‘There is no such thing as a free lunch.’

This statement rings truer now than at any other time in recent history. Since the 1960s and 1970s, Western democracies have slowly been moving away from good old fashioned common sense – not to mention common cents, meaning sound monetary policies, resulting in the basket cases many of them have become today.

Money that isn’t backed by gold merely becomes Fiat currency. Over the past 50 to 60 years (despite periods of fiscal restraint such as the Clinton/Chretien/Martin years of the 1990s, Governments in US and Canada have by and large embraced modern monetary theory (MMT), a preposterous philosophy whereby it is perfectly ethical to continue to print money that is backed by nothing, and without any consequences.

Furthermore, governments since the 1970s who have been racking up debts with the understanding that they will be paid by future generations have only been kicking the proverbial can further down the road.

And now, my friends, we have reached the end of the road, so to speak, with the only other direction to go in is off the proverbial fiscal cliff.

History shows us that the careless, unrestrained printing of money always leads to economic disaster, not to mention out of control inflation; The Weimer Republic of Germany of the 1920s, Argentina, Zimbabwe, Venezuela.

With inflation rates reaching 40 – year highs of 8.6% in the United States and 7.7% (official, not real rates, btw) in Canada, people in North America who have already been struggling to make ends meet – are finding themselves being hit from all directions. despite low unemployment rates, wages have not gone up in decades, and are certainly nowhere near what they should be to keep up with increasing inflation. If this isn’t enough to contend with, homeowners will soon be hit with historically high interest rates, much higher than what baby boomers had to contend with back in the early 1980s. Ditto for skyrocketing fuel prices. To add further insult to injury, the 6.2 million seniors in Canada will see the value of their homes drop considerably when they go to sell them en masse.

Back in the 1960s, when the American economy was very strong, and the country was trying to pay for a generous welfare state along with the war in Vietnam, the term ‘guns and butter’ was born.

In 1971, President Richard Nixon instructed the Federal Reserve to close what was known at the time as the ‘gold window’, which allowed countries to trade U.S. dollars for gold, and continue to print money.

Like now, the unrestrained spending of the 1970s led to the Federal Reserve raising interest rates around 1980 in a bid to recover the economy.

I would like to say that we are seeing history repeating itself, but, with the global economy in such a state of instability, not to mention the threat of another World War, there could very well be much worse times ahead for us.

Devaluing currency – as anybody with any logic can plainly see – is truly playing with fire. It is time for governments to embrace a common cents approach to spending, and realize that we all must tighten our belts and learn to live within our means.