•4:25 PM
This week I had some great correspondence with a very good friend of mine. We wrote back and forth regarding Monetary Policy. Below is the bulk of that correspondence. I thought you would learn from & enjoy the content:
Ezra Taft Benson in his landmark speech said, "I believe in honest money... I regard it as a flagrant violation of the explicit provisions of the Constitution for the Federal Government to... use irredeemable paper money." You can read the full text of that speech here: http://laissez-fairerepublic.com/benson.htm I love that speech and agree with almost all of it. However, I do not agree with the entirety of that sentance.
Our currency is not redeemable by the government. I cannot go to the government and turn in $100 for anything other than $100 in ones, twenties, tens, fives, etc. Our currency is non-redeemable by the government but it is redeemable by purchase.
The constitution says the following:
"The Congress shall have Power . . .To borrow Money on the credit of the United States; To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;To provide for the Punishment of counterfeiting the Securities and current Coin of the United States. . ."
I believe in honest money as well but I also believe that the love of money is the root of all evil so it is hard to have anything honest as far as government and money are concerned.
Adam Smith in his landmark book on economics (published in 1776 and used by our founders) discussed the wealth of nations (hence its title). He concluded that the true wealth of the nation was not in gold, but in labor. The wealth of the nation, the true wealth isn't determined by the gold in the King's coffers but by the production, the labor, the capacity of the population to create products. The more a country produced the wealthier it truly was. If you consume more than you produce there is an imbalance of trade and it keeps the low producer poor - despite the consumption of more products. It keeps you indebted and in that sense poor (although there is a mirage of wealth). This was the way of the colonial empires - conquer a nation, take their gold and make them produce for the empire and control the things that they could buy. It kept them in poverty and enriched the state. Adam Smith saw great problems with that model. The only way to increase the wealth of the nation was to increase the money in the King's coffers. That would lead to wars, death, suffering and a lack of production - the king got richer while the people got poorer.
If Smith was correct, that the true wealth of a nation is the labor, why not create the monetary system based on that? Why not back it up by the people of the nation rather than by gold? If people work harder the gold doesn't come any easier. As a matter of fact, as people work harder and the people grow & multiply, the money supply gets proportionately smaller & smaller. Wages don't rise - they fall (unless Congress inflates the value of the money) because there is a smaller and smaller amount of gold to go around. It is kind of like a loaf of bread, if I have a family of 5 at the dinner table, we all can get a few slices of bread at dinner. If I have a family of 50, we all get scraps. If I have a family of 200,000,000, most don't even get crumbs. Many people suffer in that kind of a system. Bread you can produce more of, gold you can't. You can also eat bread. You can't eat gold. Our money is like bread. If we can cook it, we will. And if we do, we will eat it.
The problem is if we cook more money than we had the capacity to cook. For example, if productivity rose by 3% in the first quarter, but we created 50% more money than that, then the money is inflated. There is so much bread out there that it isn't worth that much any more. Who needs 50% more bread than they can eat? We have to wait until it goes bad, then start cooking some more. If we only produced 2% then the value is actually deflated. The bread is actually worth more because there is less to go around. Even though it is worth more, what you get doesn't satisfy. When we create too much of a product, and inventories rise, we have inflation and then a recession.
I think a money system built truly on labor is the only honest money out there. The problem is, men are not honest - especially most of our elected officials. They make me ashamed. Our world needs us & we have filled the halls of congress it seems almost entirely with the most uncooperative group of self serving people in the whole country. How can we trust them to coin money? It is probably best as is - However, we need to amend the constitution to allow for it.
Monetary policy today could use some tweaks. One major one that I see would be that we could create a means to only increase the money supply proportionality to labor with exceptions to be approved by congress. This would truly tie the "coinage" of money forever to the wealth of the nation - labor and the people.
Our founders did coin paper money - but it was all redeemable. I do believe that we have learned from the founders and that over the course of 230 years that we have learned some things and that maybe there are better ways to do things than our founders originally wrote into the constitution. For example, we recognize the ability of every citizen to vote. We recognize the right of every citizen to own property. We recognize the right of every citizen to make a contract. We recognize the right of life perhaps more than did our founders. We recognize the equality of all mankind in employment law. All of these are advances that I think they would hail, but at the time did not see possible for the country. At the same time, our founders did understand more than our leaders do today about the appropriate definition of the separation of church and state. They understood more about the true meaning of limited government. They understood our federal system. They understood the need for checks and balances. Jefferson also understood that the nation would grow and change and learn and actually recommended a new constitutional convention every 20 years. They understood the brilliance and the dynamic nature of man and the miraculous providence of God.
I, like you, am greatly concerned about "socialism." However, I don't necessarily view our current government intervention as socialism. I worry that it is not socialism at all - I view it as pure government favors to big businesses that are crafted in a manner that is intended to look like it benefits the people. Politicians rarely get elected because of their good will towards the voter. I sound pretty cynical don't I? I don't mean to be - I just see too much of this perhaps to feel good about it any more. For example, government controlled health care - who does it really enrich? It enriches the insurance providers (imagine that, government mandated customers!) and the health care industry (imagine that - unlimited customers now!). Government bailouts of Fanny Mae & Freddie Mac - who does it really benefit? It really benefits the businesses. And it also benefits the politicians because they can say they did this for the people and then get re-elected. That is what is alarming. Socialism in its truest sense wasn't about that - it was about truly protecting the people from this kind of mess - but at the expense of the other freedoms - life & property - which is where Socialism's true evil came in. Communism attacked those plus liberty. This has strayed far from that. I think this is under the guise of socialism but is in fact something else. I worry about it too. How long can the people afford this kind of reckless management of the country? Time will tell.
