Ben Shapiro

It’s the same tried and true policy that created the Great Depression. During the inflationary period following the institution of the Federal Reserve in 1913, the purchasing power of the dollar fell rapidly -- 56 percent by 1929. The easy availability of credit led to the same sort of economic bubble mirrored during the recent real estate boom.

The government’s response was the same, too. According to economist Murray Rothbard, within a week after the stock market crash of 1929, the Federal Reserve pumped cash into the system: it added $300 million to the private bank reserves; it doubled its holdings of government securities, adding $150 million to the reserves, and discounting $200 million for member banks. Writes Rothbard, “As a result, the weekly reporting member banks expanded their deposits during the fateful last week of October by $1.8 billion (a monetary expansion of nearly 10 percent in one week).” The Federal Reserve lowered its discount rate from 6 percent to 4.5 percent.

This, of course, did not stave off the Great Depression. Similarly, Germany, Britain and many other European countries moved off the gold standard in the early 1930s; this merely heightened the sense of urgency in the United States, where the gold standard was still in place, leading to runs on gold. FDR countered by dramatically inflating the currency in 1933, when he made it unlawful for private persons to hold gold; in 1934, he reset the value of the dollar at $35 per ounce of gold rather than the previous $20.67.

Without financial stability ensured by the free market gold standard, banks became even less willing to lend. FDR attempted to push up wage rates by backing labor against business; the result was prolonged unemployment, because prices were already too high.

And all of this justified more and more governmental intrusion.

Now Obama wants to pursue the same inflationary policies. He’s pushing the deficit beyond the breaking point. He’s using “card check” to inflate wages, producing unemployment. He’s destroying savings.

And he’s loving every minute of it. When it comes to inflation, very few people can identify its pernicious effects; it’s far easier to cite the dangers of laissez-faire capitalism. Which, of course, is Obama’s plan. Capitalism will be different when Obama finishes with it -- it will be another name for socialism, purposefully brought on by governmental measures.

Ben Shapiro

Ben Shapiro is an attorney, a writer and a Shillman Journalism Fellow at the Freedom Center. He is editor-at-large of Breitbart and author of the best-selling book "Primetime Propaganda: The True Hollywood Story of How the Left Took Over Your TV."
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