Free market money
ByFebruary 26, 2009
If anyone still has doubts that the natural tendency of governments is to always inflate the currency, they should consider that we now talk freely of annual federal deficits in the trillions of dollars. Thirty or forty years ago, annual federal deficits of twenty or thirty billion were considered shocking. The cumulative federal debt is now over sixty trillion dollars. This debt is greater than the entire world GDP!
No human being or human institution can be given the power to create money at will, out of thin air, and not abuse the power. This is not mere conjecture; all of history proves it.
So thoroughly has government worldwide taken over the creation of money, that most people actually believe money can only be a creation of governments. But historically, this was not the case. Money evolved out of markets, as a means of facilitating transactions, and replacing barter systems. For example, if you were a tailor, and you wanted to exchange products with a grocer in order to get some potatoes, this would be difficult without money. Precious metal coins evolved over time as the perfect medium of exchange because they are difficult to debase, are a stable store of value, are not easily broken or destroyed, and are easily portable.
So, you might ask, if precious metal money is so vastly superior to government paper money, why don’t people use it? The simple answer is that so-called “legal tender” laws make it illegal to do so (although some people on the fringes of the legal economy have begun taking privately minted silver coins as payment).
In the long run, the only solution to the business cycle of boom, bubble, and crash is honest money, which is free market money. Free people have the right to exchange goods and services, using whatever means of exchange they wish. In a free society, this would naturally take the form of precious metal coins for most transactions. The only role the government should have would be the prosecution of those who engage in counterfeiting. (Yes, even though governments historically are the greatest of all counterfeiters.)
Of course, I admit this is extremely radical thinking. There is zero chance of freedom in money happening under Obama, or his successor. Governments love the power to inflate, for obvious reasons: it gives them total control of the economy. But, if things get as bad in the next few years as I think they will, the time may come for an actual revolution, complete with Federal Reserve officers and other government gangsters and pirates locked up in prison, where they belong. If enough people learn the lessons of history and money, that could be the time to move to a system of true economic freedom.
3 Responses to Free market money
griff
February 26, 2009 at 8:10 pm
It’s only considered radical thinking because we’ve been beaten senseless by the media.
From Andrew Jackson’s farewell address (I took the liberty of breaking it into shorter paragraphs for easier reading):
“In reviewing the conflicts which have taken place between different interests in the United States and the policy pursued since the adoption of our present form of Government, we find nothing that has produced such deep-seated evil as the course of legislation in relation to the currency. The Constitution of the United States unquestionably intended to secure to the people a circulating medium of gold and silver. But the establishment of a national bank by Congress, with the privilege of issuing paper money receivable in the payment of the public dues, and the unfortunate course of legislation in the several States upon the same subject, drove from general circulation the constitutional currency and substituted one of paper in its place.
The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain. The corporations which create the paper money can not be relied upon to keep the circulating medium uniform in amount.
In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community.
The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry.
It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government.
Some of the evils which arise from this system of paper press with peculiar hardship upon the class of society least able to bear it. A portion of this currency frequently becomes depreciated or worthless, and all of it is easily counterfeited in such a manner as to require peculiar skill and much experience to distinguish the counterfeit from the genuine note. These frauds are most generally perpetrated in the smaller notes, which are used in the daily transactions of ordinary business, and the losses occasioned by them are commonly thrown upon the laboring classes of society, whose situation and pursuits put it out of their power to guard themselves from these impositions, and whose daily wages are necessary for their subsistence.
It is the duty of every government so to regulate its currency as to protect this numerous class, as far as practicable, from the impositions of avarice and fraud. It is more especially the duty of the United States, where the Government is emphatically the Government of the people, and where this respectable portion of our citizens are so proudly distinguished from the laboring classes of all other nations by their independent spirit, their love of liberty, their intelligence, and their high tone of moral character. Their industry in peace is the source of our wealth and their bravery in war has covered us with glory; and the Government of the United States will but ill discharge its duties if it leaves them a prey to such dishonest impositions. Yet it is evident that their interests can not be effectually protected unless silver and gold are restored to circulation.
These views alone of the paper currency are sufficient to call for immediate reform; but there is another consideration which should still more strongly press it upon your attention.
Recent events have proved that the paper-money system of this country may be used as an engine to undermine your free institutions, and that those who desire to engross all power in the hands of the few and to govern by corruption or force are aware of its power and prepared to employ it. Your banks now furnish your only circulating medium, and money is plenty or scarce according to the quantity of notes issued by them. While they have capitals not greatly disproportioned to each other, they are competitors in business, and no one of them can exercise dominion over the rest; and although in the present state of the currency these banks may and do operate injuriously upon the habits of business, the pecuniary concerns, and the moral tone of society, yet, from their number and dispersed situation, they can not combine for the purposes of political influence, and whatever may be the dispositions of some of them their power of mischief must necessarily be confined to a narrow space and felt only in their immediate neighborhoods.”
This was 1837 folks. Read it more than once and let it sink in.
Paolo
February 28, 2009 at 7:40 am
Hi Griff,
Excellent reply. Isn’t it amazing how much more articulate Americans were in 1837, compared to nowadays? Imagine if Bush or Obama used words like “cupidity” in an address to the public!
Andrew Jackson absolutely nailed it.
griff
February 28, 2009 at 9:40 am
Yeah, I couldn’t imagine them texting the Declaration of Independence to King George in text-speak.
With all the comparisons our leaders like to make to former Presidents, I don’t think anyone will be comparing Obama to Jackson any time soon.
The more things change…