Deglobalization and Economic Fascism

From a monetary policy induced globalization boom to a deglobalization bust, the global political economy is ostensibly undergoing a dramatic transformation.

According to the Economist (bold emphasis mine), ``THE economic meltdown has popularised a new term: deglobalisation. The process of the global integration of goods, capital and jobs is in trouble. The IMF predicts global growth of 0.5% this year, the worst in 60 years. World trade has plunged. Foreign direct investment, a common route to transfer skills and technology from rich to poor countries, fell by 21% in 2008 to $1.4 trillion and will contract by another 12-15% this year. Unemployment is expected to rise by 30m from 2007 levels by the end of this year. A poll taken in the last two months of 2008 by Edelman for the World Economic Forum found that 62% of repondents in 20 countries said they trusted companies less, with a majority keen on more state regulation.”

This trend towards more government, higher taxes and increased regulation or socialism is based on the belief of quick fixes. People are now invoking for a sacrifice of civil liberties for economic "salvation" based on serfdom.

And this had been foretold by Ludwig von Mises (Human Action), ``The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about.”

This addiction to inflation is also equivalent to embracing economic fascism.

Professor Gary North in Economic Fascism And The Bailout Economy elaborates (bold highlight mine)…

``Liberals love to call conservatives fascists. The problem is, the liberals are right. Of course, well-informed conservatives like to call liberals fascists, and they are correct, too. Everyone who believes in the efficiency of the so-called government-business alliance is a fascist.

``The fascist State was always an attempt to control private industry by means of inflation, taxation, and regulation. Fascism was always a system of keeping the big boys alive and happy at the expense of the taxpayers. Of course, the faces changed. The system was always one gigantic system of cartels, regulation, and fiat money.

``The modern economic system is one gigantic interlocking system of promised bailouts, beginning with Social Security. In commerce, it is a system designed to keep large producers protected from consumers…

But will a more socialistic form of government succeed in restoring economic growth?

``This economy will revive, but it will revive a new basis. It is no longer possible for someone who understands Austrian School economics to look at this economy as anything remotely resembling a free-market economy. At the very core of the free-market economy, as Mises said in 1912, is the monetary system. That system is now completely and openly run by a cartel that is now trapped by the Federal government. The Federal Reserve System is soon going to have to bail out the Federal government. The Federal government is bailing out the commercial banks, and if the Federal government cannot bail out the banks, the Federal Reserve has got to do it directly. In either case, the banks are busted…

``These scholars agree: we are seeing the bankruptcy of every Western government that has made too many big promises to too many voters regarding free healthcare and guaranteed retirement. All of it will collapse. The tatters of the promises will point to the tatters of those who made the promises -- politicians -- and the tatters of the system that supposedly was going to guarantee delivery of the promises.

``The academics still believe in the healing power of the State. The voters still believe this, too. But voters are catching on more rapidly than the academics that the State is running out of wiggle room. Millions of voters have figured out that they are going to get stiffed. They don't know what to do about it, but at least they understand that they really are going to get stiffed…

Yes, economic transformation will occur. However, economic realities will compel a reawakening of the people mesmerized by the delusion of prosperity based on policy based manipulation.

And how will this happen?

``We will have another round or two of centralized government, and probably more than one or two rounds of increased monetary expansion. But what we will not have is a restoration of anything resembling the financial world that existed prior to September 2008. That world is gone. The insiders will not get it back. They may get an imitation of it, based on fiat money that does not buy very much, but they will not see the world of 2007 restored. The power base of the modern fascist State is unraveling rapidly."

According to von Mises, ``The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market. But it could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”

In other words, repeated attempts to manipulate-the grandest experiment of all time-the fractional reserve paper money system will lead to a government debt bubble which may ultimately implode at the cost of the world’s monetary system.

Professor North’s suggested course of action…

``This is why it is important for you to preserve your assets by not believing the official assurances. Put your money where the experts tell you should not put your money. You should take your money out of those segments of the economy which the experts say you should put your money, and will soon boom. They have ignored the fact that the stock market has been a losing case since March of 2000. They would not admit it then; they will not admit it now. Anybody who bought and held a portfolio of indexed American stocks in March of 2000 has lost well over half of his money. Investors will learn, even though academic economists will not.”

The last word from von Mises, ``It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights.”