As it happened, it was the reparations crisis that led to Germany’s insane printing press monetary spree and the destruction of the German middle class in the 1923 hyperinflation. And without that society-crushing development along with all of the above, the history books would have never recorded the Hitlerian ascent to power and all the evils that flowed thereupon.
Herewith is a capsulized dissection which attempts to explain why Stalin and Hitler should have never happened. Accordingly, the hot, cold and Forever Wars wars that followed thereafter condemn the case for the American Empire, not make it; and they show that Trump’s America First is a far more appropriate lodestone for national security policy than Imperial Washington’s specious claim that America is the Indispensable Nation.
The Great War had been destined to end in 1917 by mutual exhaustion, bankruptcy and withdrawal from the utterly stalemated trenches of the Western Front. In the end, upwards of 3.3 million combatants had been killed and 8.3 million wounded over four years for movement along blood-drenched front-lines that could be measured in mere miles and yards.
Still, had America stayed on its side of the great Atlantic moat, the ultimate outcomes everywhere would have been far different. Foremostly, the infant democracy that came to power in February 1917 in Russia would not have been so easily smothered in its crib.
There surely would have been no disastrous summer offensive by the Kerensky government to rollback Germany on the eastern front where the czarist armies had earlier been humiliated and dismembered. In turn, an early end to Russia’s bloody and bankrupting impalement on the eastern front would also likely have precluded the return of Lenin to Russia in a German boxcar and the subsequent armed insurrection in Petrograd in November 1917. The flukish seizure of power by Lenin and his small band of fanatical Bolsheviks, in turn, would most certainly never have happened.
CARACAS, Oct 1 (Reuters) – Venezuela on Friday launched its second monetary overhaul in three years by cutting six zeros from the bolivar currency in response to hyperinflation, simplifying accounting but doing little to ease the South American nation’s economic crisis.
The plan seeks to makes accounting more straightforward at businesses and banks, where systems can no longer handle the huge figures. Venezuela’s year-on-year inflation is 1,743%, according to the Venezuelan Finance Observatory. A minimum wage salary is barely $2.50 per month.
“Honestly, I think hyperinflation is too strong, this is already the third reconversion,” said Alfredo Bohorquez, a 55-year-old selling drawings on a boulevard in eastern Caracas. “This one will last three or four years, maybe less.”
President Nicolas Maduro’s government in 2018 removed five zeros from the currency due to high prices. That came a decade after the late President Hugo Chavez subtracted three zeros from the bolivar with the promise of single-digit inflation, which was not achieved.
The once-prosperous OPEC nation is suffering a years-long economic crisis that has led millions of Venezuelans to emigrate. Maduro’s socialist government blames U.S. sanctions for the country’s woes, while critics assign responsibility to interventionist macroeconomic policies.
The widespread adoption of the U.S. dollar for commercial transactions in Venezuela will further dilute the relevance of the new scheme. Bolivars in cash in Venezuela are rarely used for routine purchases.
Many people on Friday were using dollars in cash for purchases in supermarkets, pharmacies, and stores selling school supplies and uniforms, Reuters witnesses said. Bank systems were functioning normally after an hours-long planned outage early on Friday morning as they converted to the new currency scheme.
“The economic imbalances in the country are very acute and the zeros that are being removed today will soon return,” said economist Jose Manuel Puente. “The reconversion will have no impact in macroeconomic terms.”Reporting by Vivian Sequera and Mayela Armas in Caracas Writing by Brian Ellsworth and Luc Cohen Editing by Rosalba O’Brien
The government last week announced it would lop six zeros off the currency – a million-to-1 change – with new bills as of Oct.1. Currently, the 1million bolivar note is the largest denomination. It’s worth roughly a U.S. quarter.
Inflation happens when government prints money and dilutes the value.
That was a boon for the private sector, which began importing all sorts of goods that Venezuelans had not seeing in years.
Regina Garcia Cano and Juan Pablo Arraez ASSOCIATED PRESS CARACAS, Venezuela – Yosmar Sanguino says she struggles to put food on the table for her two daughters and three grandchildren in a low-income neighborhood of Venezuela’s capital.
