The Chief Struggle: Part 1. Banks

Today I was accused, as I have been often: “You always find some way to make it about the government.” I acknowledged, yes, I do always find some way to make it about the government, and there is good reason for it. Today’s accusation was prompted by a sit-com during which a character called Animal Control to take away a neighbor’s pet pig, which had not so much as set foot on anyone else’s lawn; I commented, joking with a tinge of knowing, “That’s just like people: get the government to do their dirty work.”

The chief struggle in society is not between the rich and poor, the haves and have-nots, the Republicans and the Democrats, the creationists and the evolutionists, the owners and the workers, the whites and blacks and browns and yellows and reds and everyone in between, the conservatives and the liberals, the Christians and the Muslims and the Jews and the sikhs and the Baha’i and the atheists, the factories and the farms, the red states and the blue states, or any other oft-touted struggles. (There exist real struggles in all these scenarios, to be sure, but they all pale in comparison to the chief struggle.) The chief struggle in society is between the political class and everyone else, what we might call the rulers and the ruled.

Let me illustrate this by putting forth a traditional class struggle, what in recent years has been dubbed “Wall Street vs. Main Street.” The politically connected banks have had access to private reward and socialized risk. When their profits were propped up throughout the last decade by government housing subsidies and government-mandated bad lending practices, they reaped the rewards, but when that bubble started to deflate in 2007 and burst in 2008, their losses were socialized, i.e., passed on to the taxpayers in the form of bailouts and protection in the form of regulations.

In fact, every bank in the USA is a creation of the national government and exists only by its good graces. Each bank participates in a web of dollar creation, distribution, and lending; many legal protections exist for banks to counter the fact, on the unregulated market, their practices would be unsustainable and they would be out of business as quickly as a bank run could be made. The politicians recognize the unsound nature of their business, and they draft protective legislation to (1) keep everyone else out of the banking business and (2) prop up the banks they created in the first place.

When taxpayers, loan seekers, and savers—in short, average people—are victimized by banks, their victimization is only possible because of the regulations put into law by politicians.

Thomas Jefferson thought a central, government-controlled bank was so dangerous—more so than standing armies!—he created a new word for those who agitated for it: mountebanksters. My word processor notwithstanding, this is a great amalgam of mountebank and bankster; it highlights just what damage a central bank can do within society.

There are many other traditional struggles that are escalated or created by government action. I hope to highlight some of these in the coming weeks.