money (please explain) - Politics and Economics

Ryan Beal · 05-17-2009, 12:29 PM

This may fit better in economics, but I'm asking here anyway because I'm equally interested in the political aspects of this. I'm genuinely curious what the arguments could be against the following statement, or if there even are any.

Quote:

There is no justification in history for the existing position of a government monopoly of issuing money. It has never been proposed on the ground that government will give us better money than anybody else could. It has always, since the privilege of issuing money was first explicitly represented as a Royal prerogative, been advocated because the power to issue money was essential for the finance of the government - not in order to give us good money, but in order to give to government access to the tap where it can draw the money it needs by manufacturing it. That, ladies and gentlemen, is not a method by which we can hope to ever get good money. To put it into the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will not ever again give us good money.

-Hayek

http://mises.org/story/3204

Nielsio · 05-17-2009, 12:37 PM

Here is your decoder-ring:

Borodog · 05-17-2009, 12:39 PM

Pretty sure I disagree. There have always been apologists who argue that government monopoly money will be better than free market money. I recall specifically the argument that free market money would somehow magically be more susceptible to counterfeiting and "cheating" (light weights, alloying, etc). These arguments are of course wrong, but they are still made.

Rubeskies · 05-17-2009, 12:48 PM

Quote:

Originally Posted by Borodog

Pretty sure I disagree. There have always been apologists who argue that government monopoly money will be better than free market money. I recall specifically the argument that free market money would somehow magically be more susceptible to counterfeiting and "cheating" (light weights, alloying, etc). These arguments are of course wrong, but they are still made.

People also contradict themselves arguing that a gubment can offer a more "stable" money supply and at the same time that gubments steady X% interest rate in good times and X * Y% inflation rate in bad times is also good.

The argument is that the benevolent overlords can somehow offer a stable money supply (which is good amirite?) and an unstable money supply (also good amirite?)! Now that is the magic of the benevolent overlords.

EDIT: At different times they'll make either argument for gubment money over free market money, depending on the political expediency.

Ryan Beal · 05-17-2009, 12:49 PM

Quote:

Originally Posted by Borodog

These arguments are of course wrong, but they are still made.

Yeah, but I think you could be splitting hairs. Wouldn't surprise me if that particular argument came up only after the initial proposals had already been decided.

But ok boro has given one argument: it's supposedly less susceptible to counterfeiting.

bobman0330 · 05-17-2009, 12:51 PM

Quote:

It has always, since the privilege of issuing money was first explicitly represented as a Royal prerogative, been advocated because the power to issue money was essential for the finance of the government - not in order to give us good money, but in order to give to government access to the tap where it can draw the money it needs by manufacturing it.

If it wasn't immediately apparent to you that this is completely false (as a description of why people support government control of money), you should be concerned.

Ryan Beal · 05-17-2009, 12:52 PM

Quote:

Originally Posted by bobman0330

If it wasn't immediately apparent to you that this is completely false (as a description of why people support government control of money)

That's probably because it's not a description of why people support government money.

Borodog · 05-17-2009, 12:53 PM

Quote:

Originally Posted by bobman0330

If it wasn't immediately apparent to you that this is completely false (as a description of why people support government control of money), you should be concerned.

If it isn't immediately apparent to you tht this is not what the paragraph is saying, you should be concerned.

Edit: D'OH SLOW PONY

mjkidd · 05-17-2009, 12:54 PM

Boro is right...in fact the argument is made currently. Many people think that the Fed gives us money that is much better than any privately-issued money. Even a relatively free-market oriented economist like Friedman argued that commodity-backed currency was wasteful (whether it was privately issued or government-mandated), and a monopoly like the Fed would be able to most efficiently provide money to a society.

But Hayek has a good point in that the government generally didn't employ a utilitarian argument when they took control of coinage. They were taking control of the money because it was the prerogative of the crown and there was money in it.

Borodog · 05-17-2009, 12:57 PM

Quote:

Originally Posted by mjkidd

Boro is right...in fact the argument is made currently. Many people think that the Fed gives us money that is much better than any privately-issued money. Even a relatively free-market oriented economist like Friedman argued that commodity-backed currency was wasteful (whether it was privately issued or government-mandated), and a monopoly like the Fed would be able to most efficiently provide money to a society.

FWIW later in life he recanted and admitted he was wrong.

Quote:

But Hayek has a good point in that the government generally didn't employ a utilitarian argument when they took control of coinage. They were taking control of the money because it was the prerogative of the crown and there was money in it.

I still say that, in everything government does, there is the actual reason for doing something, and the excuse for doing it. The former is always in the interest of those in the government, while the latter always purports to be in the interest of the public (and is always false).

Nielsio · 05-17-2009, 12:59 PM

FYI,

Here the theory of the purpose of money and it's emergence is explained (up to an international gold standard), and the subsequent steps government has undertaken to bring it under it's control and to breakdown all mechanisms and possibilities for the market and the consumer to get away from an increasingly bad money.

http://www.youtube.com/watch?v=tyeF7H3tHFw

bobman0330 · 05-17-2009, 01:05 PM

Quote:

Originally Posted by Borodog

If it isn't immediately apparent to you tht this is not what the paragraph is saying, you should be concerned.

Edit: D'OH SLOW PONY

So you're interpreting it as a statement about why people supported government-backed currency in the past?

Borodog · 05-17-2009, 01:07 PM

If by "people" you mean specifically "people in government", then yes. If by "people" you mean "people in general", then no.

zan nen · 05-17-2009, 01:08 PM

Here is Hoppe's "The Yield from Money Held" Reconsidered for those who missed it. Salerno's Economics: Vocation or Profession? gives some insight too:

Quote:

Professionalist aspirations and the culture it engenders are not only inconsistent with truth seeking in economics, however, they are positively antithetical to it. For the professionalization of a scientific discipline, particularly a social science like economics, almost always proceeds hand in hand with the expansion of government interventionism.

As Mises put it "The development of a profession of economists is an offshoot of interventionism." The reason for this inevitable connection rests on two facts. On the one hand, the State requires a class of intellectuals and specialists for designing, implementing, and providing rationalizations for various interventions into the market economy. On the other hand, those intellectuals who seek the regular income and prestige that accompany the professionalization of their discipline are ever ready to oblige, because the ability of an intellectual to earn his living researching and writing in his chosen field on the free market is always precarious at best.

As the interventionist State expands, it reinforces the need for trained experts and the university system obtains increasing subsidies from government to initiate and expand graduate programs that will provide such personnel. The lucrative positions in these programs are naturally bestowed on those economists who spearhead the drive to professionalize and are, therefore, most active and outspoken in their support of government interventionism.

In the U.S. the most extreme and thoroughgoing instances of domestic interventionism occurred during the two World Wars of the twentieth century. It was therefore no surprise that the movement to professionalize American economics, which began in the 1880's, experienced quantum leaps during these war crises. For when the State goes to war it needs professional expertise to plan and direct the massive mobilization of the resources it requires. This translates into a cornucopia of lucrative and prestigious jobs for economic experts and specialists in the bureaus and advisory boards of the political planning apparatus that centrally directs the war economy.

tomdemaine · 05-17-2009, 01:49 PM

Isn't there an argument that is along the lines of money (or more specifically interest rates as manipulated via the money supply) is a vital tool in the arsenal of the central planners. That when the capitalists all go crazy and create a boom the smart guys in government can use interest rates to cool them down and when they go crazy the other way and create a bust the gov't can get them back on track and the only way a gov't can ever change the interest rate to anything other than the market defined one is to have a monopoly of money. I'm not saying it makes sense but I'm sure I've heard something along these lines.