|
|
A Chinese Tale
Once upon a time the Treasury of the Celestial Empire was found empty The Emperor instructed
Hwa, the Chairman of the Heavenly Research Council,
to work out a plan to meet the emergency.
Hwa suggested that
the Emperor assume the title "The Son of Heaven," thereby laying
claim to supernatural powers. The Emperor would then inject words and phrases
such as "targeting the money supply," "clean versus dirty
floating," "the crawling peg," "semi-fixed
standard," "snake in the tunnel," softening the bands of hard
currencies," and so forth, into the public debate on money, thereby
endowing these meaningless words with sacramental effects. The purpose of
this exercise would be to induce men to give up actual goods and services in
exchange for fictitious ones.
The Emperor went along with these proposals and
debased the silver coins of the Empire, while retaining the coins' outward
appearance. But the people refused to be duped, and they accepted the debased
coins only at a discount. Hwa threw himself at the
feet of the Emperor. "Son of Heaven, it is not enough for you to claim
absolute power over the value of coins and over the destiny of the people. You
must also forbid any examination of your claims. You must outlaw logic. All
questions about currency depreciation must be tabooed. To ask them, to answer
them, even to think of them must be declared an act of sacrilege, an unpardonable
sin. Only then will people believe that coin-clipping is no self-mutilation,
but rather the mutilation of their competitors. Only then will the coolie
stop cursing and start blessing his yoke."
The Emperor was not impressed. "Hwa, you talk like a fool. Even a child can see through
your theocratic fraud. All he need ask is whether the priest is the
instrument of religion, or religion is the instrument of the priest. The
proof that the people have been duped is that the priest is rich and
powerful. He can taboo questions, he can adjust
moral principles to suit himself. So your studied gestures and poses, your
hieroglyphic messages are losing their effects because people observe your
simony, the trafficking of relics. Seek as one may, there is no substitute
for an informed and enlightened public opinion. It is the only remedy."
Then the Emperor recalled the debased coinage, and
let it be known that hard times can be overcome if everybody worked, and
saved, even harder. Before twelve moons had passed, the Treasury was once
more replete with full-bodied silver coins.
The biggest human exploitation
Today people take it for granted that
"targeting the money supply" is a legitimate objective of monetary
policy It wasn't always like that. In 1932, the
Canadian economist and humorist, Stephen Leacock, could joke:
"The gold standard has fallen into opprobrium. Awhile
ago it looked as safe as the rock of ages, and now it is being relegated to
the age of rocks. We have been learning some new economic truths. Consider
the control of the money supply. What does it mean? A lot of flowery words
have grown up around this. But if that means anything at all, it means that
there will be a board, a committee of people who will, when they like, expand
money or contract money and boost prices up or boost prices down. There will
be three men in a room somewhere who will do that. If that time ever comes. I
want to be one of the three, or at least a warm personal friend of all
three."
"Now I say this in all sincerity that the
three-men-in-a-room stuff will do for the Soviets; it will not do for us. You
cannot have a system of social controls dependent upon the will of three men
in a room. You cannot have prices which can be moved up by a group in
control. You cannot have wages which can be shifted down in their purchasing
power by the good will of the men of the monetary caste. You must weigh that
very very carefully. The board, when it boosts
prices up or down, would follow or be tempted to follow, all sorts of
self-seeking ends. You cannot run society like that. If you try to have a
money standard based on human interest or opinion, you have started the
biggest human exploitations one can possibly imagine."
The greatest virtue of the gold standard
The concept of the money supply is a spurious one,
and the idea of targeting the money supply by open market operations of the
Fed is a modern theocratic fraud, establishing the biggest scheme of human
exploitation in history. The extent to which this method of plunder is
practiced is in inverse proportion to the perspicacity of the people. It is
in the nature of abuses to go as far as they can. Plunderers conform to the
Malthusian law: they multiply in direct proportion with the means of
existence - and the means of existence for knaves is the credulity of their
dupes.
If God had made man a solitary animal, everyone
would labor for himself, and individual wealth
would be in proportion to the services that each man performed for himself. But
since man is a social creature, services are exchanged for services. Moreover,
to provide for certain needs such as security the members of society organize
governments and agree to tax themselves in order to cover these needs. The
government too is subject to the Malthusian law. It tends to expand in proportion
to its means of existence which, in the last analysis, is nothing but the
substance of the people. So when the government runs out of real services, it
will continue to expand by offering fictitious services to the taxpayer. Targeting
the money supply is one of the most reprehensible of these fictitious
services.
In private transactions each party remains the sole
judge of both values: the value of services rendered, and that of services
received. The individual is perfectly free either to decline the exchange or
to make it elsewhere. The greatest virtue of the gold standard is that the
medium through which these services are exchanged is left outside of the
political arena, and hence individual valuations remain as free of distortion
as possible. But when government starts targeting the money supply it
interposes between the exchanging parties a medium which cannot be valued
because it has, by design, no definable value. In combination with that fatal
disposition, that one man could always be persuaded to live at the expense of
others, this interposition by the government creates
enormous disparities between the exchanging parties, while plundering both. The
people are astonished to find that, while they hear of wonderful inventions
that are supposed to save labor and multiply output
without end, they are working as hard as ever and are still no better off
than before. Meanwhile, things go from bad to worse and, at last, people open
their eyes, not to remedy (for they have not yet progressed that far), but to
the evil.
Monetary policy under
limited government
Targeting the money supply is an arbitrary and
unlimited power, which is at variance with our Constitution and with the
principles on which our government is based. Constitutionally, the government
has a carefully circumscribed responsibility in the realm of money. This is
to see to it that the value of every kind of money in circulation, namely
coins, bank notes, bank drafts, bank deposits, etc..
rigidly conforms to the standard unit of value, The
government is charged with the responsibility of stabilizing the value of
currency and is must not aggrandize its powers by destabilizing it.
Antal E. Fekete
September, 2005
|
|
