The Great Fiction of Fiat Money Cornucopia

In this day and age of easy and equal access to a practically infinite supply of independent information, a serious economic crisis can potentially have intellectually beneficial consequences. It can make people start questioning the "mainstream consensus" on, say, the nature of central banks, ex nihilio credit expansions and fiat money systems. In the best-case scenario, it can lead to the cleansing of a backlog of logically incoherent technocratic experiments with the economy and their replacement with well-tried, commonsensical principles of the monetary free market (notice that this last term is by no means a tautology).

However, what should make one at best cautiously optimistic about the prospects of the above scenario taking place is the fact - most forcefully and succinctly described by Bastiat - that statism of every kind draws its strength from clientelizing its victims, which always assumes the form of pitting them and their claims against one another. Union leaders, government bond holders, welfare recipients and politically connected bank oligarchs abhor the vision of sovereign debt defaults, so they can be relied on with regard to supporting debt monetization schemes and the resultant unprecedentedly vast inflationary redistribution of fiat monies' purchasing power. Rather than endorsing the commonsensical solution mentioned earlier, which would involve short-term pain for themselves and long-term gain for everyone (except the technocratic coercion wielders), they prefer short-term gain for themselves and long-term pain for everyone. What will be the ultimate nature of this pain - a relatively quick hyperinflationary meltdown or decades of protraced recession interspersed with regularly occurring partial debt defaults of public and private institutions - remains to be seen.

Some say the former would be more desirable insofar as it would vastly speed up the intellectual turnaround necessary to counter the root causes of the current economic woes - i.e., the acceptance of the logically incoherent, inherently unsustainable system of monetary socialism. But then again, did, say, the Germans really learn their Weimar lesson? After all, we should know all too well what the only really infinite thing in this world is.

In any case, Bastiat's most famous assertion needs to be expanded: it is not only the state in general, but fiat money in particular that is "the great fiction through which everybody endeavors to live at the expense of everybody else". Fiction in the most literal and insidious way imaginable.