even enhancing the value of the government estate, as a king would do, a president (the government’s temporary caretaker or trustee) will use up as much of the government resources as quickly as possible, for what he does not consume now, he may never be able to consume… For a president, unlike for a king, moderation offers only disadvantages. Hoppe speaks of a king. Unlike democracy, Hoppe contends, monarchy takes the long view. The monarch owns the apparatus of government. As will his heirs. So he naturally inclines to policies that increase the value of his property over time. If Social Security, Medicare and the rest begin to deplete the government’s stocks, the monarch will announce a halt to them. “It’s welfare you want, subject? I understand the church runs a charity. “Social Security, you seek? I suggest you begin planning early for your retirement. And remember to save against the rainy day. “You say you want health care? I hope you don’t smoke or drink too much. And let me mention it now — sugar is a far-from-healthful substance. Besides, there are private insurers. I can refer you to several if you wish.” [Urgent Note From Jim Rickards: “You’re Running Out Of Time!”]( [Click here for more...]( Your exclusive “Pro level” upgrade to Strategic Intelligence is ready to be claimed. This is your chance to claim 3 exciting new benefits along with a whole new level of service. Hurry… you only have until the timer hits 0 to act… [Click Here ASAP]( The People Tell the King to Get Bent Is such a system undemocratic? Certainly. Callous, perhaps? Well, perhaps it is. But is it fiscally stable? Yes. In brief, monarchy may be better with money than democracy. It is a superior steward of wealth — at least by this theory. Once again, Hoppe: While a king is by no means opposed to debt, he is constrained in this “natural” inclination by the fact that as the government’s private owner, he and his heirs are considered personally liable for the payment of all government debts (he can literally go bankrupt, or be forced by creditors to liquidate government assets). Consider, as one example: In 1392, England's Richard II was in arrears to the Pope in Rome… and required 1,000 pounds toward satisfaction of his debt. He did not have it. So old Rich appeared before the citizens of London with an open hat. Moreover, they refused him. Imagine it! Freeman Tilden, from his neglected 1936 masterwork A World in Debt: Kings had power enough to contract debts, but found it much more difficult to take advantage of that power… The feudal system, with its insecurity and constant clash of petty divisions, was not calculated to invite credit. In distinct contrast, Hoppe argues, we find the democratic president: A presidential government caretaker is not held liable for debts incurred during his tenure of office. Rather, his debts are considered “public,” to be repaid by future (equally nonliable) governments. Perhaps this explains — pandemic aside — why the national debt of the United States runs to some $31 trillion? It is a capital fact beyond all dispute: Most democratic nations groan beneath bloated government… extortionate taxation… and Himalayan levels of debt. Taxes How does this lovely, lovely state compare with the barbarous age of monarchs, Mr. Hoppe? During the entire monarchical age until the second half of the 19th century… the tax burden rarely exceeded 5% of national product. Since then it has increased constantly. In Western Europe it stood at 15–20% of national product after World War I, and in the meantime it has risen to around 50%. Government spending ran to roughly 10% of GDP prior to World War I. It currently nears 50% in many democratic countries. Total government spending in this Land of the Free amounts to 36% of GDP — nearly 40%. Perhaps in retrospect, the world might have been made safe for monarchy in 1917. And maybe our Colonial forefathers should have left old King George alone in 1775. His tax bite was so light… it failed to break the skin. Our researches reveal that American Colonial taxation ran to about 1% of total income — 1%. And between 1764 and 1775, claims political scientist Alvin Rabushka: The nearly 2 million white Colonists in America paid on the order of about 1% of the annual taxes levied on the roughly 8.5 million residents of Britain, or 1/25th, in per capita terms… As traitorous as it may appear, we are half-tempted to disinter King George’s innocent bones and throw them a much overdue parade. But let us entertain no more thoughts of heresy. The Worst System of Government… Except for the Rest Hoppe’s book is actually no call for monarchy. As the author himself states at the onset — “I am not a monarchist and the following is not a defense of monarchy.” His primary purpose is to diagnose an illness — not to prescribe a cure. Hoppe’s sins against democracy are nonetheless of the mortal variety. And mainstream academics put him under excommunication for his blasphemies. But to repeat, Hoppe does not call for monarchy. Nor do we. Beneath our seditious motley beats the heart of an American patriot… and our blood runs true under red, white and blue. Besides, a king could be every inch the scoundrel as an American president. And since he faces no election, how could we possibly count upon him to say amusing and idiotic things? Let us, therefore, not discount the comedic value of democratic government. In addition, monarchy is certainly no guarantee against bankruptcy — as history records well. More than a few ne’er-do-well kings have driven their realms to rack and ruin. Who can dispute it? But it is due more to incompetent kingmanship than kingmanship itself. A rascally Henry VIII can inherit a throne as easily as a wise Solomon. Regardless, it matters little… Hoppe’s monarchic realm will never exist — not in today’s age of mass democracy. But does it soften his case? Winston Churchill famously quipped that democracy was the worst form of government except for the rest. But upon further reflection, perhaps monarchy is the worst form of government… except for the rest… Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning Ed. note: You open our emails. You follow our research. And that’s why you’re getting a special courtesy reminder from the publisher… alerting you to a massive change in our business that could have [a direct and immediate impact on your financial future.]( What exactly is going on? And how could massive change affect your relationship with us? Our executive publisher put together this [one-minute clip]( explaining everything. So please, take a quick minute to watch this important message. [Click Here Now to Open It.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Brian Maher] [Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please read our [Privacy Statement](. 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