October 3, 2022

Sound Money Can Prevent What Representative Democracy Does Not

For everyone of the talk about “our democracy, ” there is a better method to protect the lives plus property of people than just choosing politicians

One of the arrogances of “ Western” nations is that our way of life and our protections are protected by regular elections as required simply by constitutions, written (America) or not (Great Britain), containing bills of rights, etc .

The individuals rule, it is claimed, and we get exactly what we want, even though those in the minority are unhappy with the result. Minorities can always become tomorrow’s majority and institute choice policies. Therefore , Western countries really cannot get into too much trouble, since everyone wants serenity, freedom, and prosperity, even when we disagree on the correct route to take to get there.

But what if I told you that there was a deadly flaw embedded in the quite structure of Western countries that undermined this view? What if we common citizens can vote, change leaders, change parties, and it’s almost all meaningless? A good argument can be made that Ludwig vonseiten Mises believed exactly that and warned nations repeatedly in book after book to get rid of this fatal flaw or suffer complete societal collapse. Mises knew this could occur, because he had seen it happen firsthand. He pleaded with the elected leaders of Austria, his beloved homeland, to take action in order to prevent what had happened in Weimar Germany.

The Cause of Societal Collapse within Weimar Republic Germany

What happened within Weimar Germany— a real republic with democratic elections, by way— was a test situation that should not be ignored. The collapse of the German Weimar Republic led directly to the rise of National Socialism.   The cause had been unsound money ; i actually. e., money printed (literally at the time) in such quantities that the  papiermark   became worthless. Society was thrown directly into chaos. Germany had lost  two million guys   in World War I out of an overall total population of  sixty-eight million . The nation had been one of widows, orphans, and the aged almost entirely dependent upon what savings they had gathered. These savings became worthless. Widows became prostitutes, kids became thieves, and good old parents committed suicide. Among the best descriptions of this disaster is certainly Adam Fergusson’s  When Money Dies: The particular Nightmare of Deficit Investing, Devaluation, and Hyperinflation within Weimar Germany . The book is not for that squeamish.

Mises wrote repeatedly that unsound money was just as important, possibly more important, that the trappings associated with popular government. Perhaps their best-known quote is found on page 455 in  The Theory of Money and Credit :

It is extremely hard to grasp the meaning of the idea of sound money if one particular does not realize that it was invented as an instrument for the safety of civil liberties towards despotic inroads on the part of governments. Ideologically it belongs within the same class with political constitutions and bill of rights.

Notice that Mises does not meet the criteria the kind of governments that may give in to the despotism of money publishing. This is very important. All governments, whether or not democratic republics or totalitarian states, are susceptible to the despotism of money printing. Mises returns to this subject time and again. Here is just one quote from  Economic Plan , page 65.

The precious metal standard has one great virtue: the quantity of the money supply, under the gold standard, is usually independent of the policies of governments and political parties. This is its main advantage. This is a form of protection against spendthrift governments.

A Budding Alternative to the Fiat Dollar

Iran, of all nations, recently accepted as a member associated with the  Shanghai Assistance Organization , has proposed that the organization  establish a new currency   in order to bypass the buck for settling trade among its members. Alasdair Macleod has studied this process and written two learned articles,   here   and  right here , which refer to their own progress. The key points:

The Cross Economic Union (EAEU), composed mainly of a central Hard anodized cookware subset of the Shanghai Cooperation Organisation (SCO) has introduced plans for a trade negotiation currency backed by a combination of commodities and the currencies associated with member states.

… a successful EAEU trade settlement currency can be prolonged from EAEU nations in order to both those in the broader SCO and the BRICS people not in the SCO. It might also be an acceptable replacement of the particular petrodollar for oil export payments to the Middle Eastern.

The SCO members are negotiating over the new currency’s construction, but the important point is it will have a very large commodity-based component, including gold. The SCO’s understanding of money is more in line with that of Ludwig vonseiten Mises, who defined cash as the following on web page 425 of his magnum opus  Individual Action : “ Under the gold standard precious metal is money and money is gold. ”

Sound Cash Prevents War

Top among the most essential reasons for sound money is that it militates against unnecessary wars. Wars are tremendously expensive, of course , and usually are performed only as a last vacation resort or as a purely defensive action. But unsound cash makes it appear, for a while anyhow, as if war is without charge.

The USA may be the poster child for entering wars not as a last holiday resort but for other reasons. When Eisenhower left office in early 1961, the US dollar was, nicely, as sound as a dollar. Eight years later, right after Lyndon Johnson’s “ Guns and Butter ” policy, the dollar’s value was under threat, as the US’s dwindling precious metal reserve amply illustrated. 2 and a half years later, rather than end the Vietnam War and other Johnson-era welfare applications, Richard Nixon ended gold redemption by our trading partners. The war ongoing to its ignominious finish. Had he done their duty the US would have continued to be on the gold standard and avoided other failed army adventures, a list so long that it is embarrassing to list all of them.

Which usually Works Better— Gold or even Representative Democracy?

In other words, gold might have done its primary duty— i. e., make the actual cost of government spending flawlessly clear so that people, via their elected representatives, can decide the extent associated with government spending. Instead, the whole absence of any kind of objective barometer of the real cost of federal government merely encouraged US neoconservatives to search the world for dragons to slay and, when dragons were hard to find, in order to convince the people that the dragons existed in places really far away— Libya, Iraq, Syria, Somalia, Afghanistan, Ukraine … have I missed any? — and had been a threat to our way of life. Few, if any, of the failed adventures would have already been undertaken had the US been on an enforceable gold standard.

Representative democracy is important, yes, but it will not prevent societal collapse from fiscal and monetary irresponsibility. Whereas a gold regular dollar quickly shows the true cost of government and can prevent most follies. To put it bluntly, there are thousands of moms who today would have their particular sons by their sides rather than a  gold star   in their home windows.

But wait! There’s more! as the late-night TV salesmen of tchotchkes for the gullible used to say. Printing money out of nothing causes multiple adverse effects, but most are delayed somewhat. Higher prices. The boom/bust credit score cycle. Resource misallocation. Plus, many more, and all leading to a lower standard of living. But a sound cash standard reveals the surrender that the public must create to fund more government spending.

Taxes must be raised, borrowing increased, or other programs defunded. These adverse consequences happen nearly immediately and are visible to any or all. If the public thinks that the war or other investing program is necessary, then the authorities will get its approval. However really! how many ordinary people can even find the location on a chart of our many wars from the last sixty years or understand and support boondoggle spending programs that never ever die and, most often, get increased funding?

The worst spending programs in the past few years were the so-called stimulus checks. Even dyed-in-the-wool big spenders would certainly question the rationale of taxing the public to send them investigations, minus the government’s bureaucratic managing fee, of course. Ladies and gentlemen, this makes no sense and under a sound cash environment would never happen. Yet our federal government sent out 3 of them! And now our rulers are trying to convince us that will increasing the money supply to finance all these fiascos had nothing to do with higher prices plus shortages. Sure. But then again, these late-night TV salesmen like Ron Popeil sold plenty of  Vegematics !

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