She often whips up arepas – traditional flat, round corn patties – with butter and cheese. But it’s hard to afford even those few ingredients.
‘There is food, but the money is lacking. Because if you buy one thing, you can’t buy the other,’ she said. ‘If you buy butter, you can’t buy cheese. Or if you buy the cheese, you can’t buy the butter.’
And she’s among the relatively fortunate Venezuelans who have at least some access to dollars – money sent by a son who emigrated to the United States as the the South American nation’s social, political and economic crises worsened.
More than 40% of Venezuelan households receive some remittances from abroad, which last year were expected to reach $4billion, according to the consultancy firm Econoanalitica, based in Caracas, the capital. The money often flows through a network of third-party foreign bank account holders who charge commissions, digital payment methods such as Zelle or via friends or relatives traveling home with cash.
The country’s socialist government two years ago gave up its long and complicated efforts to restrict transactions in dollars in favor of the local bolivar, whose value has been obliterated by the world’s worst inflation.
That has largely ended shortages that for years left markets with chronically empty shelves. But it means many Venezuelans – paid in bolivars whose value evaporates by the day – can’t afford what’s on those shelves.
The government last week announced it would lop six zeros off the currency – a million-to-1 change – with new bills as of Oct.1. Currently, the 1million bolivar note is the largest denomination. It’s worth roughly a U.S. quarter.
But without other measures, that would have little to no effect on the continuing erosion of value. The government already had cut three zeros in 2008 and five more in 2018.
Despite repeated multiplications of the official minimum wage earned by millions of Venezuelans, it still amounts to about $2 – not even enough to buy a kilogram of chicken.
Millions of Venezuelans anxiously wait for the semi-monthly arrival of a heavily subsidized box of goods that costs between 43 cents and 62 cents and usually includes corn flour, rice, oil, sugar, pasta and beans. Many scramble to make ends meet with side jobs – home bakeries, haircuts, car repairs, food deliveries, barter.
And for some, the ends don’t meet at all.
Per capita consumption of protein dropped 60% between 2013, when President Nicolás Maduro took office, and 2019, according to investment firm Torino Capital. Consumption of chicken plunged 82% during that period, while eggs’ fell 66%.
A report from the U.N. Food and Agriculture Organization found that roughly a third of Venezuelans reported they had no food stored up and 11 percent reported sometimes going a day without food. The U.N. World Food Program in 2019 reported that 6.3% of children under 5 years were acutely malnourished, 13.4% were stunted and 30% were anemic. About 24% of women between the ages of 15 and 49 were also anemic.
The value of the bolivar had been collapsing for years despite – or because of – government efforts to control the exchange rate. It rapidly expanded the money supply even as there was less to spend it on, with an economy that was producing fewer goods and eventually exporting less oil.
But massive blackouts in 2019 began to change the dynamic, said Dagnelly Duarte, an economist for Torino Capital, which has a special focus on Venezuela.
Consumers without an enormous stash of paper bolivars couldn’t go the grocery store because credit card terminals weren’t working. People charged $1 to power up cellphones. Bags with ice went for $10. By the end of the year, the government had abandoned efforts to constrict the U.S. dollar.
That was a boon for the private sector, which began importing all sorts of goods that Venezuelans had not seeing in years.
Duarte said sellers initially were wary of setting prices in dollars; most customers had none and many feared the government would still crack down.
But after awhile, ‘it became evident that, ‘Look, I’m using dollars and the sale of the products is flowing better.’’
These days, Duarte said, over 60% of transactions are in U.S. dollars – a fact that snarls life for those without greenbacks.
‘It’s very complicated for a person like me, who retired from the university – 27 years of service, professional. I had the position of head of public relations … and my salary does not even reach $5,’ said Germán Socas, who was buying fruits and vegetables at a market in Caracas.
Even dollar prices have risen sharply, partly because the currency itself is less scarce. A set of basic goods for a family of five – including flour for arepas, chicken, sardines and butter – in May cost almost four times more in dollar terms than it did two years ago, according to Torino Capital.
‘In 2019, when (the use of) the dollar was still restricted, with $100 dollars you could make a complete market run, and you still had plenty. Currently, the basic basket is around $390 (a month),’ Duarte said.
