To attempt to coordinate society through
coercion is an intellectual error.

The most important priority right now is dramatic monetary reform.
…
People should be free to use any money they can get each other to accept. More than that, people should be free to introduce new moneys based on gold or silver or any other commodity, and develop payment systems based on this, whether that means paper signifiers or digital goods. The market is capable of policing this system the same way it does retail trade.

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A classic book we should all read: it’s next on my list.

So prices, overall, can change for only two reasons: If the supply of money increases, prices will rise; if the supply falls, prices will fall. If the demand for money increases, prices will fall (PPM rises); if the demand for money declines, prices will rise (PPM falls). The purchasing power of the dollar varies inversely with the supply of dollars, and directly with the demand. Overall prices are determined by the same supply-and-demand forces we are all familiar with in individual prices. Micro and macro are not mysteriously separate worlds; they are both plain economics and governed by the same laws.

Available free here with more here.

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Lew Rockwell introduces the surprising simplicity, fascination and usefulness of a study of money, and points to mises.org’s read more | digg story

In continuing my sometimes-reported study of money, I have been reading Milton Friedman’s “Capitalism and Freedom”.

After dismissing a thoroughly automatic commodity standard, chiefly on the grounds of practicality, Friedman moves on. Reviewing the establishment and effects of the Federal Reserve System, he writes:

No sooner was the [Federal Reserve] Act passed than World War I broke out. There was a large-scale abandonment of the gold standard. By the end of the war, the Reserve System was no longer a minor adjunct to the gold standard designed to insure the convertibility of one form of money into others and to regulate and supervise banks. It had become a powerful discretionary authority able to determine the quantity of money in the United States and to affect international financial conditions throughout the World.

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Is it time for ordinary people to ask how the world’s system of money works?

Consider the words of Wright Patman, a US democratic congressman and Chairman of the Committee on Banking and Currency, 1963-1975:

I have never yet had anyone who could, through the use of logic and reason, justify the Federal Government borrowing the use of its own money….I believe the time will come when people will demand that this be changed. I believe the time will come in this country when they will actually blame you and me and everyone else connected with this Congress for sitting idly by and permitting such an idiotic system to continue. I make that statement after years of study.

I have talked to the Secretary of the Treasury and members of the Federal Reserve Board and other people who are supposed to know about the money system of our country. They know this can be done easily and conveniently and will save money…. We have what is known as the Federal Reserve Bank System. That system is not owned by the Government. Many people think that it is because it says “Federal Reserve.” It belongs to private banks, private corporations. So we have farmed out to the Federal Reserve Banking System that which is owned exclusively, wholly, 100 percent to the private banks – we have farmed out to them the privilege of issuing the Government’s money!

But that’s the USA. Consider these words, usually attributed to Josiah Stamp, Director of the Bank of England 1928-1941 and possibly England’s second-richest man at the time:

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.

Some questions:

1. Why do governments choose to borrow money from private banks at interest when they could create all the money they need themselves?
2. What would happen if governments spent all the money they need into existence?
3. Why create money as debt at all?
4. Why not create money that circulates permanently instead of money that must be perpetually borrowed at interest for the system to function?
5. How can a money system dependent on perpetually accelerating growth be used to build a sustainable economy?

This complex subject was popular a hundred years ago: it may become popular again.

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