The archive.

A weakly mandated president and a divided Congress could agree on little in 2002, except the pleasure of spending, which swiftly turned projected surpluses into deficits through defense, farm, and countless other outlays. That bipartisan appetite is the essay's real subject. Federal Reserve money creation is cast as the hidden enabler, adding no real resource but issuing fresh purchasing-power claims against existing goods, falsifying capital signals, and priming boom and bust. A political sociology sorts Congress into four spending blocs, social-need advocates, parochial district-servers, Keynesian full-employment stimulators, and cost-wary conservatives, who converge in a guns-and-butter front weighted toward the butter. Entitlements and mandates, in the closing movement, divide the nation into a provider class and a dependent class, trading natural rights and self-reliance for claims on government.

Stone walls do not prisons make; they are houses of care and dependency.

Argentina stood near civil conflict in March 2002, with banks frozen, presidents falling in quick succession, and protesters dead in Buenos Aires. The catastrophe, this essay contends, sprang not from too much market reform but from reforms that stopped short of the root: Menem's 1991 convertibility plan tied the peso to dollar reserves and tamed inflation, yet left Peronist transfer politics, chronic deficits, and IMF-financed debt untouched. The bank freeze becomes the breaking point where fiscal insolvency turns into open assault on property. Sennholz's remedy is contractual monetary freedom, citizens free to hold and contract in dollars, euros, pesos, or gold, with creditors and debtors renegotiating without new controls, taxes, or compensatory schemes, and a labor market where the unemployed may accept work on freely chosen terms after political devices have failed.

The freedom to work is an economic necessity and a moral imperative.

On the first day of 2002, roughly 300 million Europeans traded their national currencies for a common medium of exchange, and Sennholz reads the changeover as a vast political experiment rather than a technical convenience. He credits the euro's real gains, lower transaction costs, price transparency, sharper competition, then turns an Austrian critique on the European Central Bank, whose mandate defines price stability as consumer-price growth of less than two percent a year. The ECB, he insists, is a political creation bound by the same incentives as every central bank before it: pressure to rescue failing institutions, accommodate welfare-state finance, and loosen money whenever recession threatens. Statutory independence cannot withstand them. Weighing dollar pegs, commodity baskets, and gold, he concludes that no anchor a mandate alone can furnish will hold.

Unfortunately, throughout the long history of central banking no central bank has ever managed to achieve the illusive goal of price stability.

Ancient Mesopotamia gave the world law, commerce, and art; modern Iraq, in Sennholz's telling, has produced mainly bloody revolution, coups, and war. Writing weeks after American and British forces toppled Saddam Hussein, he warns that military victory is not the same as liberal reconstruction: a centralized apparatus can be shattered far faster than a free order can be built. Saddam's rule figures here as the culmination of militarized Arab socialism, its shortages, black markets, and inflation the predictable fruit of political control over economic life. Against triumphalism, he cautions that occupation may inflame Islamic and nationalist resentment, and that immediate national elections would only turn office into the prize of sectarian struggle among Shiites, Sunnis, and Kurds. His prescription is decentralized: local self-government, secure property, free speech, and open markets as peace-making institutions.

Only the market order, which has no borders and makes no ethnic or religious distinctions, would bring peace and prosperity to Iraqi society.

Executive pay had become a public scandal by the early 2000s, and this compact essay enters the fray by refusing both the egalitarian outrage and the blanket defense. Compensation genuinely paid for scarce managerial ability, Sennholz argues, obeys the same law of supply and demand as any wage; he decomposes executive income into three parts—managerial labor, interest on invested capital, and entrepreneurial profit—and applies a property-rights test, since a firm that overpays gives away stockholder wealth while one that underpays loses the best manager. Most large-company CEOs, he insists, are not entrepreneurs in the Rockefeller or Ford mold but trained organization men. What deserves censure is the 1990s windfall: Federal Reserve credit expansion inflated equity prices far past corporate earnings, turning stock options into unearned "bubble lucre" and tempting some executives into accounting fraud.

Nothing sharpens the sight like envy.

Politicians praise fiscal discipline in their election oratory and then govern by borrowing, and Sennholz reads George W. Bush's post-September 11 turn toward deficits and tax cuts as one instance of a permanent pattern. Deficits, he insists, are not harmless accounting entries but claims on real resources, capital markets, and foreign dollar creditors; when voluntary saving falls short, the Federal Reserve creates the credit that keeps spending afloat, shifting the burden from explicit taxation to a depreciating currency. Tracing the dollar from Bretton Woods through Nixon's suspension of gold convertibility to today's floating fiat standard, he argues that reserve-currency privilege only delays adjustment while magnifying the eventual danger. Foreign confidence is the hinge: should creditors liquidate their dollar holdings, the essay warns, monetary upheaval and deep global recession lie straight ahead.

It is a fiat standard, unbacked and irredeemable, which can be inflated and depreciated at will.

