Economic Outlook: Economic Summits and Our Era of Monetary Inflation

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In the era of monetary inflation, only economic self-sufficiency can improve your economic outlook.

As you probably know, another Economic Summit Meeting was held in Germany in mid-July and–as usual–Little Jimmy Carter and all the other world “leaders” who attended declared the gathering a great success. And all the newspapers and television journalists who covered the confab then ran stories telling us that the Summit was, indeed, a Great Success.

As this column reported following the London Economic Summit back in May 1977, however, the real story of the meeting was the fact that it was held at all.

Back in the “Good Ol’ Days” before the printing press money boys gained control of most of the world’s governments, you know, there simply wasn’t any need for such grandstand plays to reassure the planet’s peons that “someone’s doing something” about the earth’s (politically created) economic ills. It was 31 1/2 years between the major economic conference held in Bretton Woods, New Hampshire in July of 1944 and the one held in France November 15 and 16, 1975. But in just the following two and a half years, the world has witnessed three more Economic Summits (one in Puerto Rico in June of 1976, a second in London in May of 1977, and–now–a third in Germany in July of 1978). More are on the way.

And, as this column asked after the London gathering, “Why is it that the more frequently our ‘leaders’ get together to ‘solve’ our economic problems, the faster the world’s economy and economic outlook goes to hell in a hand basket? And just how long will it be until those same ‘leaders’ declare monthly–or weekly–Economic Summits?”

Era of Monetary Inflation

The stock market goes up one week and down the next and the bulls seem to stay bullish and the bears bearish. And all the time–over the long haul–as the traders and the buyers and the sellers count their short-term paper profits and losses, the real value of the stock market (thanks to the erosion of inflation) continues to go down. The value of the Dow Jones Industrial Average Index –when computed in constant 1967 dollars–is now bouncing around down in the 500-550 region, not up in the 850-900 area as currently (late July 1978) reported (in inflated dollars).

Which, of course, is why the smart money for years has been going into real wealth–gold, silver, land, homes, liquor, works of art, diamonds, crude oil, tools, long-term-storage food, etc.–that its owners can touch and feel and which tends to increase in value as paper dollars and other paper promises (bonds, stocks, pension funds, social security, etc.) continue to erode away.

How about you? How smart has your money been? Is it tied up in social security, paper dollars, stocks, bonds, and insurance policies, or food, land, a home, gold, silver, etc.? “A penny saved is a penny earned” during an era of inflation only if that penny is saved in the right way. And this is an era of inflation–actually, increasing inflation–as you well know.

But what does that word “inflation” mean–on a “we can feel it” gut level–anyway? How will it affect our lives?

Well, as Federal Reserve Board Governor Henry C. Wallich told the graduating class of Fordham University’s Graduate School of Business in late June: “At the going rate of inflation [officially, about 8% at that time … higher now–The Editors], a year at a leading college that today costs $7,000 will cost $32,630 by the time your children approach college age.” And “if you buy an average home (today), by the time your present life expectancy ends, your heirs could sell it for almost $2.5 million.”

Or–as Jack Vanier, president of the Kansas Livestock Association–noted in another recent speech: At a 10% rate of inflation (which is about what we currently have), any dollar you stash away in savings right now will purchase only 53¢ worth of today’s goods in 1983 just five short years from now.

Or–as Vermont Royster wrote in an open letter to Little Jimmy Carter in the March 22, 1978 issue of The Wall Street Journal: It’s awfully hard to get ahead of the game, even when your money is drawing 7% interest in the bank. That 7%, as Mr. Royster pointed out, may sound “like a lot.” But is it? Not really. Not when the minimum tax rate on those earnings is 14% (which, for someone earning just $6,000 in other income, turns into an effective tax rate of 20%). Deduct that–and inflation for the year–and Royster’s prudent saver finds that he hasn’t earned anything at all. In fact, he was lucky if his real wealth didn’t shrink while those paper dollars were in the bank drawing interest. As Royster concluded, “It’s no wonder people worry in the middle of the night.”

And the inflation juggernaut rolls on, even as the world passes into a new age of slower economic growth. As the prestigious Swiss-based Bank for International Settlements pointed out in a recent report, “Even with the best combination of luck and wise policies, the western industrial world won’t be able to return to the growth path that prevailed (from the end of World War II) until 1973 (when the OPEC nations quadrupled the price of oil).”

The BIS then went on to state that there is definite evidence of “the possibility of a slowdown of the ‘Kondratieff’ type after several decades of virtually uninterrupted fast growth.”

What it all boils down to, of course, is that the Little Guys (you and me) are gonna get it in the neck goin’ and comin’ no matter what happensif we continue to play the game with paper dollars and other funny money. Put your faith in the brayings of politicians and Keynesian economists and the people who sell stocks, bonds, insurance policies, annuities, pension plans, social security, and other forms of paper “wealth” and you’re probably gonna continue getting burned just the way you’ve been getting burned for the last several years, only more so.

So–as we’ve said on this page so many times in the past–wise up. Open your eyes. Face the facts. See things as they are, rather than as our “leaders” or the E-2 Credit Company would have you see them.

Western Man’s 450-year-long expansionary binge–which was fueled by inexpensive, plentiful energy and other natural resources–is now drawing to a close. And, just as Walter Prescott Webb predicted 27 years ago, the industrialized nations of the world are having a difficult time understanding what is happening to them. The sooner our “leaders” realize this and begin converting the planet’s countries to a steady-state economy, the better.

In the meantime, there’s no need for you to wait until those “leaders” wise up. If you haven’t already done so, learn to become as food and energy self-sufficient as possible, and do it. Convert to wood heat. Build or buy a solar collector and use it to supply your household with hot water. Convert the whole dwelling to solar heat! And if it won’t convert, move your family into another residence that will. Build a greenhouse, and use it. Plant a garden. Can your produce, dry it, or keep it in a root cellar. Start a backyard mini-flock of chickens. Feed your leftovers to a pig. Raise rabbits. Get yourself a cow or a couple of milk goats.

Strive, also, for economic self-sufficiency. Learn a basic trade or set up a home business that will always be in demand and which you or your family can control. Put yourself on a pay-as-you-go basis. Invest your excess funds in real wealth: land, how-to books, quality tools, and trade goods (liquor, tobacco, salt, ammunition, toilet paper, silver coins, coffee, etc.) that will always have a value no matter what our addled economists and politicians do with their paper promises of future security.

And what if the worst never comes to pass? What if our “leaders” really do work a miracle and dampen inflation before it plunges us all into a depression? What if they actually work their magic so well that times (as promised) turn around and get better and better from now until eternity?

Wonderful! But keep right on tending that garden and converting yourself to solar energy anyway. At the very least, you’ll still be ahead of the game. It’s hard to beat the satisfactions of self-sufficiency and independence. Even in “normal” times, economic virtue is Its own reward.

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