Ending the Monetary Fiasco – Returning to Sound Money
Ludwig von Mises is one of the most important economist of the 20th century and one of the greatest social philosophers. Mises knew that capitalism, for a number of reasons, has politically powerful enemies. The most powerful, most destructive, and most vicious and subversive of these would be false monetary theory and, as a result, a misguided monetary system, as it inevitably will destroy the free societal order. In The Theory of Money and Credit, published in 1912, Mises noted. It would be a mistake to assume that the modern organization of exchange is bound to continue to exist. It carries within itself the germ of its own destruction; the development of the fiduciary medium must necessarily lead to its breakdown.[2]
By fiduciary medium Mises meant fraudulent money: money that systematically violates the principle of private property — money that isn't backed by freely chosen money proper (such as gold and silver). Government controlled fiat money is and will always be, by construction, fraudulent money. We already find ourselves facing the destructive consequences that the worldwide fiat-money regime has engendered: impoverishment, caused by malinvestment, and rising despair among the people — which, it must be feared, will set into motion disintegrating forces for capitalism, the productive, peaceful, and sustainable societal cooperation.
Interventionism is," as Mises wrote,
not an economic system, that is, it is not a method which enables people to achieve their aims. It is merely a system of procedures which disturb and eventually destroy the market economy. It hampers production and impairs satisfaction of needs. It does not make people richer; it makes people poorer.[3]
By fiduciary medium Mises meant fraudulent money: money that systematically violates the principle of private property — money that isn't backed by freely chosen money proper (such as gold and silver). Government controlled fiat money is and will always be, by construction, fraudulent money. We already find ourselves facing the destructive consequences that the worldwide fiat-money regime has engendered: impoverishment, caused by malinvestment, and rising despair among the people — which, it must be feared, will set into motion disintegrating forces for capitalism, the productive, peaceful, and sustainable societal cooperation.
Interventionism is," as Mises wrote,
not an economic system, that is, it is not a method which enables people to achieve their aims. It is merely a system of procedures which disturb and eventually destroy the market economy. It hampers production and impairs satisfaction of needs. It does not make people richer; it makes people poorer.[3]
Today's money is supplied by government-controlled central banks, which hold the money-supply monopoly. Today's money is fiat money; it no longer has any link to a commodity such as gold. Central banks can, and do, issue new money "out of thin air." The stock of money is increased without invoking any wealth-producing activities as required in the free market. Fiat-money creation — which is typically done via the credit markets — can therefore — from the viewpoint of the best legal tradition — be called counterfeiting money. The increase in the fiat-money supply via circulation credit is inflationary, and its consequence is prices for consumer or asset prices going up.
What is more, it leads to a false sense of real savings. The artificially lowered market interest rate induces investment projects that would not have been undertaken under an unchanged credit and money supply.
The increase in the fiat-money supply via circulation credit is inflationary, and its consequence is prices for consumer or asset prices going up.What is more, it leads to a false sense of real savings. The artificially lowered market interest rate induces investment projects that would not have been undertaken under an unchanged credit and money supply.
The increase in the fiat-money supply via circulation credit is inflationary, and its consequence is prices for consumer or asset prices going up.What is more, it leads to a false sense of real savings. The artificially lowered market interest rate induces investment projects that would not have been undertaken under an unchanged credit and money supply.
...The disintegrating of fiat-money systems the world over...If commercial banks default on their debt, bank liabilities — in the form of unsecured and secured debentures — and finally also demand, time, and savings deposits would be destroyed.
The collapse of stock-market valuations has been accompanied by skyrocketing price volatility. In the US stock market, volatility has reached levels last seen in the Great Depression period.
The price volatility of gold has also been going up dramatically, having returned to levels last seen when paper money devalued sharply against gold, that is in 1933–34, the early 1970s and 1980s.
What is more, governments around the world have underwritten domestic banks' balance sheets with tax payers' money. This, in turn, has increased investor concern about possible government defaults, as reflected in strongly rising premiums for insuring government bond portfolios, or so-called "credit default swap spreads."
....establishing free banking, based on 100% reserve banking that complies with traditional legal rules of property rights. The corollary would be ending any government inference in monetary affairs, abolishing the central bank....Central banks loose their monopoly over the money supply, and they could no longer manipulate the market interest rates.
Mises lays bare, and unmistakably so, the decivilization process caused by government-controlled fiat money. Fiat money destroys, sooner or later, the free society, through the economic and political catastrophes it provokes.
By Thorsten Polleit
The collapse of stock-market valuations has been accompanied by skyrocketing price volatility. In the US stock market, volatility has reached levels last seen in the Great Depression period.
The price volatility of gold has also been going up dramatically, having returned to levels last seen when paper money devalued sharply against gold, that is in 1933–34, the early 1970s and 1980s.
What is more, governments around the world have underwritten domestic banks' balance sheets with tax payers' money. This, in turn, has increased investor concern about possible government defaults, as reflected in strongly rising premiums for insuring government bond portfolios, or so-called "credit default swap spreads."
....establishing free banking, based on 100% reserve banking that complies with traditional legal rules of property rights. The corollary would be ending any government inference in monetary affairs, abolishing the central bank....Central banks loose their monopoly over the money supply, and they could no longer manipulate the market interest rates.
Mises lays bare, and unmistakably so, the decivilization process caused by government-controlled fiat money. Fiat money destroys, sooner or later, the free society, through the economic and political catastrophes it provokes.
By Thorsten Polleit
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