Monetary Policy and the Existing Trend toward All-around Planning
The folks of all countries agree that this present state of financial affairs is unsatisfactory and that a change is highly desirable. However , ideas about the kind of change needed and about the objective to be aimed at differ broadly. There is some confused discuss stability and about a standard that is neither inflationary nor deflationary. The vagueness of the conditions employed obscures the fact that people are still committed to the unwarranted and self-contradictory doctrines whose very application has created the current monetary chaos.
The destruction of the monetary order was the result of deliberate actions on the part of various governments. The government-controlled central banks and, in the United States, the government-controlled Federal Reserve System were the instruments applied within this process of disorganization and demolition. Yet without exception many drafts for an improvement of currency systems assign towards the governments unrestricted supremacy within matters of currency and design fantastic images of superprivileged superbanks. Even the reveal futility of the International Monetary Fund does not deter authors from indulging in dreams in regards to a world bank fertilizing human beings with floods of cheap credit.
The inanity of all these plans is not accidental. It is the logical results of the social philosophy of the authors.
Money is the commonly used medium of exchange. It is a market sensation. Its sphere is that of business transacted by people or groups of individuals within a society based on private possession of the means of production and the division of labor. This particular mode of economic organization— the market economy or capitalism— is at present unanimously ruined by governments and politics parties. Educational institutions, from universities down to kindergartens, the push, the radio, the legitimate movie theater as well as the screen, and posting firms are almost completely dominated by people within whose opinion capitalism shows up as the most ghastly of most evils. The goal of their insurance policies is to substitute “ planning” for the alleged planlessness from the market economy. The term planning as they use it means, of course , central planning by the specialists, enforced by the police energy. It implies the nullification of each citizen’s right to program his own life. It changes the individual citizens into simple pawns in the schemes from the planning board, whether it is called Politburo, Reichswirtschaftsministerium , or some other name. Preparing does not differ from the interpersonal system that Marx recommended under the names of socialism and communism. It transfers control of all production activities to the government and thus removes the market altogether. Where there is not any market, there is no money either.
Although the existing trend of economic guidelines leads toward socialism, the usa and some other countries have got still preserved the feature features of the market economy. Up to now the champions of government control of business have not however succeeded in attaining their ultimate goal.
The Fair Deal party has maintained that it is the duty of the government to determine exactly what prices, wage rates, plus profits are fair and what not, and then to enforce its rulings by the law enforcement power and the courts. This further maintains that it is the function of the government to keep the rate of interest at a reasonable level by means of credit growth. Finally, it urges a process of taxation that aims at the equalization of earnings and wealth. Full application of either the first or the final of these principles would on its own consummate the establishment associated with socialism. But things have not yet moved so far on this country. The resistance from the advocates of economic freedom has not yet been damaged entirely. There is still a good opposition that has prevented the particular permanent establishment of immediate control of all prices and wages and the total confiscation of all incomes above a height deemed fair simply by those whose income is leaner. In the countries on this side of the Iron Curtain the battle between the friends and the foes of totalitarian overall planning is still undecided.
In this great conflict, the advocates of community control cannot do without having inflation. They need it to be able to finance their policy associated with reckless spending and of lavishly subsidizing and bribing the voters. The undesirable but inevitable consequence of inflation— the rise in prices— offers them with a welcome pretext to establish price control and therefore step by step to realize their scheme of all-around planning. The illusory profits which the inflationary falsification of economic calculation makes appear are addressed as if they were real income; in taxing them away under the misleading label of excess profits, parts of the main city invested are confiscated.
In spreading discontent and social unrest, inflation generates favorable conditions for the subversive propaganda of the self-styled champions of welfare and progress. The spectacle that this political scene of the final two decades has offered has been really amazing. Governments with no hesitation have embarked upon vast inflation and govt economists have proclaimed debt spending and “ expansionist” monetary and credit management as the surest way towards prosperity, steady progress, and economic improvement. But the exact same governments and their henchmen have indicted business for that inevitable consequences of inflation. While advocating high prices and wage rates as a panacea and praising the administration for having raised the “ national income” (of course, expressed in terms of a depreciating currency) to an unparalleled height, they blamed private enterprise for charging excessive prices and profiteering. Whilst deliberately restricting the output associated with agricultural products in order to increase prices, statesmen have had the audacity to contend that capitalism creates scarcity and that but for the sinister machinations of big business there would be plenty of everything. And an incredible number of voters have swallowed all of this.
There is have to realize that the economic insurance policies of self-styled progressives are not able to do without inflation. They can not and never will accept a policy associated with sound money. They can depart neither their policies associated with deficit spending nor the assistance their anticapitalist propaganda gets from the inevitable consequences of inflation. It is true these people talk about the necessity of doing away with inflation. But what they mean is not to end the particular policy of increasing the quantity of money in circulation but to determine price control, that is, useless schemes to escape the emergency arising inevitably from their guidelines.
Monetary reconstruction, including the abandonment of pumpiing and the return to sound cash, is not merely a problem associated with financial technique that can be resolved without change in the structure of general economic procedures. There cannot be stable money within an environment dominated by ideologies hostile to the preservation of economic freedom. Curved on disintegrating the market economy, the ruling parties will definitely not consent to reforms that would deprive them of their most formidable weapon, pumpiing. Monetary reconstruction presupposes to begin with total and unconditional being rejected of those allegedly progressive procedures which in the United States are specified by the slogans New Offer and Fair Deal.
Mises’s 1st book, The Theory of Money and Credit , was released in 1912, catapulting him into the ranks of Europe’s most respected economists. In 1953, Mises added a new section, “ The Return to Sound Money, ” from which this short article is excerpted.