Continental Army, Continental Congress, Inflation, Wage & Price Controls, Paper Money, Specie, IOUs, Impressment and Repudiation

Posted by PITHOCRATES - May 3rd, 2012

Politics 101

The Articles of Confederation made the United States of America a Confederacy of Sovereign States that had Little Power to Raise Revenue

By the time the Continental Army left Valley Forge they could hold their own against the British Army.  The British couldn’t push them around any longer.  They became so good that they fought the war to a standstill.  They came close to some major wins on the field of battle.  But close didn’t diminish the staying power of the British Army.  And they stayed.  On the battlefield.  And in their cities.  Dragging the conflict out for a total of 8 years.  And no matter what era of warfare you use to measure war-years 8 years of war is very costly.  Someone has to pay for it.  And, ultimately, it’s the people.  Either through taxation.  Or the loss of wealth through inflation.  Or simply the loss of wealth through the losing of your stuff.  And going without.  Because the army fighting for your liberty had no choice but to take what was yours.

This made the Revolutionary War unlike other wars.  For this war was about liberty.  Property rights.  The tyranny of a distant power.  And unjust taxation.  In other words this war was against all the things that made fighting a war possible.  You can’t really draft men to fight in a country that stands for liberty.  You just can’t confiscate the things you need to wage war from your people in a country built upon the principle of property rights.  You can’t declare martial law and suspend the rule of law on people you deem not to be patriotic enough in supporting the cause when you’re fighting the tyranny of a distant power that does.  (Even the Americans gave British soldiers a fair trial for the Boston Massacre).  And taxes?  The people that dumped tea into Boston Harbor over the principle of no taxation for revenue purposes without representation in Parliament was not going to be able to tax their people on a federal level.  Which proved a big obstacle in paying for the war to win their liberty.

The Articles of Confederation made the United States of America a confederacy of sovereign states.  And those sovereign states held the real power.  Virginia.  Massachusetts.  Pennsylvania.  New York.  And the other 9 sovereign states.  Not the United States of America.  That confederation that was waging war against the mightiest power in the world.  Which made raising funds difficult.  For without the power to levy taxes all they could do was ask.  Just like George Washington did all of the time.  Especially during that horrible winter at Valley Forge when his army was naked and starving.  He asked the Continental Congress for provisions.  And the Continental Congress asked the several states for their apportioned funds raised by their state legislatures.  Per the Articles of Confederation.  If they didn’t pay these funds timely or in full (or at all) they could ask again.  And that’s all they could do.  Which is why George Washington’s army suffered through that horrible winter.  Because the funds weren’t there to buy Washington the provisions his army needed.

Thanks to Inflation the Continental Army often had No Choice but to Take what they Needed from the People they were Fighting For 

The Americans never had enough money.  Which makes it amazing that they held off losing for 8 years.  Eight very costly years.  And won.  Especially considering how bad the economy was during the war.  Unable to tax or get sufficient loans from Europe they had little choice but to print money.  Which caused a whole lot of trouble.  For the more money they printed and put into circulation the more the value of their currency fell.  And soon a Continental was “not worth a Continental.”  And when the currency lost its value it took more of it to buy things.  Which led to price inflation.  The price of material and parts grew so high that it increased the cost of American manufactured muskets over the cost of imported French muskets.  Which they had to bring in through a British blockade.  Giving what should have been a cost advantage to the Americans.  Had it not been for the inflation.

To try and keep prices under control they implemented wage and price controls.  Which didn’t work.  The continued devaluation of the currency forced sellers to raise their prices to cover their rising costs.  Forcing them to sell below their costs would just put them out of business.  Voluntarily.  Or involuntarily.  Creating shortages in the market place.  Some offered lower prices for specie (gold and silver coins).  You can’t print hard money (specie).  So it held its value.  Unlike the paper money.  So a little of specie went a long way compared to paper money.  Of course, this didn’t help their wage and price controls.  It just made the paper more worthless.  And raised prices further.

There was yet another ugly side to this sordid business.  High prices and shortages created opportunity to profit handsomely.  There was speculation and market manipulation (hoarding, cornering the market, etc.) to take advantage of those highly priced items that were in scare supply.  Further raising prices for the people.  And compounding the problems of provisioning the army.  Which infuriated the low-paid soldiers.  Who the Continental Congress paid in that worthless paper money.  Angry mobs arose to address this profiteering.  As well as new laws and enforcement.  But they helped little.  The army often had no choice but to take what they needed from the people they were fighting for.  Either outright.  Or in exchange for IOUs.   Promises that the Continental Congress of the United States of America would make good on.  Just as soon as the several states paid their apportioned funds raised by their state legislatures. 