The shelves stocked with imported olive oils and imported cheeses give ‘an image of prosperity’ said travel agent Viviana Stifano after visiting a supermarket. ‘But it is an environment of scarcity at the same time because now there is an excess of products, but you do not have the purchasing power to buy the ones you want. You get what you need to barely live.’
All sides blame part of Venezuela’s problems on falling oil prices. Critics blame government mismanagement and corruption for the collapsing output of the country’s main export and its failure to diversify the economy away from oil. From a peak of about 3.2million barrels of oil a day in 1997, the country with the world’s largest oil reserves today pumps out fewer than 500,000 barrels.
The government blames U.S. sanctions for many of its economic woes and Maduro last month accused a few rich Venezuelans, whom he did not name, of manipulating prices, warning of possible action against them. ‘There are no untouchables in the Venezuelan oligarchy,’ he said.
Two years ago Venezuela stopped restricting transactions in dollars, which has largely ended shortages, but has meant many Venezuelans who are paid in bolivars can’t afford what’s on those shelves.Ariana Cubillos/AP
That the largest signature on the Declaration of Independence was signed by the richest smuggler in North America was no coincidence. He was hopping mad. Parliament in 1773 had cut the tax on tea imported by the British East India Co., so the cost of British tea went lower than the smugglers’ cost on non-British tea.
This goes back to a term paper I wrote in graduate school. It was on Colonial taxation in the British North American Colonies in 1775. Not counting local taxation, I discovered that the total burden of British imperial taxation was about 1% of national income. It may have been as high as 2.5% in the southern Colonies.
In 2008, Alvin Rabushka’s book of almost 1,000 pages appeared: Taxation in Colonial America (Princeton University Press). A review published in the Business History Review summarizes the book’s findings.
Rabushka’s most original and impressive contribution is his measurement of tax rates and tax burdens. However, his estimate of comparative transatlantic tax burdens may be a bit of moving target. At one point, he concludes that in the period from 1764–1775 “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, not taking into account the higher average income and consumption in the Colonies” (p. 729). Later he writes that on the eve of the Revolution, “British tax burdens were 10 or more times heavier than those in the Colonies” (p. 867). Other scholars may want to refine his estimates, based on other archival sources, different treatment of technical issues such as the adjustment of inter-Colonial and transatlantic comparisons for exchange rates or new estimates of comparative income and wealth. Nonetheless, no one is likely to challenge his most important finding: the huge tax gap between the American periphery and the core of the British Empire.
Was the Declaration of Independence Built Upon a Lie?
The Colonists had a sweet deal in 1775. Great Britain was the second-freest nation on Earth. Switzerland was probably the most free nation, but I would be hard-pressed to identify any other nation in 1775 that was ahead of Great Britain. And in Great Britain’s Empire, the Colonists were by far the freest.
I will say it, loud and clear: The freest society on Earth in 1775 was British North America, with the obvious exception of the slave system. Anyone who was not a slave had incomparable freedom.
Jefferson wrote these words in the Declaration of Independence:
The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.
I can think of no more misleading political assessment uttered by any leader in the history of the United States. No words having such great impact historically in this nation were less true. No political bogeymen invoked by any political sect as “the liar of the century” ever said anything as verifiably false as these words.
The Continental Congress declared independence on July 2, 1776. Some members signed the Declaration on July 4. The public in general believed the leaders at the Continental Congress. They did not understand what they were about to give up. They could not see what price in blood and treasure and debt they would soon pay. And they did not foresee the tax burden in the new nation after 1783.
In his book, Rabushka gets to the point:
Historians have written that taxes in the new American nation rose and remained considerably higher, perhaps three times as much, than they were under British rule. More money was required for national defense than previously needed to defend the frontier from Indians and the French, and the new nation faced other expenses.
So as a result of the American Revolution, the tax burden tripled.
The debt burden soared as soon as the Revolution began. Monetary inflation wiped out the currency system. Price controls in 1777 produced the debacle of Valley Forge. Percy Greaves, a disciple of Austrian economist Ludwig von Mises and for 17 years an attendee at his seminar, wrote this in 1972:
Our Continental Congress first authorized the printing of Continental notes in 1775. The Congress was warned against printing more and more of them. In a 1776 pamphlet, Pelatiah Webster, America’s first economist, told his fellow men that Continental currency might soon become worthless unless something was done to curb the further printing and issuance of this paper money.
