Libertarian Jackass

"Life is short, but truth works far and lives long; let us speak truth." -- Schopenhauer

Sunday, August 03, 2003

Who Needs Arnold? Solution to California's Financial Woes Is Here!

The Golden Reagan: Resolving California’s Financial Crisis
By Jeff Cleveland & Devlin Cooper

The State of California is teetering on the brink of financial collapse. As a State with the 13th largest economy in the world, this is not only tragic but also completely unnecessary. Forget the partisan budget negotiations. Forget the tedious signature gathering to recall Governor Joe (aka Gray) Davis. Forget the rolling blackouts two years ago and the recent warnings of a similar impending energy crisis. These are all minor problems. California’s number one problem—aside from their state government—is their inelastic money supply.

So, what’s an inelastic money supply got to do with it? A lot! A whole lot! Sure, California suffers from rampant spending that is necessary to prop up their government programs[1] , but this is not a problem. After all, private markets would lead to great inequities in the state, and some people may even go hungry. Let’s be real. Pete Wilson “deregulated” the energy industry in California, and look where that got them.

No, California’s biggest problem is the “inelasticity” of the money supply. With an inelastic money supply, there is simply not enough money and credit available for the State to fund its essential programs. Simply stated, California is in a “liquidity crisis.” Indeed, the culprit behind California’s current budget crisis is not even in California (stop looking at the list of former Governors and please refrain from pointing your finger at Gray). No, the perpetrator is none other than Alan Greenspan!

Recognizing and admitting that this is the problem is indeed the first step to solving California’s crisis. You see, it is only after this first step that you can see the forest through the trees and recognize the obvious solution to California’s problem—a new Central Bank with its own currency![2]

It’s difficult to pinpoint other possible causes of California’s financial crisis. It might be the “excessive saving” that the citizens of California continue to insist upon indulging in that results in less consumption and lower sales tax revenues. Although many Americans have dutifully followed President Bush’s call to demonstrate patriotism through spending, some Californians chose instead to selfishly pursue their own family’s welfare. Clearly, these people put their families ahead of our communities.

On the other hand, maybe it’s the profiteering investment groups trying to make a quick buck in inefficient capital markets that are crucifying California’s finances. Again, just look to the energy crisis that plagued California in the fall of 2000. Forget the fact that A.B. 1890—the main attempt by California to “deregulate” the electricity business—was heavily prescriptive and merely replaced one set of regulations with another set. No, greedy capitalists caused the energy crisis. Just go back and listen to Gray Davis’s speeches and announcements.[3]

It is clear that t he centralization of the monetary system in the United States has failed. The Federal Reserve is no long able to manage the complexities of California’s stunning economy. Has Greenspan ever visited Venice Beach? Is he really in touch with the needs of Californians for after-school programs or the courageous “living wage”? To answer these questions one need look only to the balance sheet of the Federal Government and ask: is it in peril of going bankrupt in a matter of hours?

In times of crisis, we must use history as our guide. The theories of economists do not fit the complex modern world in which we live. Prior to the institution of the Federal Reserve System, an inelastic money supply, liquidity crises, credit market instability, government deficits, and business recessions plagued Americans. The creation of a system centralizing the banking sector permitted the Federal Reserve to create money and credit to fund government debt, fuel economic growth, and maintain the stability of our nation’s financial markets. Everyone prospered from this; we cannot deny its successful, important role in providing our present standard of living. Now, history must repeat itself. It is time for California—in order to grow as a State and economy and to better provide for its citizens—to create a central bank, float its own currency, and monetize the deficits.

Combining the histories of the gold rush in California and their most distinguished citizen Ronald Reagan, an obvious choice for California is to create the “Golden Reagan.” The State should construct their Central Bank at the site of Sutter’s Mill, the epic-site giving rise to California’s gold rush. With these changes, the government of California will be better suited to serve the demands of its citizens, by providing money and credit to fund failing state programs like schools, universities, health services, child care, and sex changes.[4] In fact, California’s failure to implement programs like these (opponents have gone as far as labeling them “socialistic”) stems from the federal government prohibiting California through threat of physical violence from acquiring enough liquidity to provide for their subjects—eh, citizens.

With financial collapse impending, this is not a time for in-depth debate about the feasibility of such a plan. Instead we must ask what we will do in the absence of State government programs? Who will employ these people in the absence of the state of California? Who will teach our children without State schools, colleges and universities? Who will provide quick, efficient transportation on the 405 Freeway? Who else can we look to in ten years to fund sex changes for the needy? Can you imagine your child walking home from school, crossing busy street intersections without the assistance of your friendly neighborhood State-funded crossing guard?

We are not merely advocating a policy of assistance to the State government. This is not a scheme whereby we simply print dollars and pay our debts like some sneaky counterfeiter. We are advocating this solution as a final effort to avert economic collapse, massive unemployment and the death of children in our streets long before their time. This is a battle for the future of California. This is what is at stake. You are either with us or against us. The solution to all of California’s financial problems lies at their fingertips! If only they would recognize this panacea. Alas, there are better chances of President Reagan’s full recovery.

Jeff Cleveland is a political economy student at Claremont Graduate University in Claremont, California. Devlin Cooper is a student at George Mason University School of Law in Arlington, Virginia.

[1] You cannot blame Californians for their rampant spending since they are doing all that is possible to decrease the size of their state government. Remember, they voted to finally stop providing welfare to illegal aliens. Of course, California’s courts struck down this proposition, but what more can you ask for from Californians?
[2] Not to mention, any type of California currency featuring the likeness of Ronald Reagan would have a direct-use value in addition to an exchange value. What direct-use value you inquire? Simple. Have you ever noticed how many neoconservatives collect Ronald Reagan memorabilia? It’s so profitable that Franklin Mint even has a Ronald Reagan pocket watch for sale—in addition to the Reagan statue and sculptures bearing Reagan quotes. Just check out their website at http://www.franklinmint.com. Some may even say that a Ronald Reagan currency would be as good as gold, but we’ll stop short of that for now and save that discussion for a future article.
[3] Whatever you do though, don’t hunt down the truth about the crisis (though a good starting point for the truth is http://www.cato.org/pubs/pas/pa406.pdf).
[4] Admittedly, California does not currently subsidize sex changes. The City of San Francisco does fund sex changes though, and it would not surprise the authors one bit if the state began to do the same. After all, there are underprivileged members of Californian society who are entitled to sex changes.

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