Sweet Are the Uses of Adversity

In Shakespeare’s As You Like It, Duke Senior, his throne usurped, has been exiled into the Forest of Arden. Even so, life is not all bad he allows, for “sweet are the uses of adversity.” Duke Senior does not say he’s glad for adversity, but he would prefer to use his adverse circumstances wisely rather than to sit around complaining.

As a nation we can begin the process of using our adverse circumstances wisely. Government, at all levels, counts on the ignorance of the public in order to be able to continue their disastrous policies. Let us begin the process of remedying deficiencies in our own education. Monetary policy make headlines almost daily, and I urge everyone to read and study Murray Rothbard’s classic What Has Government Done to Our Money? This monograph is available online for a free download at the Ludwig von Mises Institute.

We are continually told the nonsense that the cure for the bursting of our credit bubble is an unprecedented flood of new money and credit. Can simply increasing the money supply cure our economic woes and restore prosperity? Common sense tells us that it cannot, and Murray Rothbard explains why:

When the supply of any other good increases, this increase confers a social benefit; it is a matter for general rejoicing. More consumer goods mean a higher standard of living for the public; more capital goods mean sustained and increased living standards in the future. The discovery of new, fertile land or natural resources also promises to add to living standards, present and future. But what about money? Does an addition to the money supply also benefit the public at large?…

Whereas new consumer or capital goods add to standards of living, new money only raises prices–i.e., dilutes its own purchasing power. The reason for this puzzle is that money is only useful for its exchange value. Other goods have various “real” utilities, so than an increase in their supply satisfies more consumer wants. Money has only utility for prospective exchange; its utility lies in its exchange value, or “purchasing power.” Our law—that an increase in money does not confer a social benefit—stems from its unique use as a medium of exchange.

Yes, it is true that prices for most goods are not rising right now, but they are not falling as rapidly as they would otherwise be falling. Government who purports to be an advocate of affordable housing is desperately trying to stop housing prices from deflating and, in the process, is keeping housing out the hands of those who were prudent savers. Chrysler cars will sell at some price—that price may be 50% or more off—but why is Chrysler any different than your local clothing store where clothing is being marked-down 80%? Eventually, because of excess money creation, we may get the worst of all worlds—depression followed by hyperinflation.

So why is the Fed doing what it is doing? If new money is not a cure, why pump up the money supply at all? The key to understanding the Fed’s actions is the fact that the new money is not distributed equally to all of us; and those who do get it do not receive it at the same time. Despite Ben Bernanke’s nickname of “Helicopter Ben”—derived from a famous speech he gave that the Fed could spread money around through a helicopter drop—the Fed would never spread money around by a helicopter drop. New money always goes to benefit the Fed’s politically connected cronies, and it is not distributed equally.

Who are these cronies? Consider this report from Associated Press: “Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year.” These banks have so far received $188 billion in taxpayer’s money. Among the other findings:

Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. J P Morgan Chase chairman James Dimon ran up a $211,182 private jet travel last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds.

I could go on and on, but who is not getting the money? Probably those of us reading this blog post are not being bailed-out, but at least we have shelter and food. The LA Times recently reported on the growing homeless crisis in Los Angeles with poignant examples: “The father who pretends to work through the night at a computer at a 24-hour office supply center so his child can sleep safe and warm in a stroller…the mother who takes a baby to the emergency room at 11 p.m., knowing the odds are they won’t be called until morning and can pass the night in the waiting room.”

There are many more stories that appear every day, and they are heartbreaking. How can this be America? Trillions transferred from the middle class and poor to the incompetent, stupid, and criminal among the wealthy. I don’t believe in an Old Testament God that punishes nations and individuals for their misdeeds, but I do believe that individuals and nations that fall out of step with the principles of liberty suffer the natural consequences.

We all need to contribute in our own way to those who are suffering—direct contributions of food and clothing are important—but long-term, the only way out is education that corrects our mis-education. Please read What Has Government Done to Our Money?