Thanks for Reading.
Ezra Taft Benson in his landmark speech said, "I believe in honest money... I regard it as a flagrant violation of the explicit provisions of the Constitution for the Federal Government to... use irredeemable paper money." You can read the full text of that speech here: http://laissez-fairerepublic.com/benson.htm I love that speech and agree with almost all of it. However, I do not agree with the entirety of that sentance.
Our currency is not redeemable by the government. I cannot go to the government and turn in $100 for anything other than $100 in ones, twenties, tens, fives, etc. Our currency is non-redeemable by the government but it is redeemable by purchase.
The constitution says the following:
"The Congress shall have Power . . .To borrow Money on the credit of the United States; To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;To provide for the Punishment of counterfeiting the Securities and current Coin of the United States. . ."
I believe in honest money as well but I also believe that the love of money is the root of all evil so it is hard to have anything honest as far as government and money are concerned.
Adam Smith in his landmark book on economics (published in 1776 and used by our founders) discussed the wealth of nations (hence its title). He concluded that the true wealth of the nation was not in gold, but in labor. The wealth of the nation, the true wealth isn't determined by the gold in the King's coffers but by the production, the labor, the capacity of the population to create products. The more a country produced the wealthier it truly was. If you consume more than you produce there is an imbalance of trade and it keeps the low producer poor - despite the consumption of more products. It keeps you indebted and in that sense poor (although there is a mirage of wealth). This was the way of the colonial empires - conquer a nation, take their gold and make them produce for the empire and control the things that they could buy. It kept them in poverty and enriched the state. Adam Smith saw great problems with that model. The only way to increase the wealth of the nation was to increase the money in the King's coffers. That would lead to wars, death, suffering and a lack of production - the king got richer while the people got poorer.
If Smith was correct, that the true wealth of a nation is the labor, why not create the monetary system based on that? Why not back it up by the people of the nation rather than by gold? If people work harder the gold doesn't come any easier. As a matter of fact, as people work harder and the people grow & multiply, the money supply gets proportionately smaller & smaller. Wages don't rise - they fall (unless Congress inflates the value of the money) because there is a smaller and smaller amount of gold to go around. It is kind of like a loaf of bread, if I have a family of 5 at the dinner table, we all can get a few slices of bread at dinner. If I have a family of 50, we all get scraps. If I have a family of 200,000,000, most don't even get crumbs. Many people suffer in that kind of a system. Bread you can produce more of, gold you can't. You can also eat bread. You can't eat gold. Our money is like bread. If we can cook it, we will. And if we do, we will eat it.
The problem is if we cook more money than we had the capacity to cook. For example, if productivity rose by 3% in the first quarter, but we created 50% more money than that, then the money is inflated. There is so much bread out there that it isn't worth that much any more. Who needs 50% more bread than they can eat? We have to wait until it goes bad, then start cooking some more. If we only produced 2% then the value is actually deflated. The bread is actually worth more because there is less to go around. Even though it is worth more, what you get doesn't satisfy. When we create too much of a product, and inventories rise, we have inflation and then a recession.
I think a money system built truly on labor is the only honest money out there. The problem is, men are not honest - especially most of our elected officials. They make me ashamed. Our world needs us & we have filled the halls of congress it seems almost entirely with the most uncooperative group of self serving people in the whole country. How can we trust them to coin money? It is probably best as is - However, we need to amend the constitution to allow for it.
Monetary policy today could use some tweaks. One major one that I see would be that we could create a means to only increase the money supply proportionality to labor with exceptions to be approved by congress. This would truly tie the "coinage" of money forever to the wealth of the nation - labor and the people.
Our founders did coin paper money - but it was all redeemable. I do believe that we have learned from the founders and that over the course of 230 years that we have learned some things and that maybe there are better ways to do things than our founders originally wrote into the constitution. For example, we recognize the ability of every citizen to vote. We recognize the right of every citizen to own property. We recognize the right of every citizen to make a contract. We recognize the right of life perhaps more than did our founders. We recognize the equality of all mankind in employment law. All of these are advances that I think they would hail, but at the time did not see possible for the country. At the same time, our founders did understand more than our leaders do today about the appropriate definition of the separation of church and state. They understood more about the true meaning of limited government. They understood our federal system. They understood the need for checks and balances. Jefferson also understood that the nation would grow and change and learn and actually recommended a new constitutional convention every 20 years. They understood the brilliance and the dynamic nature of man and the miraculous providence of God.
I, like you, am greatly concerned about "socialism." However, I don't necessarily view our current government intervention as socialism. I worry that it is not socialism at all - I view it as pure government favors to big businesses that are crafted in a manner that is intended to look like it benefits the people. Politicians rarely get elected because of their good will towards the voter. I sound pretty cynical don't I? I don't mean to be - I just see too much of this perhaps to feel good about it any more. For example, government controlled health care - who does it really enrich? It enriches the insurance providers (imagine that, government mandated customers!) and the health care industry (imagine that - unlimited customers now!). Government bailouts of Fanny Mae & Freddie Mac - who does it really benefit? It really benefits the businesses. And it also benefits the politicians because they can say they did this for the people and then get re-elected. That is what is alarming. Socialism in its truest sense wasn't about that - it was about truly protecting the people from this kind of mess - but at the expense of the other freedoms - life & property - which is where Socialism's true evil came in. Communism attacked those plus liberty. This has strayed far from that. I think this is under the guise of socialism but is in fact something else. I worry about it too. How long can the people afford this kind of reckless management of the country? Time will tell.
Thanks for Reading.
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