Libertas

John Stuart Mill (1806-1873)

Currencies and Economies around the World – from the Seventh Century BC to the Twenty-First Century AD

“After experience had shown that pieces of paper, of no intrinsic value, by merely bearing upon them the written profession of being equivalent to a certain number of francs, dollars, or pounds, could be made to circulate as such, and to produce all the benefit to the issuers which could have been produced by the coins which they purported to represent; governments began to think that it would be a happy device if they could appropriate to themselves this benefit, free from the condition to which individuals issuing such paper substitutes for money were subjects, of giving, when required for the sign, the thing signified. They determined to try whether they could not emancipate themselves from this unpleasant obligation, and make a piece of paper issued by them pass for a pound, by merely calling it a pound, and consenting to receive it in payment of the taxes. And such is the influence of almost all established governments, that they have generally succeeded in attaining this object; I believe I might say they have always succeeded for a time, and the power has only been lost to them after they had compromised it by the most flagrant abuse.” – John Stuart Mill, Principles of Political Economy, 1848

Hard Money

What is the difference between hard money and soft money? What are their purposes? Hard money is stable and reliable. It is a specific measure of an amount of gold, silver, or other commodity, such as even cowrie shells. Hard money is therefore based on the rule of law.

Soft Money

Soft money is adaptable to short term policy goals. It is subject to the “whims of its mangers” and is therefore based on the rule of man. Soft money is only possible in a monopolized monetary system, for why would anyone accept paper of no intrinsic value?

Definite, unchanging, mutually agreed transactions will be preferred by all parties. A transaction made where the terms  can change without mutual agreement means one party is getting cheated. Governments and the private entities colluding with  government prefer this form of “monopoly money.” History shows a cycle between hard and soft money, and the world is currently in a soft money cycle. Presently there are no hard currencies in the world economy.

People naturally prefer stable money for their business, but special interest groups and the government prefer the advantage of soft money to manipulate, saving themselves from another crisis most likely they themselves created. Since decreasing the money supply (deflation) is recessionary, “Monetary policy (the modern term for this manipulation)” inevitably moves toward increasing the money supply, that is inflation (inflation is not the increase in prices, it’s the cause of increasing prices. Increasing prices is therefore the symptom of inflation).

The Consequences

As the problem of inflation becomes more severe, the public will want to return to stable money, eventually abandoning the useless currency and perhaps the government enforcing the monopoly as well. As the crisis builds, the government will likely become more tyrannical, forcing the citizenry to submit and accept the government’s currency. Without this “monopoly money” the government will fall. The rise and fall of states and empires “mirrors” the rise and fall of taxes and the quality of the currency.

Taxes are increasing, despite Obama’s pledge. Cap and Trade is another form of taxation. Inflation is unbelievable, though the increase in prices has not yet hit the market. The government  ignores the Constitution; it increases police-state powers. History does not make me optimistic about the future of the United States. I am, however, optimistic about the future. Truth does win out; freedom eventually triumphs; light casts out darkness; love conquers.

Don’t despair; prepare for the future. It’s still bright.

Aloha

Inspired by Gold: The Once and Future Money by Nathan Lewis