[117356] in Cypherpunks
SNET: What Is Money?
daemon@ATHENA.MIT.EDU (Vladimir Z. Nuri)
Wed Sep 1 02:35:27 1999
Message-Id: <199909010613.XAA05765@netcom13.netcom.com>
To: cypherpunks@cyberpass.net
Date: Tue, 31 Aug 99 23:13:17 -0700
From: "Vladimir Z. Nuri" <vznuri@netcom.com>
Reply-To: "Vladimir Z. Nuri" <vznuri@netcom.com>
From: "Mark A. Smith" <msmith01@flash.net>
Subject: SNET: What Is Money?
Date: Thu, 26 Aug 1999 09:24:47 -0400
To: Mark <msmith01@flash.net>
-> SNETNEWS Mailing List
Lew Rockwell wrote:
August 26, 1999
What Is Money?
Llewellyn H. Rockwell, Jr.
For years, J.S.G. Boggs has suffered every manner of government
intimidation
because of his art. He draws currency, very beautiful currency, which
he
calls Boggs' bills. He's not trying to fool anyone, and there's no
mistaking
them for dollars. In fact, they are much nicer looking than the
Treasury's
new bills that feature overgrown heads of politicians and official
graffiti
of all sorts.
Because Boggs' bills are both lovely and fun, he quite often persuades
merchants to accept his artistic creations in exchange for goods and
services. They've even been known to give change -- in real dollars.
The
more famous he becomes (the University of Chicago has just published a
book
about him) the more his art is in demand.
But far from getting a grant from the National Endowment for the Arts,
he's
been subjected to three Secret Service raids. The agency seized 1,300
bills
from Boggs' home, and despite the refusal of several courts to convict
him
of counterfeiting, the government won't return his property.
There's a popular bumper sticker that reads: "Don't Steal. The
Government
Hates Competition." In light of Boggs' experience, there should also be
one
about printing money. The Fed, and the government that created it in
1913,
hate the competition.
Consider that the stock market soars and tanks on the merest
speculation of
what Greenspan the Great will do next. He may raise rates, causing
markets
to crash. Or he may raise rates less than previously expected, making
markets to take off. Predicting which will occur is an art, not a
science.
The only constant is the power of the Fed itself. In what does this
power
consist? Two factors: 1) money is no longer gold but paper and
therefore can
be created (or destroyed) on a whim, and 2) the Fed controls the money
supply. Congress and the Courts can only envy that level of power.
It wasn't always thus. Money originated in the market, not by decree of
a
government or a central bank. Any valuable commodity can come to be a
means
of facilitating exchange. Salt, shells, pelts, and even cigarettes in
prisoner-of-war camps have functioned as money. But throughout most
history
and in most countries, the market has chosen gold because it is scarce,
portable, durable, and constant.
Before there was a central bank, there was no overarching manager of
the
money supply. People used gold for money and banking operated like any
other
business. The bankers performed the service of storing gold and making
loans
based on their capital. They didn't create money out of thin air, and
they
certainly didn't raise and lower interest rates on their own.
The glory of this system is that it operated outside the authority of
government. That is precisely the reason government did not like it.
Early
in the century, a cabal of bankers and government officials got
together to
change that, to reconfigure the monetary system so that it served their
collective interests. The result was the Fed, and the subsequent loss
of
personal and economic freedom. Centralized control of money was once
just a
plank in the "Communist Manifesto"; now it is accepted as normal by
virtually everyone.
Take a look at our money today. Coins that were once silver are now tin
or
some other worthless metal. Their value has nothing to do with the
marketability of their metal, but only with their use in transactions.
Whereas paper dollars used to be exchangeable into gold and silver,
they are
now nothing but paper with a value dependent on how much the government
and
the Fed decide to print up.
What the government has monopolized and controlled it has always
destroyed,
as Murray Rothbard argues in "What Has Government Done to Our Money."
The
turn-of-the-century dollar is worth a few pennies today. The balance
has
funded the rise of the Welfare-Warfare State at the expense of our
savings.
With the Fed in control of the money supply, we will forever experience
booms when money is inflated followed by inevitable busts, as well as
relentless inflation that eats away at our living standards. What the
government cannot grab through taxation and borrowing it can always
create
with a call to its friends at the Fed.
Before the Fed, what was money? It was an easy question to answer: gold
and
silver. But politicians and central bankers destroyed that system. What
is
money today? The short answer is: what the government says it is. And
apart
from the government's promise to print quantities of it, it would have
no
value whatsoever.
In some ways, the work of Mr. Boggs illustrates the point nicely. "It's
all
an act of faith," he says in "Boggs: A Comedy of Values," the new book
about
him. "Nobody knows what a dollar is, what the word means, what holds
the
thing up, what it stands for." He has shown repeatedly that his own
drawings, valued as art, are worth far more than the government's
currency.
And yet he is constantly threatened with property confiscation and even
jail
for doing what the government is doing.
Several years back, a separatist group in Montana called "The Freemen"
had
the bright idea of printing up their own money. They studied the
operations
of the Federal Reserve and discovered that its money wasn't backed by
anything. Declaring themselves a sovereign country, The Freemen figured
they
would also do what the Fed did. Of course, the FBI quickly surrounded
their
land and hauled them off to jail where they are rotting today.
Frederic Bastiat defined a free society as one in which the government
is
not permitted to do to private citizens what they are forbidden to do
to
each other. Following Bastiat, if private citizens are not allowed to
print
up paper tickets and call them money, the government shouldn't be
either.
That we allow government to do so has led to disastrous consequences.
If the U.S. government tried to run its empire on taxes and debt alone
--
without the power to create money -- it would likely collapse in short
order. That's as good a reason as any to restore the gold standard.
Then the
dollar would be worth as much as a Boggs.
-----------
Llewellyn H. Rockwell, Jr., is president of the Ludwig von Mises
Institute
in Auburn, Alabama.
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