Gold owes its value not to mysticism but to the same considerations that price any economic good, utility and scarcity, and in extremity bread or shelter may matter more. With that correction to the goldphiles who preach the metal's eternal worth, Sennholz's March 2003 essay establishes gold's real monetary fitness: its marketability, durability, storability, and a stock so vast relative to annual production that supply shocks barely register. From there he reaches the political drama he cares about, governments coveting gold yet fearing its discipline, hoarding it, monopolizing the mint, at times criminalizing private use. The 1971 suspension of gold payments installed the dollar standard and freed the Federal Reserve to finance deficits by credit creation. Chronic depreciation, he concludes, could exhaust confidence in fiat money, leaving gold once more the implicit alternative.

The special characteristics which man ascribes to gold have made it the most marketable economic good of all, the popular medium of exchange and unit of economic calculation and account; they have made it man’s money.

When the Census Bureau reports falling median household incomes, rising poverty, and more Americans without health insurance, most readers see a distributional grievance; Sennholz sees capital consumption. Living standards, he argues, rise or fall with labor productivity, and productivity depends on capital per head, the tools, structures, and savings that make work effective. Read through that principle, declining income signals an impaired production structure rather than a mere failure of welfare administration. The culprits are fiscal and monetary: deficit spending at every level of government competes for savings, while household debt, mortgage expansion, tax rebates, artificially low interest rates, Federal Reserve money creation, and foreign purchases of Treasury debt sustain present consumption by drawing on future income. Apparent recovery, the essay warns, can mask a capital erosion that the statistics will register only after the credit boom fails.

When the present bubble finally bursts, the Census Bureau will keep us informed about falling household income.

The 2003 Medicare prescription-drug expansion arrives here not as health reform but as a move in a permanent struggle over who pays and who receives. Sennholz reads the parties' sudden role-reversal, Republicans now championing an entitlement they once resisted, as a clever maneuver rather than any conversion of principle, and he redescribes social insurance bluntly as public assistance. The projected $400 billion covers only a fraction of seniors' drug bills, and the uncovered remainder, he notes, is precisely what invites the next round of expansion. From there the essay forecasts a widening administrative war: rising costs bring investigation, price pressure, and regulation of pharmaceutical firms and physicians, so subsidy becomes supervision and supervision becomes stagnation. Carried far enough, Sennholz warns, entitlement conflict without end summons a supreme arbiter armed with emergency powers to enforce social peace.

Politics rarely listens to reason and economics; it is search after power masquerading as a contest of principle.

A giant inverted pyramid, $692 billion in Federal Reserve notes supporting some $8.9 trillion in bank deposits, governs Sennholz's picture of the American fiat system, an unstable construction that distorts production, erodes savings, and subsidizes government debt. Rapid monetary expansion need not surface in the consumer-price index, he argues, because official measures emphasize stable consumer goods while ignoring surging prices in real estate, commodities, and raw materials; meanwhile cheap imports from China, India, and Malaysia and foreign appetite for Treasury securities temporarily suppress both prices and interest rates. This arrangement, in which foreigners trade real goods for American promises, is historically exceptional and politically fragile. Should their willingness end, he predicts higher rates, a falling dollar, soaring prices, and another boom-bust cycle, and closes with the case for honest commodity money against a currency severed from market discipline.

The love of money, fiat money that is, is the root of much evil.

Never before, Sennholz observes, have monetary and fiscal policies been so stimulative while the economy remained so weak, and that paradox drives this catalogue of possible futures for the dollar. The essay's engine is the falsification of interest rates: when the Federal Reserve suppresses the market rate that coordinates saving and investment, business calculation is corrupted and debt-financed consumption swells beyond sustainable limits, down to households that converted home equity into fresh spending. He then lays out competing scenarios, continued foreign financing, a creditor withdrawal and crisis, abrupt stabilization, inflationary collapse, protectionist escalation, orderly adjustment, rejecting both complacency and total apocalypse. Asian central banks sustain the deficits for now, but their trust wears thinner daily. His preferred path is gradual, painful discipline: balanced budgets, restored market interest, and ultimately a gold-backed dollar to rebuild international confidence.

The Federal Reserve’s utter disregard of the market rate of interest, which guides the efficient employment of all factors of production according to consumer choices, is bound to do great harm to the economic structure.

Justice once meant rendering each person what is due; modern "social justice," Sennholz argues, quietly rewrites that standard into a mandate for state-managed welfare, making officials the superior judges of individual rights. Tracing the term from Plato and Aristotle through biblical ethics and Aquinas, this classical-liberal critique watches a moral and juridical idea harden into administrative redistribution. His economic objection turns on capital: confiscating or forcing the liquidation of productive assets does not merely shift purchasing power but erodes the capital structure on which wages and employment depend. Welfare economics, progressive taxation, Social Security, and Medicare become engines of dependency, bureaucracy, and envy, dividing society into providers, recipients, and administrators, and closing, with Benjamin Franklin, on the corruption that follows when a people can no longer master itself.

A "social justice" society is a conflict society which locks beneficiaries and victims alike in a struggle without end.