Wednesday, January 21, 2015

Standards, V: When Governments Get Interested


So far in this brief series we’ve covered the why, what, and application of standards, and what can happen when you don’t have any.  Today we’re going to look at what happens when people manipulate standards to their own advantage, especially the monetary standard.

In the first posting we saw what happens when private individuals mess around with the currency.  They got their hands chopped off.  If they failed to learn a lesson from that, they were hanged.

It’s different when government manipulates the currency, for two reasons.  One, of course, the government sets the standard for the currency, so it can get away with changing the standard.

Sort of.  A variable standard, however, is not really a standard, even if someone or something has the ability to change a standard at will.  Giving government the job of establishing and maintaining standards necessarily implies that the standard that is established will be maintained, and not changed for any reason.  A standard that is always being changed is, frankly, not a standard at all.

Consider that for a moment.  And while you’re considering it, also consider this: the first principle of reason is the law of contradiction, that is, nothing can both be and not be at the same time under the same conditions.

So we come to the bottom line very quickly here.  If the government misuses its power to set standards to change standards, then it is — at one and the same time — both establishing and disestablishing standards by the same action.

This is contradictory, and therefore unreasonable.

Two, the State is society’s only legitimate monopoly.  That monopoly is over the instruments of coercion, meaning the creation and enforcement of law, that is, the administration of justice.

How just is it, however, for a government to change standards at will, so that some gain at the expense of others?  If you are contractually obligated to deliver 100 yards of cloth of a certain quality by a certain date, and you entered into the contract two weeks ago when a yard was 36 inches, but the yard as of the delivery date is 72 inches, you have been cheated by the government that forces you to deliver twice as much as you thought you were obligated under the contract.  If the yard is 18 inches on the delivery date, however, the government has cheated your customer.  How is either case “justice”?

Yet that is what happens when the government changes the value of the currency by inducing either inflation or deflation by issuing or retiring currency backed by government debt.  In periods of inflation, debtors (people who owe money) get to cheat creditors (people who are owed money) with the connivance of the government.  In periods of deflation, creditors get to cheat debtors with the connivance of the government.

And that’s just for fixed obligations denominated in the local currency that the government is manipulating.  It gets worse when it comes to new transactions.  When prices are rising (inflation) and a wage-worker or small businessman is involved, they get crushed between the upper and nether millstones.  Individual workers or small businessmen can’t affect prices.  They might be taking in “more” money, but it buys less than it did before; they are net losers.

Further, when prices of things start going up, customers (whether employers or consumers) start to look for cheaper substitutes.  Instead of buying Brand A Bread, consumers might start buying Brand X Bread, or stop buying bread and go with potatoes.  Employers start to look seriously at moving jobs to lower wage areas, or buying machinery that suddenly is less expensive in relation to labor than it was before.  Has anyone considered just how easy it would be to replace virtually all workers in fast food restaurants with a vending machine?  Japan has already done that in many cases.  A $25 minimum wage is great . . . for those people with jobs.

For a while . . . until employers start raising prices to pass the cost on to consumers.  Which causes the market for the product(s) to shrink by decreasing demand.  Which means that labor costs are relatively more expensive than technology or jobs in lower wage areas. . . .

#30#

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