I.O.U.S.A - Addison Wiggin [55]
Q: But if we understand that that ’ s such a despicable concept, to give your children a pile of debt, how is it that we as a country have bought into this? Is it happening on an individual c08.indd 114
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level or is it happening in Washington or is it happening in both places?
Bill Bonner : Things that people will not do to themselves and their own children, they will do collectively. We see episodes of collective madness all the time. As a recipient of government money, such as Medicaid or an agricultural subsidy, you think that somebody else ’ s children are going to pay for it. The debt is in the hands of the public and it becomes so lost in generalities that you ’ re not really worried about your own children having to pay off that debt. You know that you ’ ve got money in the present.
You ’ re not going to worry that most likely someone else ’ s children are going to be paying. Institutions have a tendency to work this way. If a politician wants to get reelected, he ’ ll get reelected by giving people something. And if you have to take it from them fi rst, it ’ s not a very good deal. So the voter will say, “ Wait a minute, you took $ 10 in taxes from me, and now you ’ re giving me back $ 10? That ’ s not a very good deal. ” The politician gets the vote when he gives the person $ 11. And where does the politician get that other dollar? He has to borrow it from somewhere. That ’ s a good deal for the taxpayer. But that one dollar is now hanging over the heads of the whole society. Over time, this system of buying power and buying votes becomes institutionalized and entrenched.
And you gradually get a more and more corrupt system where you have to spend more and more money in order to keep voters voting for you. Finally, the system collapses, but that ’ s sometime in the future and we haven ’ t seen that in America yet.
Q: Warren Buffett says that people should understand economics, because if they don ’ t, they ’ re going to be subject to a lot of demagoguery. If they don ’ t understand what ’ s going on fi nancially around them, they can buy into a lot of really bad reasoning and bad logic from their leaders that may want to take them off to war. And that to me seemed to echo your “ As We Go Marching ” section in your book. Can you explain to me why that becomes the option?
Bill Bonner : Hemingway said the fi rst panacea of a mismanaged government is the infl ation of the currency, and the second is war.
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Both bring a temporary prosperity, but both bring permanent ruin. When you start spending more money than you have in a government, fi rst you get the support of the masses and that ’ s how you get reelected. But eventually it becomes harder and harder to do that; you run out of money, and you begin to get a backlash from people when they see that the programs don ’ t work. They see their money squandered, they see infl ation, they see debt, and you get resistance, primarily from the most conservative citizens or people who are afraid of those kinds of things. And the way to overcome that is to go to war, because nobody, apparently, can resist the call to arms. You know, if you have a real war, everybody tends to get behind it. We ’ ve seen that recently in America. Almost any war, for almost any circumstance or any pretext, is a way of unifying the population behind its leaders. That ’ s why George W. Bush wanted to be a war president, because all of the great presidents in American history were either war heroes or served as presidents during war: Lincoln, Wilson, and Washington — after the war, but he was a military hero; Eisenhower was a military hero. People get behind you when you ’ re going to war. So when the rascals and scoundrels in public offi ce can no longer spend their way to popularity, then they typically choose