If you Violate the Ideals you’re Fighting for while Fighting for those Ideals it can Complicate the Peace

Fighting for an ideal makes war complicated.  If you’re just a tyrannical dictator looking to rape and pillage it makes things easier.  You don’t have to worry about liberty.  Property rights.  Debt.  Or taxes.  In the short term.  Or the long term.  Which made the American Revolutionary War a very difficult war to fight.  Because at the heart of the United States of America were those ideals.  To win this war to grant liberty to the people required taking their liberty away.  A little.  To win this war to guarantee property rights you had to violate property rights.  A little.  To win this war against tyranny you had to use excessive force against your people.  A little.  To win this war to establish taxation only with representation caused the destruction or personal wealth.  A lot.  Through impressment (taking things from the people).  Borrowing from foreign countries.  Or through inflation.

When the French joined the Americans in 1778 inflation was already out of control.  They printed twice as many Continentals in 1778 as they did in the last three years combined.  And there was serious discussion about doing the unthinkable.  Repudiation.  To simply escape the inflation by escaping the currency.  To retire the bills from circulation.  At a fraction of their value.  And that’s what they did in 1780.  Issuing new currency based on specie for the old currency at a 40 to one ratio.  The states were to tax their people to raise the funds for the new currency.  So the people took a huge short-term loss.  For a stable long-term future.  Based on specie.  That they couldn’t inflate.  This hard money would come from in large part the Spanish and the French.  The Spanish in Cuba buying American flour with specie.  And French aid.  As well as their army and navy spending their hard money in the American economy.

Wars are costly.  And they are rarely nice.  Trying to make them nice can make them last longer.  Which will make them more costly.  Of course, if you violate the ideals you’re fighting for while fighting for those ideals it can complicate the peace.  Luckily, for the Americans, they won their peace.  Their allies, the French, were not so lucky in their revolution.  The French Revolution.  Fought less than a decade after the American Revolution came to a close.  And unlike the Americans the French peace that followed was a bloody one.  That would eventually replace the king they executed with an emperor.  Napoleon Bonaparte.  Who the Americans helped bring to power in part due to the crushing debt King Louis XVI incurred supporting the Americans in their revolution.

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FUNDAMENTAL TRUTH #76: “You know they’re governing against the will of the people when they play with the meaning of words to fool the people.” -Old Pithy

Posted by PITHOCRATES - July 26th, 2011

The More they Trust You the Easier it is to Lie to Them

People lie for one reason.  They don’t want you to hear the truth. Sometimes it’s done with good intentions.  “No, those jeans don’t make your butt look big.”  Most times it’s not.  “I am not having an affair.  And I can explain those earrings you found in the backseat.  And the underwear that’s not yours.  Just give me a minute.”

The truth about lying is the truth.  And someone’s attempt to hide it.  A husband doesn’t tell his wife about an affair.  Because he doesn’t want his wife to know about the affair.  For a variety of reasons.  But mostly so he can keep having the affair.

And this is why people lie.  To continue doing something they couldn’t otherwise do.  By misleading those people who know them.  Who love them.  Who trust them.  And the funny thing is, the more they trust you the easier it is to lie to them.  “Look, honey, I didn’t want to say anything before.  But the rumor at work was that John and Mary were having an affair.  I didn’t believe it at first.  I mean, they’re both married.  And they’re more than just my coworkers.  They’re my friends.  Then one day John had to borrow my car.  So I lent it to him.  The next thing Bill tells me is that he sees John and Mary in my car turning into an alley.  Guess I know what they were doing in that alley.”

See?  Easy.

Good Lying is about Creative Language and Class Warfare

So if you’re into lying it’s best to get yourself into a position where lots of people trust you.  Like elected office.  Because for some reason people tend to trust anyone in government.  Far more than those evil greedy people in corporate America.  Or rich people in general.  Even though it’s a given that politicians lie.  It is an interesting dynamic.  How this inherently dishonest institution is trusted first then questioned about their honesty later.  Long after the scandals that follow them.  So how do they do it?  How do these liars get to be so trusted?