9 Responses to Sweet Are the Uses of Adversity

  1. James D. says:

    In the end, the fault and the blame are ours. The rich and connected may be shafting the rest of us, be we continue to allow it to happen; the tacit realization of which is the only reason I can think of (besides blind ignorance of the way things work) why these talking heads haven’t been lynched. We elected these idiots, we did not call them to account when their buddies cronied their way into appointed positions from which they could write the rules that allowed such excess to flow to so few.
    We also continue to tolerate corporations. In social psychology, they explain a situation where something bad happens to someone in a crowd and no one helps as “diffusion of responsibility”. The same thing seems to be happening at corporations, where shareholders are so dilute in their power and responsibility (many not even realizing they have either) that they no longer participate in the voting, and we end of with boards full of the ceo’s cronies glad-handing them these insane golden parachutes. I think the business structure here needs some revamping. I know the agency problem will always be an issue, be we need a better way around it than this.
    Then, the bad news comes. When my friends ask me how all this could happen, the only answer I have to give them is that people in government and business (all of whom knew better) have figured out how to work together, to the benefit of none but themselves. Add in a culture of indebtedness, and you have all the makings of a first rate mess.

  2. Frankvv says:

    Unfortunately history repeats itself and eventually the people, once hungry enough, will revolt. Education is clearly a catalyst in terms of driving change, but hunger will bring immediate change, albeit catastrophic. Essentially the cornerstone of what this country was built on is being eroded away by the self-serving interests of the rich. And many great countries of the past have succumbed to greed, which eventually became their downfall. Rome, for example, was once an unbeatable empire. And we all know how that ended. I keep saying to myself that there is no way that can happen here; but then again, we are presently driving down the same slippery slope as the Romans. However, we are taking that path in our Ford, Chrysler and GM vehicles, instead of the chariots of old. The $15 question is who will pick up the torch when we drop it? Which is the next empire that will take the lead after we crumble? I’d like to know so that my granddaughter can take the right second language when she starts school in a couple of years. Perhaps the real question is will the people wake-up and change the game before it is too late?

  3. Tesh says:

    Frank, considering how the elections went, I’d have to say “probably not” to whether or not people will wake up. Education has been broken for a long time in the States, and it’s hard to wake people up when they don’t understand what questions to ask or even feel a need to question in the first place. As long as there are “causes” to engage in, like the Green movement, ACLU’s flavor of the month, or “tolerance” and “diversity sensitivity”, the population at large will either be afraid to grow a spine and apply some intellectual honesty and rigor, or they will be too distracted patting themselves on the back to care.

  4. Jim, Frank and Tesh,

    There is more madness everyday. See Mish Shedlock’s blog today “Fed Destined To Become World’s Largest Auto Dealership”

  5. Tesh says:

    That reminds me of another thing… even if we do object to these things consciously, how could we object practically? Stop paying taxes? Erm… not easily; even if you do subscribe to the idea that income taxes are illegal, the Feds can still nail you for it. Refuse to pay any other taxes? Not likely. Protest? Yeah, Karl Denninger got far with that. Ron Paul’s supporters weren’t enough, either.

    There just isn’t a sufficiently large critical mass of people who care to make the notion of a democracy work. Even then, we’re in a republic, and as long as those in power act on their own interests, regardless of what the voters say, there are huge election-period windows where they effectively run unsupervised.

    BB, it’s not just the Fed, it’s us, the taxpayer. I sure as heck didn’t consent to this, but it goes on anyway. “We the People” might be the ultimate bagholders, but I voted against it at every opportunity. That’s what bothers me most; I’m doing what I can to stop the stupidity, but I’m outnumbered.

  6. nate5176 says:

    Great stuff! I saw you made a referrence to one of my blogs, and had to check you out. Great stuff. I’m going to keep reading. I haven’t wrote much lately. I just made it back to the States a week and a half ago after a 14 month tour in Iraq.

  7. Tesh,

    Exactly, until the consciousness of the public changes, nothing on the external will.


    Thanks for the kind words and welcome back home!

  8. G says:


    Don’t loose heart…you’re not alone. Take some comfort in knowing that there are others (maybe more than you or I can realize) that are taking the same action. It is too true that at present the collective public is unconscious to their own loss of liberty, but as long as we are still willing to sound the alarm there is hope that others will wake up…Even if you and I never experience the effects of it.

    Dr. B – Thanks for the link to Rothbard’s work. It is a very good read and I’m finding ample opportunity to share it with others.


  9. […] possibility? After all, Shakespeare had the deposed and exiled Duke Senior in As You Like It avow, sweet are the uses of adversity which like the toad, ugly and venomous, wears yet a precious jewel in his head. If as the quote […]

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