Tuesday May 22

Money for Nothing

I was surprised to see that, of all people, Michael Arrington of TechCrunch has started a discussion about the dark side of the boom that is descending (again) on Silicon Valley. What disappoints me as I read the many responses is that nobody dares to offer an explanation that cuts to the root of the problem. In my view, the tide of greed that washes over the Valley once per decade is not a force of nature, it is the hand of US government policy.

Arrington's rant is some of the best evidence you can have of the damaging effect that the American monetary system has on a society of honest, industrious, caring people. I live and work in Silicon Valley because the culture here reminds me of what my country is supposed to be about. There are so many people here who understand that work is not about money, but the vitality one feels from creating things that people want. Unfortunately, the Fed and its printing press have a policy of cheating the people that do honest work by flooding the economy with money that can be had by people who do nothing to earn it. This might sound like fiction, but it has been a fact for almost a century. I can't recommend enough that you learn about the Federal Reserve and the pros and cons of its inflationary policies.

It is difficult to explain the harmful effects of deliberate inflation to the average person, but it really hits home for anyone that has observed what Arrington is describing. Since the Fed came to be in 1914, more and more businesses have been able to succeed financially while providing little or no benefit to society. Too many Americans take jobs at these companies and look the other way. Too many people trying to do things honestly are drowned out, and find themselves unable to survive without playing the game. It doesn't have to be this way, unless we continue to blame the random winds of fate for this cycle instead of identifying the institutions that cause it intentionally.

What scares me the most about all the ignorance about inflation is that when the next bust/recession/depression happens, people will be angry and looking for a scapegoat, but they won't be looking for it in the right place. The Fed has already survived through too many crises that it created on the world's stage, only because people don't understand how money works, and we tend to try and legislate our way out of a crisis instead. Silicon Valley should be smart enough to see through that.