NEARLY EVERYONE at this moment of money madness will
agree with Wynn's statement - humorous but sound. H. B. Bohn remarked:
"Of money, wit, and virtue, believe one-fourth of what you hear." As to
wit and virtue, Bohn may be right. But I doubt that as much as a fourth
of what we hear about money is worth serious consideration, for most of
the pronouncements stem from a premise that it is a function of
government to issue money and regulate the value thereof. The premise
seems wrong to me. I believe that if money is to be useful to traders as
a medium of exchange then the decisions as to what shall serve as money
must be worked out by traders in the market, voluntarily, rather than by
governmental edict.
If you are further interested in what I believe,
reflect f or a moment on the various commodities and other things that
have been used for money: wampum, sea shells, salt, fur, dried fish,
ivory, cigarettes, silk stockings, gold and other metals-the list is
long. These are some of the things called money, but note that of those
listed thus far, all are commodities that, at the time, were in common
use in trade - so common that they were useful as a medium of exchange.
But things of a different category, "non-commodities,"
also are called money - and thereby hangs our tale. German marks are
things; in 1923 five billion of these things wouldn't buy a loaf of
bread. Paper dollars also are things called money -legal tender -
government money which the law requires a creditor to accept in payment
of a debt. Or to put it another way, government money, if created out of
thin air by edict, is in no sense a scarce and valuable resource useful
to traders but is rather a means of taxing or taking scarce resources
from the market without offering anything useful in exchange. Such
"money" may be a clever form of taxation, but it is far worse than
useless as a medium of exchange.
Not Worth a Continental?
Am I arguing that government money never has been
"worth a Continental"? Not necessarily. If a government issues paper
receipts that are fully backed by some valuable and widely acceptable
item of trade - fully redeemable upon demand by the bearer - such
receipts may serve very well as a medium of exchange. But, of course,
there's no reason on earth why the issuance of warehouse receipts should
be a governmental function. Let anyone do it who has a warehouse, and
printing press, and a sufficient stock of gold or silver or whatever
else the receipt calls for. And let government intervene only to see
that the receipts are not fraudulent - counterfeit.
I am well aware that some governments of some nations
at sometimes have been in charge of monetary policy with quite
satisfactory results, when the policy was to mint standardized coins and
issue receipts fully redeemable in some well-known and highly marketable
commodity. But there is no reason to suppose that the managers of a
governmental monopoly will long function in competitive fashion if the
monopoly can be exploited to gain additional political power. And it
doesn't take a genius to figure how to exploit a money monopoly: just
print bogus warehouse receipts and declare them to be legal tender; then
pass laws to penalize suppliers of goods or services who refuse to
accept the bogus receipts at face value. Finally, this can be pushed to
the point of issuing receipts based not on the fullness of the warehouse
but on its emptiness instead - the use of the national debt as the
backing for the paper money.
What would be the grossest fraud if an individual tried
it has become the common practice of governments - all quite legal
because it is a governmental monopoly. And the result is a runaway
inflation that disrupts business activities and hinders rather than
facilitates trade. This is why governments cannot be trusted with power
to determine what traders should use as a medium of exchange. Let the
traders choose.
Leave the decisions about money to the market. Limit
the government to its proper function of policing the market and
punishing traders who cheat or rob or willfully injure other peaceful
persons.
There Is No Blueprint
When I say that decisions about money should be left to
the market, I do not presume to know precisely what those decisions
might be. Nor do I find much agreement among monetary experts as to what
those decisions ought to be. Would traders insist on pure gold as money?
Would they use checking accounts or American Express or credit cards?
Would they patronize banks and insist on 100 per cent reserves? I don't
know, and I'm not terribly concerned that no one else seems to know
precisely. What I am concerned about is that men be free to choose
whatever best seems to serve their own respective purposes. And I
believe that from such freedom to succeed or fail in open competition in
the market will come the most nearly perfect and tamper-proof monetary
policy humanly possible.
How much understanding of money is required of us? No
more understanding than any one of us has about how to make a jet
airplane.
To support this point, let me repeat for the umpteenth
time that no single person knows how to make an ordinary wooden lead
pencil, explained in a brevity entitled, "I, Pencil."1 Yet,
the year that piece was written, we made in the U.S.A. 1,600,000,000
wooden pencils. How come? How explain a know-how that exists in no one
of us, even remotely? My answer: It is the overall luminosity, the
wisdom in the free market. When millions of people are free to act
creatively as they choose, an unimaginable wisdom is the consequence. To
assert that it is a billion times greater than exists in any discrete
individual would be a gross understatement.
Keep in mind that any single person's understanding of
how money could be made to serve us honestly and efficiently is
precisely as impossible as understanding how to make a pencil!
It is appropriate at this point to ask a question to
which no one has a correct answer: What would be the medium-of-exchange
situation were it left not to dictocratic control but to the fantastic
wisdom of the market? To hazard a guess would be to feign a clairvoyance
beyond human experience. Guessing would be as farfetched as expecting
Socrates to have foreseen and described the makings of present-day air
travel, electric lighting, the human voice delivered around the earth in
one-seventh of a second, my dictaphone, or a thousand and one other
phenomena. I call these "phenomena" because no one understands or can
describe the genesis of these countless economic blessings even after
their existence! The wisdom that accounts for them is not in you or me;
it derives from the overall luminosity. Why then should we not entrust
money-the medium of exchange - to this same wisdom rather than to the
coercive power of those now in public office?
Yes, what this country needs is a good five-cent
nickel. The way is clear: Relegate organized force - government-to the
defense of life and property, invoking a common justice, keeping the
peace. And leave all creative activities, including the medium of
exchange money - to the wisdom of the market. Do this or our country
will end up with a five-cent thousand-dollar bill.
Difficult? Yes! Impossible? Who knows! One thing for
certain: Turning money affairs over to the free market is no more an
idealistic dream than reducing government to its proper role. And,
another thing for certain: Standing for that which seems politically
expedient or feasible gains nothing; such techniques are doomed to
failure. On the other hand, every boon to mankind has had its birth in
the pursuit and upholding of what's right. Humanity has been graced with
many boons, every one of which was first thought to be impossible. Bear
in mind that righteousness, as well as faith, works miracles.
The Sources of Invention
IF PAST Experience is anything to judge by, crucial
discoveries may spring up at practically any point at any time.
As contrasted with the ideal ways of organizing effort
in other fields, what is needed for maximizing the flow of ideas is
plenty of overlapping, healthy duplication of efforts, lots of the
so-called wastes of competition, and all the vigorous untidiness so
foreign to the planners who like to be sure of the future.
John Jewkes, from Lloyds Bank Review, January 1958
I see "I, Pencil."- Copy on request.
Reprinted with permission from The
Freeman, a publication of The Foundation for Economic Education, Inc.,
January, 1975, Vol. 25, No. 1.
Yourname@libertyhaven.com
