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Libertarianism and Capitalism

I think the reason that Libertarians failed to see–assuming I am right, of course–that a precisely defined amount of money is desirable is that they want as little government as possible. Yet, too little means chaos. If we allow money to expand and contract, then real purchasing power likewise goes back and forth in ways that can be manipulated.

If we posit, as I did in a previous post, that what is desirable is NO CHANGE in the money supply, and MUCH CHANGE in the supply of material goods, then that is a function of the government.

Let us call the opposing poles Capitalism and Inflationism, where inflation is a means of wealth redistribution (perhaps, it is the outcome, but the net effect is the same, so it doesn’t matter).

What is the means to fix this problem? We abolish the Fed–which prints all our money–what then? Libertarians think that a market will evolve for money, where everything gets sorted out. I see no value in this, since it does not fix, formally and finally, the underlying problem of fluctuating money supplies.

My proposal is that each State print its own currency. You take any dollars you have now, and exchange them for new ones on a certain date. Any money in your bank account automatically transitions. You transition from Federal Reserve Notes, to, say, Texas Reserve Notes.

We need gold in vaults. Who pays for it? This is the question I am having trouble with. Banks? And what is the proper role of banking? Right now, they in effect loan “on margin”. They loan out money, in the expectation that all the depositors will never demand their money at once. Part of the role, now, for the Federal Reserve is to make short term loans so that their books are balanced at the end of each day. Who does that in the future? The States? Does that not replicate on a smaller scale the same problem?

One general statement that can be made is that banks, like any other business, need to be free to stand or fall as businesses. I am not opposed to States providing something like the FDIC to prevent panics, but perhaps we pass laws that state that the Board of Directors and CEO of any firm that uses that money go to jail for 5 years. We get the protection, but we disincent risk taking with other peoples money.

I’m still working all this out. You can see my method in these blog posts. I just take a thought, ponder it, chew it, move it around, stretch it, bounce it, throw it in the air, drop it in water, and somehow through the process it expands, and gets more clear. I use logic to jump from stone to stone where I can, and dream the big perceptions. It usually seems to work out, I think. Unless I am being stupid, which one must always remember is a real possibility.

2 replies on “Libertarianism and Capitalism”

question: If, as you have previously said, the naturally fluctuating money supply we had before the creation of the Fed was not a problem, why would a fluctuating money supply after the abolition of the Fed be a problem?

Money is simply a commodity. If you are to regulate it's supply by fiat, why not regulate the supply of everything else as well? Really, considering that money is used as an exchange for everything else, the effect of regulating money supply is price-fixing.

You've clearly come a long way in coming to the conclusion that the Fed is an instrument of tyranny. But you still desire control, and order, and in this post you advocate Federal control of the money supply. Think it through. It isn't a good thing.

And who is this "we" you speak of?

But the fluctuations WERE a problem. Buying power will necessarily fluctuate up and down, if currency can be added. Clearly, it can be hoarded, then reintroduced, but that is a problem with any money supply. The key point is that we are impervious to, say, a major gold find in Mexico, or Peru, or Mongolia.

I need to underscore the point that in this scenario we have distributed this money across all fifty states, and done nothing more or less than create "real" money, and put it into circulation.

Literally EVERYTHING after that is entirely up to the consumers, including the following price of all gold objects, such as bracelets, rings, necklaces and the like.

Real money is nothing more or less than a sophisticated, time distorted, form of barter. All I am ever really buying is food, housing, books, booze, or whatever I value. All that storing it does for me is extend my power to do so into the future. We all want what money will buy, but in and of itself it has no value, and never can have value. Ostrich shells would serve the same purpose.

The only reason I am proposing gold, here, is that is helps, psychologically, to know that something that can be sold for real goods underlies the paper currency, even if when put into the market it would be not be up to current prices.

The core idea is that motion is shared between money and production. If you fix money production, therefore, the motion moves in its entirety into production. We avoid thereby business booms and busts, and the possibility of large currency additions.

"We" is people who agree with me.

I think the error you make is in thinking that we can go directly back to the freedom backwoodsmen used to have. We can, in the long term, but in the short and medium term the Federal Government and Constitution will continue to have value. The Constitution is as close to a perfect governing document as the mind of man has yet produced, yet it still provides for a government. The task is determining what is properly the role for government, and what for the private sector.

As I continue to argue, we face no greater existential threat than a mutable money, and even on a gold standard money can be manipulated. Therefore, fixing it once is both the proper solution, and the proper domain of the Federal Government, in cooperation with the sundry States.

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