The people and the Congress refused to listen to his wise advice. With more and more paper money in circulation, consumers kept bidding up prices. Pork rose from 4 cents to 8 cents a pound. Beef soared from about 4 cents to 100 a pound. As one historian tells us, “By November 1777, commodity prices were 480% above the prewar average.”
The situation became so bad in Pennsylvania that the people and legislature of this state decided to try “a period of price control, limited to domestic commodities essential for the use of the Army.” It was thought that this would reduce the cost of feeding and supplying our Continental Army. It was expected to reduce the burden of war.
The prices of uncontrolled imported goods then went sky-high, and it was almost impossible to buy any of the domestic commodities needed for the Army. The controls were quite arbitrary. Many farmers refused to sell their goods at the prescribed prices. Few would take the paper Continentals. Some, with large families to feed and clothe, sold their farm products stealthily to the British in return for gold. For it was only with gold that they could buy the necessities of life which they could not produce for themselves.
On Dec. 5, 1777, the Army’s quartermaster-general, refusing to pay more than the government-set prices, issued a statement from his Reading, Pennsylvania, headquarters saying, “If the farmers do not like the prices allowed them for this produce, let them choose men of more learning and understanding the next election.”
This was the winter of Valley Forge, the very nadir of American history. On Dec. 23, 1777, George Washington wrote to the president of the Congress “that, notwithstanding it is a standing order, and often repeated, that the troops shall always have two days’ provisions by them, that they might be ready at any sudden call; yet an opportunity has scarcely ever offered, of taking an advantage of the enemy that has not been either totally obstructed, or greatly impeded, on this account… We have no less than 2,898 men now in camp unfit for duty, because they are barefoot and otherwise naked… I am now convinced beyond a doubt, that, unless some great and capital change suddenly takes place, this Army must inevitably be reduced to one or other of these three things: starve, dissolve or disperse in order to obtain subsistence in the best manner they can.”
“There Was No British Tyranny, and Surely Not in North America”
Only after the price control laws were repealed in 1778 could the Army buy food again. But the hyperinflation of the Continentals and state-issued currencies replaced the pre-Revolution system of silver currency: Spanish pieces of eight.
The proponents of independence invoked British tyranny in North America. But there was no British tyranny in North America.
In 1872, Frederick Engels wrote an article, “On Authority.” He criticized anarchists, whom he called anti-authoritarians. His description of the authoritarian character of all armed revolutions should remind us of the costs of revolution.
A revolution is certainly the most authoritarian thing there is; it is the act whereby one part of the population imposes its will upon the other part by means of rifles, bayonets and cannon — authoritarian means, if such there be at all; and if the victorious party does not want to have fought in vain, it must maintain this rule by means of the terror which its arms inspire in the reactionists.
After the American Revolution, 46,000 British Loyalists fled to Canada and other places controlled by the crown. They were not willing to swear allegiance to the new Colonial governments. They retained their loyalty to the nation that had delivered to them the greatest liberty on Earth. They had not committed treason.
The revolutionaries are not remembered as treasonous. The victors write the history books.
The Boston Tea Party: A Protest Against Lower Tea Prices
What would libertarians — even conservatives — give today in order to return to an era in which the central government extracted 1% of the nation’s wealth? Where there was no income tax?
Would they describe such a society as tyrannical?
That the largest signature on the Declaration of Independence was signed by the richest smuggler in North America was no coincidence. He was hopping mad. Parliament in 1773 had cut the tax on tea imported by the British East India Co., so the cost of British tea went lower than the smugglers’ cost on non-British tea.
This had cost Hancock a pretty penny. The Tea Party had stopped the unloading of the tea by throwing privately owned tea off a privately owned ship — a ship in competition with Hancock’s ships. The Boston Tea Party was, in fact, a well-organized protest against lower prices stemming from lower taxes.
So once again, I’m not celebrating the Fourth of July today.
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