"When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid," wrote Adam Smith in 1776. The quote shows that the people of the free world have not learned any lessons since the publication of The Wealth of Nations. By allowing our governments to issue paper money, we have given them a "direct interest in lowering the value of the currency, because it is the medium in which their own debts are computed," explained John S. Mill in his Principles of Political Economy.
During the bicentennial celebrations of the American republic, William Simon gave a disturbing testimony before Congress. In it, the Ford administration's Treasury secretary said, "In the case of the federal government, we can print money to pay for our folly for a time. … This is the direction in which the 'humanitarians' are leading us. …There is nothing 'humanitarian' about the panic, the chaos … that will ensue. There is nothing 'humanitarian' about the dictatorship … as terrified people cry out for leadership. The issue is not bookkeeping. … The issue is the liberty of the American people."
In his book The Money Mystery, Richard Maybury, better known as "Uncle Eric," explained in the late 1990s how the erratic behavior of the Federal Reserve and the White House have increased uncertainty, forcing investors in the U.S. economy to avoid the excessive risks associated with long-term plans. Unlike the typically gradual changes of the free-market mechanisms, an economy run by politicians and bureaucrats guided by our experts' theoretical models tends to produce revolutionary reversals in economic trends with unpredictable side effects. As a result we have ended up with a global financial system that has a hair trigger.
Back in the 1980s America went through a very painful withdrawal from its addiction to inflation. Withdrawal from Keynesian deficit spending is going to hurt even more, but we must demand that the cure be administered now, before we turn into a mega version of Greece. When Treasury Secretary Simon gave his testimony, he described his years in office as a "bad dream" and feared that there was no one to wake the country up - neither politicians nor the media nor the people who were discussing it. "The battle," he said, "is being lost, and not a shot is being fired." The good news is that we are waking up and finally having that discussion. I don't know what "winning the future" means, but please, let's not squander our inheritance.