Ever since Barack Obama fooled independents into giving him the keys to the car (his metaphor), the talk about economic judgment day has increasingly intensified. But what, exactly, would have to happen to bring about a total collapse of the U.S. economy?

One path to economic judgment day is for the government to allow market forces to rule, which, because of decades of government meddling in the economy, would surely bring about a full-scale deflationary depression. Though the iPod, flat-screen-TV, eat-out-four-nights-a-week crowd doesn’t want to hear about it, the truth is that a deflationary economic judgment day would be a good thing because it would cleanse the economy of artificially high wages, profligate spending and malinvestment.

In a deflationary scenario, most people, to be sure, would be much worse off, but a small percentage of folks would actually come out ahead. That’s because a deflationary depression is a time when, in effect, property is returned to its rightful owners.

The second possibility for economic judgment day is runaway inflation, which I have been predicting for the past 30 years. This would almost certainly lead to social chaos and anarchy, more likely than not followed by a dictatorship. The reason runaway inflations tend to result in dictatorships is because the natives become restless when they discover that government’s paper money is worthless.

Milton Friedman’s classic “Capitalism and Freedom” explains how individual liberty can only thrive when accompanied by economic liberty

Having said all this, I must admit that I sometimes feel like Wile E. Coyote. Every time I believe the government is trapped by economic reality, I hear that infamous “Beep Beep” and end up scratching my head. With its high-speed printing presses, its ability to borrow virtually unlimited sums of money and a monopoly on the use of force, government always seems to escape the consequences of its actions and lives to see another day. But unless someone figures out how to make gold out of paper money real soon, the inevitable is already written in stone.

It is American entrepreneurs who have held up the U.S. economy for all these years by doing what they have always done best: create wealth. It is they, not government, who create jobs and increase living standards. But if BHO continues to press the welfare pedal to the floor – which he clearly has every intention of doing – an inflationary ending is virtually assured.

Remember, the continued onslaught of valueless paper money disrupts the market and causes confusion, apprehension and, eventually, panic. People are afraid to enter into long‑term contracts, because they have no idea what money will be worth in the future.

Businessmen decrease investments in new plants and equipment (as they are now doing), because they do not know if their real profits will be worth the risk. The latter causes shortages, which leads to even higher prices.

If inflation is not eventually curtailed, a final collapse of the economy begins when people start to guess at what future prices will be. This sets off a chain reaction where sellers increase prices even faster than the supply of money increases.

At that point, government faces its last chance to avoid a total collapse of the economy. Henry Hazlitt put it well when he said, “Every inflation must eventually be ended by government or it must ‘self‑destruct.'” This self‑destruction is exactly what has happened to nation after nation throughout history.

The case most of us are familiar with is Germany’s runaway inflation in 1923. Consider these figures: Between 1914 and 1923, the German government issued an additional 92.8 quintillion (92,800,000,000,000,000,000) paper marks, a 245 billionfold increase in the money supply. Prices, in turn, rose 1.38 trillionfold. Interest rates rose as high as 10,000 percent per annum on some debt instruments.

As you would guess, people eventually refused to accept paper money in exchange for goods and services. The economy collapsed and chaos and crime ensued. And waiting in the wings, preparing hysterical answers for hysterical people, was Adolf Hitler, who understood all too well that only an authoritarian police state could restore order.

Nevertheless, I’m glad the Obamessiah was able to fool the public and win out over Mush McCain. Why do I say that? Because if McCain had ended up on the throne, no matter how liberal he may have been, the Democrats and their left-wing allies in the media would have had a field day blaming the inevitable economic collapse on the evils of capitalism. (Remember, Obama has been in power going on two years and he’s still blaming George Bush for everything!)

I guess a rational person would have his South Pacific island picked out and be getting his papers in order in anticipation of having to depart on short notice. Yet, there is another alternative: Stay put, dig in your heels and do your part to spread the truth – about inflation, about entitlements, about the sanctity of liberty and about the loathsome nature of government.

In other words, do what you can do to educate others about liberty and what needs to be done to restore the United States to a nation based on our original Constitution.

One note of caution: Don’t think in terms of overnight victory. It won’t happen. In fact, this is a war where there’s no such thing as total victory. The story of the human race is told in the ebb and flow of liberty and tyranny.

Just as communists are wrong to believe they can change human nature and “convince” people to willingly give up their freedom and property, so, too, is it a mistake for defenders of liberty to believe they can convince those who worship big government to believe in freedom.

Contrary to the “summer of recovery” blather we are being fed on a daily basis, the truth is that the economy is getting worse by the day – and the worst, by far, is yet to come. Economic judgment day may be a bit late in arriving, but it is coming. So you have only two choices: Fight or flight. I’ve already made my choice. What about you?

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