It’s all about creative language.  And class warfare.  You need to get people to hate each other.  And then you stoke those passions.  Keep them burning hot.  So they feel more than think.  For the less they think the more they’ll fall for your soaring rhetoric.  You say the rich should pay their fair share (even though they pay a disproportionate high percentage of taxes).  And that rich CEOs shouldn’t get tax breaks to fly around in their private jets (even though they use them for legitimate business purposes).  You cast yourself as the protector of the little guy against rich and corporate interests.  Even though you’re anything but.  But that’s how it’s done.  And no one does it better than liberal Democrats.

For they are the king of liars.  Ivy League educated.  Arrogant.  Pompous.  Filled with an air of all-knowing condescension.  They just brim with loathing and self-confidence.  They loath you and I who are not their equals.  And they believe that there is nothing that they can’t do.  And what do they want to do?  Tax and spend.  Control the economy.  And tell us how we should live.  In the enlightened world they envision.  Of course, this has not proven to be a successful political platform.  People don’t want to elect people like this.  So they lie about what they want.  And who they are.  With a creative use of language.

Twisting the Meanings of Words

No one likes paying taxes.  No one will vote for someone who says they’re going to raise their taxes.  Which is a bit of a problem for a tax and spend liberal.  So they don’t use the ‘T’ word.  No.  Instead, taxes are called ‘contributions’.  Or simply ‘revenue’.  Because contributions sound voluntary.  And revenue sounds kind of warm and fuzzy.  In the business world, raising revenue is a good thing.  And they hate taxes in the business world.  Just like you.  So you feel less threatened about talks to raise revenue than you do about talks to raise taxes.  Even though they are the same thing.

With ever growing deficits, some people are growing a little skittish about excessive government spending.  At least, the people paying the taxes.  Those people with jobs.  They don’t want to pay more in taxes.  And they’re getting a little nervous about the huge federal debt.  So the responsible side in them tells them to say ‘no’ to more spending.  So the tax and spend liberal uses the word ‘investment’ instead.  They say we need to invest in infrastructure to rebuild our aging roads and bridges (even though gasoline taxes already pay for this work).  That we need to invest in education and research to keep America on the forefront of technology (even though we already spend a fortune on these already).  Investing in our future?  Well, yes, that sounds good.  And perhaps we should.  So we agree not to cut these investments.  But we’ll still resist excessive government spending.  Even though these are the same thing.

You see, the tax and spend liberal looks at the economy differently.  They see all money belonging to them.  Including ours.  They let us work.  Earn a paycheck.  But your net pay is only the portion of their money they begrudgingly let you keep.  In fact, what they don’t tax away from you they call government spending.  Or tax expenditures.  They’ll say things like, “We can’t afford to pay for these tax cuts.”  Of course, you don’t pay for ‘tax cuts’.  A tax cut is when the rightful owner of the money gets to keep it.  Instead of the government taking it away.  But calling this ‘government spending’ makes it easier to cut.  For cutting spending is a responsible thing to do.  But when they cut this spending they are actually raising taxes.  Clever, eh?  Talk about twisting the meaning of words.

Here are some other words and phrases they use and their translation:

  • Bipartisan = Republicans giving Democrats everything they want
  • Compromise = see bipartisan
  • Future spending cuts = no spending cuts
  • A balanced budget approach = higher taxes now and future spending cuts later (see future spending cuts above)
  • Get serious about deficit reduction = increase both spending and taxes
  • Blue ribbon panel/special commission = where you place an issue that you’re afraid to address
  • Failed policies of the past = the very successful policies of Reaganomics
  • Radical right wing = any Republican that doesn’t vote for more Democrat spending

 Republicans have Less to Hide

Liberal Democrats lie because no one wants what they’re selling.  But because they’re so much smarter than we are they’ve come up with a way to fool us.  By lying.  And using Orwellian language.  To make us accept things that we would normally not accept.

Just look at their campaigns.  And their language.  They campaign as moderates.  Then govern as liberals.  They want to raise our taxes.  But they don’t tell us that they want to raise our taxes.  Why?  Because taxpayers don’t share their Orwellian vision.  For if the people believed as they believed they would be honest.  But they don’t.  So they are less than honest.

Republicans, on the other hand, call ‘tax cuts’ tax cuts.  And ‘tax hikes’ tax hikes.  They run as conservatives.  And govern as conservatives.  Until they’re corrupted by Washington, at least.  But based on language usage alone even the most partisan hack would have to admit that the Republicans have less to hide.  And, therefore, govern more according to the will of the people.

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