Nor, should the government necessarily pay off the national debt, anymore than IBM should necessarily eliminate all of its debt on its balance sheet. There are some things for which it is prudent to fund by borrowing money.
But here is the rub, my purchasing power has increased massively over the past 25 years at the same time the government debt increased dramatically. Prices might have gone up on average, but as any economist knows, if price changes are anticipated, then they have no adverse effects on the economy or purchasing power. Unless you fall prey to the cardinal economic sin of money illusion.
Always? People are theives and liars, so are corporations. The government is no different.
These are some of my favorite quotes from Ludwig von Mises. He is known as the head of the “Austrian school” of economics. He was a Professor of Economics at the University of Vienna from 1934 to 1940
“The notion that it is possible to pursue a credit expansion without making stock prices rise and fixed investment expand is absurd.”
“Credit expansion is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate capitalists, to contrive everlasting booms, and to make everybody prosperous.”
“Firmly committed to the principles of interventionism, governments try to check the undesired result of their interference by reporting to those measures which are nowadays called full-employment: unemployment doles, arbitration of labor disputes, public works by means of lavish public spending, inflation, and credit expansion. All these remedies are worse than the evil they are designed to remove.”
“It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this the state of affairs, the government is able to collect the money that it wants to spend. **Government is the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. **Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.”
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There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as
a final and total catastrophe of the currency system involved.”
“If one wants to avoid the recurrence of periods of economic depression, one must start by preventing the emergence of artificial booms. **One must prevent the governments from embarking upon a policy of cheap interest rates, deficit spending, and borrowing from the commercial banks. **This is, of course, a very difficult task. Governments are in this regard very obstinate. They long for the popularity that booming business conditions seldom fail to win for the party in power.
The unavoidable crash, they think, will appear only later; then the other party will be in power and will have to account to the voters for the evils which their predecessors have sown.”
