On Sound Money Part 1:
1/ People’s choices are subjective, and so there is no “right” and “wrong” choice of money. There are, however, consequences to choices.
1/ People’s choices are subjective, and so there is no “right” and “wrong” choice of money. There are, however, consequences to choices.
2/ This is the easy money trap: anything used as a store of value will have its supply increased, and anything whose supply can be easily increased will destroy the wealth of those who used it as a store of value.
3/ For something to assume a monetary role, it has to be costly to produce, otherwise, the temptation to make money on the cheap will destroy the wealth of the savers, and destroy the incentive anyone has to save in this medium.
4/ The monetary media that survived for longest are the ones that had very reliable mechanisms for restricting their supply growth - in other words, #hardmoney.
5/ The choice of what makes the best money has always been determined by the technological realities of societies shaping the salability of different goods.
6/ Human civilization flourished in times and places where sound money was widely adopted, while unsound money all too frequently coincided with civilizational decline and societal collapse.
7/ Whether in Rome, Constantinople, Florence, or Venice, history shows that a sound monetary standard is a necessary prerequisite for human flourishing, without which society stands on the precipice of barbarism and destruction.
8/ History shows it is not possible to insulate yourself from the consequences of others holding money that is harder than yours.
9/ Some of the most important technological, medical, economic, and artistic human achievements were invented during the era of the #goldstandard, which partly explains why it was known as la Belle Epoque, or the beautiful era, across Europe.
10/ World War I saw the end of the era of monetary media being the choice decided by the free market, and the beginning of the era of government money.
11/ Government money is similar to primitive forms of money and commodities other than gold: it is liable to have its supply increased quickly compared to its stock, leading to a quick loss of salability, destruction of purchasing power, and impoverishment of its holders.
12/ With the simple suspension of gold redeemability, governments’ war efforts were no longer limited to the money that they had in their own treasuries but extended virtually to the entire wealth of the population.
13/ Had European nations remained on the gold standard, or had the people of Europe held their own gold in their own hands …, history might have been different. It is likely that WorldWar I would have been settled militarily within a few months of conflict.
14/ The cause of the Great Crash of 1929 was the diversion away from the gold standard in the post-WWI years, and the deepening of the Depression was caused by government control and socialization of the economy in the Hoover and FDR years.
15/ All spending is spending, in the naive economics of Keynesians, and so it matters not if that spending comes from individuals feeding their families or governments murdering foreigners: it all counts in aggregate demand and it all reduces unemployment.
16/ In essence, Bretton Woods attempted to achieve through central planning what the international gold standard of the nineteenth century had achieved spontaneously.
17/ Hyperinflation is a form of economic disaster unique to government money. There was never an example of hyperinflation with economies that operated a gold or silver standard.
18/ With government money, whose cost of production tends to zero, it has become quite possible for an entire society to witness all of its savings in the form of money disappear in the space of a few months or even weeks.
19/ Hyperinflation is a far more pernicious phenomenon than just the loss of a lot of economic value by a lot of people; it constitutes a complete breakdown of the structure of economic production of a society built up over centuries and millennia.
20/ Even if the textbooks were correct about the benefits of government management of the money supply, the damage from one episode of hyperinflation anywhere in the world far outweighs them.
21/ Hanke and Bushnell have been able to verify 57 episodes of hyperinflation in history, only one of which occurred before the era of monetary nationalism, and that was the inflation in France in 1795, in the wake of the Mississippi Bubble.
22/ The constantly increasing supply means a continuous devaluation of the currency, expropriating the wealth of the holders to benefit those who print the currency and those who receive it earliest. This is termed the Cantillon Effect.
23/ Whether it’s because of downright graft, “national emergency,” or an infestation of inflationist schools of economics, the government will always find a reason and a way to print more money, expanding government power while reducing the wealth of the currency holders.
24/ It is ironic, and very telling, that in the era of government money, governments themselves own far more gold in their official reserves than they did under the international gold standard of 1871–1914.
25/ A sound money makes service valuable to others the only avenue open for prosperity to anyone, thus concentrating society’s efforts on production, cooperation, capital accumulation, and trade.
