Wednesday, October 9, 2013

Apocalypse Now?

Recently we were copied on a comment someone posted about the proposal for a single global currencyThe commentator said, “Read the part about ‘a single global currency’, read the Book of Revelation, and tell me it doesn’t smell of the Mark of the Beast.”  Well, we could get flip and ask what does the Mark of the Beast smell like, but the commentator was evidently sincere.  We think.  So here goes:

The commentator evidently takes the more extreme “currency school” position advocated by John Maynard Keynes as a given.  That is (as Keynes put it), “money is peculiarly a creation of the State.” (Treatise on Money, Vol. I)

On the contrary, this position presumes ultimate State ownership of everything.  This is to misunderstand money and the role of the State, both of which Keynes did egregiously.  The proper role of the State is to set standards and regulate, not to create.

A single global currency in a system that prohibits the State from creating money is no more “the Beast of the Apocalypse” than a single global standard for measurement of length or weight.

This is because “money” is anything that can be accepted in settlement of a debt.  It is not restricted to currency or currency substitutes.  All money is a contract, just as (in a sense) all contracts are money, consisting of offer, acceptance, and consideration, “consideration” being the inducement to enter into a contract, that is, the thing or things of value being exchanged.

To say that only the State can create money means that only the State can enter into contracts and have property in what is being exchanged.  This abolishes freedom of association — liberty — as well as private property.  To say that the State can create money at all means that the State can interfere in any and all contracts unilaterally, which also abolishes freedom of association except on terms dictated by the State . . . which is not freedom.  Issuing money without having private property in the consideration is making promises for other people to keep, which abolishes private property.

All CESJ is saying is that the system of measuring value should be uniform throughout the world, and that government should restrict itself to ensuring that the unit of value remains stable.  After all, how would you like to contract for delivery of a yard of cloth, when you don’t know if a yard is 36 inches, 30 inches, or 42 inches that day?

Try to make clothing when the pattern is given in New York inches, which are 1.2764% smaller than New Jersey inches where you bought the cloth.  How about a pound of chicken for dinner when the pound varies depending on where you’re buying your poultry, and is subject to change even at a single store, depending on what the storekeeper decides will best serve his or her needs in that transaction — or whether the customer is bigger and stronger?  Remember “Big Julie” in Guys and Dolls who insisted on using his private dice that had no pips?  Oddly enough, because Big Julie had a gun and a gang, the dice always rolled what he needed to win.

That is not fantasy.  That was the situation after the “fall” of Rome in many areas.  Merchants got a little fed up, and began specifying which ounce, pound, or yard would be used in contracts and financial instruments, such as bills of exchange, using the weights and measures of municipalities and regions where the local government maintained strict regulation of weights and measures.

Thus, the “Troy Weight,” specified even today in contracts involving precious metals, comes from the annual trade fair held at the French city of Troyes, one of the great trade fairs of Champagne in the Middle Ages.  The “cloth-yard shaft” mentioned in the Robin Hood stories meant an arrow as long as the yard used to measure English woolens.  The “English mile” of 5280 feet replaced the less precise Roman mile consisting of 1,000 paces of a Legionary — “mile,” after all, means “one thousand.”

While not the primary cause of the economic downturn, the lack of a stable, asset-backed global reserve currency has made a bad situation much, much worse than it really should have been.  The U.S. dollar, which replaced the British pound sterling as the global reserve currency early in the 20th century, started out as asset-backed and stable in value — as did the pound, based on the Roman pound of silver.  The British pound went down under the pressure of Keynesian economics, which backed the pound with government debt, rather than private sector hard assets.

The U.S. dollar is now going down under the same pressure, having switched from asset-backing to debt-backing during the Keynesian New Deal.  The Euro was never asset-backed.  The chaos we are experiencing today is, in significant measure, due to the undermining of standard weights and measures to value financial transactions, and cutting off ordinary people from the money creation process.

Restricting money creation to the State to finance spending, instead of to the private sector to finance growth is (if you insist on the terminology) the real “Beast of the Apocalypse,” at least financially speaking.


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