|
People who have followed Steve Forbes’ “Fact & Comment” have
long noted his advocacy for the Classical, gold-based monetary
approach the United States used before 1971.
But, what most people probably did not know is the depth and breadth
of Forbes’ understanding of this fundamental topic. Steve Forbes has
one of the best monetary minds in the U.S. today – towering above
today’s academics and money bureaucrats, including central bankers,
whose collective incompetence is apparent to anyone who is paying
attention.
Fortunately for all of us, Forbes and co-author Elizabeth Ames have
expanded their thoughts in a new book, Money: How the Destruction of
the Dollar Threatens the Global Economy—and What We Can Do About It.
I think it will serve as a core work in the new Renaissance in
monetary understanding that is happening right now. In time, as
people grasp the insights contained in this book, today’s dominant
Keynesian-Mercantilist orthodoxy will be revealed as so much
flat-earth nincompoopery.
Money provides both the big-picture leadership and actionable
details of how the world can rebuild the traditional foundations of
modern Capitalism.
As Forbes describes, the United States used this approach for nearly
two centuries until 1971, and became the most successful country in
the world.
Unfortunately, the incredible ignorance that characterized post-1960
monetary understanding was also shared, to some degree, by the
Classical gold standard advocates of that time. Money suffers no
such defects, but instead displays the level of mastery that we will
require, if we are to resolve the endless difficulties that arise
from today’s funny-money chaos.
Forbes focuses on the ideal of money as a stable and standardized
unit of account, much like a kilogram or meter. “Just as we need to
be sure of the number of inches in a foot or the minutes in an hour,
people in the economy must be certain that their money is an
accurate measure of worth. When the value of money fluctuates, as it
so often does today, it produces uncertainty in addition to
unnatural and often destructive marketplace behavior—artificial
booms and busts that breed malignant economic and social
consequences.”
The book continues with a description of why a capitalist economy
can only function correctly with a stable unit of account.
“Prices don’t simply inform buyers and sellers in a particular
transaction; they also provide information that producers and
consumers throughout an economy use to make decisions …
The prices and profits facilitated by money are what allow a market
economy to provide for the needs of society. When money is made
artificially unstable by government, the information it provides
ends up being corrupted. Both producers and consumers respond to
distorted market signals. The end results are gluts, shortages, or
market bubbles.”
The briefest examination shows that a people cannot become
prosperous with nothing but the enthusiastic application of the
printing press. A little more investigation, by Forbes and Ames,
shows that they do not remain where they are, either. They get
poorer.
Money is a friendly and accessible book. For too long, this topic
has been darkened with discussion in the turgid tones of Teutonic
philosophers like Immanuel Kant (or Karl Marx). However, Money is
also informed by Forbes and Ames’ deep understanding of the subject.
Even if a topic receives only three or four sentences, they are the
right sentences–not just something that the author heard somewhere,
from someone else who actually didn’t know what he was talking
about.
I especially valued Chapter 5, “How Debasing Money Debases Society.”
One of the most insidious — and also most nebulous and difficult to
elucidate – aspects of today’s funny money is how it erodes
institutions throughout government and society. When there are no
rules governing money, and instead central bankers make it up as
they go along in the pursuit of the short-term interests of bankers
and the election cycle, this pattern spreads throughout a society.
Expediency and self-interest become the norm not just in monetary
affairs, but in all things. Talk of the “long term” and “common
good” invites snickers. The words “our children” create
uncontrollable laughter. The Rule of Law seems quaint and naïve; the
Rule of Man – degenerating ultimately into the strong exploiting the
weak – is the order of the day. The rich become richer, criminally
and parasitically, as society becomes poorer and poorer. Eventually,
they become oligarch-kings of their own little ash heap.
I actually think that today’s cohort of Classical monetary thinkers
is about the best we have had, in the English-speaking world, since
perhaps 1930 or even before then. It has been a long, dark time.
Unfortunately, many of our best people have preferred to keep a bit
quiet about it. They have learned that sometimes it is not such a
good idea to suggest that maybe … just maybe … the earth really does
revolve around the sun. Even though it does.
People are so silly.
That too is changing. I think that Forbes’ example, along with
others like the Cato Institute and the Lehrman Institute, will
encourage others to stand up and add their own special expertise and
insight. People like Arthur Laffer, Jim Grant, and Steve Hanke –
even, perhaps, Alan Greenspan – also have a degree of proficiency in
these matters which is, honestly, quite a bit better than some
well-known names from prior decades.
I have the most hope for younger people – the people who will learn
about these things for the first time from books like Money, and
don’t have to clear their heads of decades of Keynesian
indoctrination and academic math-babble. Already, as Ron Paul
reports, many college students are so enthusiastic about “Ending the
Fed” that they will burn dollar bills in effigy.
Probably, the Fed will end itself – go down in a blaze of something
not-glory, as has happened to all the other hundreds of experiments
in fiat-paper funny money down through the centuries. It might even
be not too long from now. The market cycle theorist Martin Armstrong
(who once charged six-figure sums for his advice to large investors)
is so bold as to offer a date: the global sovereign debt crisis of
September, 2015.
Forbes and Ames show us what comes next.
| |
