Richard C.B. Jonhsson
Lew Rockwell
What is needed for us to have real monetary freedom? Do we have to repeal legal tender laws? Abolish the central bank? Introduce a gold standard? Denationalize money á la Hayek? Or perhaps to introduce some other major policy change?
Not really. We just have to use some magic, some monetary magic.
Making the problem disappear
We don’t need to repeal legal tender law, abolish the central bank, introduce a gold standard or denationalize money á la Hayek. We simply need to discover new and rediscover old ways of getting around the problem. Rather than working hard at trying to solve the problem, we can make it disappear. Just like magic.
Let me explain by providing an analogy. Let’s say you want to take your kids to this great park in your city. In the middle of the park there’s a restaurant that only serves poor junk food at absolutely unaffordable prices, and this place has been granted a license by the local government.
As expected, your kids soon become hungry. What do you do? You could complain to the owner of the restaurant. You could try to gather up a crowd big enough to ask the owner to improve the food and lower the prices. You could try to petition the government to grant more licenses and hope more restaurants will open. But all of this takes time and your kids are hungry. So you will probably leave the park and simply grab a bite at another place. And the next time you want to visit the park, you will probably bring some food for a picnic. You simply get around the problem by taking your business somewhere else.
I believe we have been trying for too long to do the hard things. We have been working hard to introduce this or that major policy change, mainly through abstract reasoning, while forgetting the simple and practical ways. And the impact of the current monetary monopolies have been blown out of proportion by this excessive focus on it and the very fact that most people don’t see clearly how limited it really is, thus making it even harder for ourselves.
But what exactly is the problem?
If we seek to make something disappear we need to be fully aware of what it is we want to disappear. We need to know the enemy, so to speak.
Legal tender used to simply be the demand of the government to have taxes paid in its preferred money. The government stipulated that X was the unit-of-account and that Y and Z was legal means-of-payment for the taxes, as well as for other financial transactions with the government. The government didn’t claim any monopoly on the unit-of-account or the means-of-payment. Coins from other countries and notes issued by privately held banks circulated freely.
Later on the government claimed that its own issued money had to be accepted by everyone in the country at par. But coins from other countries and notes issued by privately held banks still could circulate freely, even though Gresham’s Law might have had a larger impact under such circumstances.
Further on the government created a central bank with a monopoly on note issuing. People hoarded valuable precious metal coins – Gresham’s Law again – the mint was closed to the public and it started to produce token coins. This monopoly has ever since been grossly abused and resulted in the highly unstable fiat currencies of today.
Be the first to comment on "Monetary Freedom, Monetary Magic"