One thing I keep seeing all over the place during this government shutdown is how America’s “democracy” is at risk. Thomas Friedman penned a piece the other day claiming this. Now, I don’t know if Friedman’s overall argument is right. It’s certainly alarming that our political parties can’t seem to agree on much. But one thing that is definitely wrong is this constant reference to the USA as a “democracy”. The USA is not a democracy. This is a point that I see all the time so let me explain why it’s important.

When the founding fathers considered the various forms of government they were extremely fearful of tyranny AND anarchy. They viewed government as something that could both serve the people and protect it from its own people. This was a simple, but brilliant perspective. They specifically designed the government so that it protected “we the people” from ourselves and also from its own powers. So they created a Constitution that specified the precise checks and balances that should be in place to ensure that no branch of the government could grow too powerful. But they also ensured that the country was a republic, which meant that the power rests with the people who can choose their representatives and alter the course of future legislation. These representatives don’t only serve their constituents, but they also adhere to the guidelines of the Constitution. This government was designed to serve the people and to help create balance so that the private sector could not abuse itself, but also designed to ensure that the public sector could not abuse the private sector.

Some people in the USA seem to think the government is the answer to all of our problems while others seem to think that government is the cause of all of our problems. Both sides seem to forget that the entire premise of the United States was founded on the principle of creating a balance. I think the government shutdown is a sign of how extremely far away from this balance the USA has grown over time.

Anyhow, I don’t want to ignite a political war of words here on the site, but this point has always annoyed me so I figured I’d get it off my chest. And if you understand my view of the monetary system you can probably see why I think this stuff matters to the way the institutional design of the system works so gold stars go to uber nerds who see the connection….