Quote note (#176)¶
A king owned the territory and could hand it on to his son, and
thus tried to preserve its value. A democratic ruler was and is
a temporary caretaker and thus tries to maximize current
government income of all sorts at the expense of capital values,
and thus wastes. […] Here are some of the consequences: during
the monarchical age before World War I, government expenditure
as a percent of GNP was rarely higher than 5%. Since then it has
typically risen to around 50%. Prior to World War I, government
employment was typically less than 3% of total employment. Since
then it has increased to between 15 and 20%. The monarchical age
was characterized by a commodity money (gold) and the purchasing
power of money gradually increased. In contrast, the democratic
age is the age of paper money whose purchasing power has
permanently decreased. […] Kings went deeper and deeper into
debt, but at least during peacetime they typically reduced their
debt load. During the democratic era government debt has
increased in war and in peace to incredible heights. Real
interest rates during the monarchical age had gradually fallen
to somewhere around
2½%. Since then, real interest rates (nominal rates adjusted for
inflation) have risen to somewhere around 5% — equal to
15th-century rates. Legislation virtually did not exist until
the end of the 19th century. Today, in a single year, tens of
thousands of laws and regulations are passed. Savings rates are
declining instead of increasing with increasing incomes, and
indicators of family disintegration and crime are moving
constantly upward.
All familiar, to a sedative degree, to those here, of course. Except, crucially, the interest rate stuff — which is remarkably dissonant with our contemporary situation. Since Hoppe’s expectation — based on a long-term, fairly consistent trend — is the rational one, it suggests that the present collapse of interest rates is intriguingly anomalous. Is there a sharp, big-picture analysis of the phenomenon out there somewhere?
Interest rates go down as you approach the speed of light.
— Ossipago (@ad_proelium) July 31, 2015