I’m still working on my Money piece, after which I will rewrite my Social Security piece (which I have decided is incoherent because it got me distracted by money), but here is my core conclusion:
Capitalism and Inflation are polar opposites. From this it follows that Capitalism and fiat money are polar opposites, and from that that the Federal Reserve is anti-capitalist. To the extent that economic freedom is both a prerequisite for and sign of political freedom, and to the extent economic freedom depends upon free markets of good, the Federal Reserve is therefore also anti-liberty.
Where Capitalism is the best system for the production of material goods ever developed, inflation is nothing more nor less than the production of money. No one wants money: they want what money will buy. Thus, the production of money is completely useless. We can, I think, posit that the creation of a fixed amount of money, once, is sufficient for any economy. What will vary thereafter is not the amount of money, but what that money will buy.
Here is my train of thought: posit a dollar bill on one side of the table, and a teacup on the other. The dollar represents all the money in existence, and the teacup all the physical wealth in existence. If I add a dollar through fiat money, I have created purchasing power for myself–I now own half the teacup–and diluted by half the purchasing power of the person who had the other dollar. This is what inflation does.
The countervailing operation is starting with the same dollar and teacup, and adding another teacup, so that with the same dollar I can now buy more. What one would expect with all the productivity gains in the last 100 years is that we could work less and own more. If our money had not been diluted through inflation (which remember equals wealth transfer) we COULD be working 20 hours a week and paying our way. As it is, we owe our souls to the company store.
To be clear, the value of money cannot go down unless there is competition for it, and competition can ONLY be added if more money is added. We expect competition to lower the price of goods and services, but fail to realize that the same thing happens with money. Since the money created by our Central Bank cost nothing, however, and since it is now worth something, that is a wealth transfer. With no fiat money, there would be no inflation, as I understand the issue. Added inventories, and added salaries will not. You can’t add to a salary without added money. What happens in conditions of stable money is production inflates, which is the primary mechanism of shared, general wealth. This is the POINT of Capitalism, which presumes Capital is in fact real money.
Thus we have three potential conditions: inventories inflate while money remains constant; money inflates while inventories remain constant; or both inflate, and people fail to see the trick, since goods and services are in fact increasing while the money supply likewise increases.
As a matter of record, in my understanding, prices did in fact drop in the 19th Century, such that what cost $1 in 1800 cost something like 50 cents in 1900. This is what you would expect with a stable currency.
Once the Federal Reserve–which enabled Big Money and Big Government–came into existence, the trend reversed, such that it would take $20 today to buy what cost $1 then. Imagine you could take the money you make today, have it be worth what it is today, and simply multiply it by 20. Unless I have badly misunderstood something, that is the real wealth you would possess. All of us could live well on what we make, and wouldn’t hesitate to share charitably.
The Central Bank of the United States made this impossible–again, unless I have badly misunderstood something.
Clearly, we need to abolish the Fed, but we need something to take its place. I am still working on that, but provisionally like my idea of 50 State currencies backed by gold. How to hold it–we don’t want State-run central banks either–is what I am trying to figure out.