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Source link: http://archive.mises.org/10644/fiat-money-how-else-you-gonna-kill-600000-americans/

Fiat Money: How Else You Gonna Kill 600,000 Americans?

September 11, 2009 by

Suppose for a moment, just for fun, that this story about the credit markets is just as backwards as the story about the stimulus package. What would that mean, if the story is 100% wrong? Well, I guess it would mean that the total amount of business loans was actually rising and in fact at an all-time high, up to the point when Paulson and Bernanke decided to throw caution to the winds. And then after their heroic intervention, the total amount of business loans fell like a stone. Can we agree that something like this would mean the story Norris has repeated is exactly backwards? Well feast your eyes on this. FULL ARTICLE

{ 45 comments }

William P September 11, 2009 at 8:45 am

As usual, a great piece by Dr. Murphy. His work is its own gold standard.

However, I found the following assertion quite bizarre:

“The world wars could not have been waged if the belligerents had stuck to the gold standard.”

Or if Hitler had not seized total power?

Is it not a little naive to suggest that if only the “good guys” hadn’t gone off the gold standard, Hitler would have been less menaceful? I comprehend the implications and ability of fiat money to fund war, but I confess I’ve never found the notion that people (or nations) who keep to themselves never attract bullies very sensical.

Marek K Nowak September 11, 2009 at 9:06 am

@William P

Hilter would not have raised to power if Germany wouldn’t have had hyper inflation (again, after having left the gold standard) in the 1920s, nor if germany been defeated in WW1, nor WW1 even waged without the central banks ability to finance the wars (especially with the creation of the U.S. Fed in 1913).

Thinking that Hilter just came out of nowhere without anything or anyone contributing to his raise is a very simplistic world view.

William P September 11, 2009 at 9:27 am

Michael,
Clearly I understand that part of the story – I believe that was evident in what I wrote. I am basically asserting something needed to be done to stop the madman once in power, and the United States funded this effort through massive taxation, in its various forms. In anticipation of the “starve the beast” argument for war making as a preventative measure, I would posit that hungry dictators who seize power find ways to fund their fund their wars in spite of the letter of the law.

I’m baffled how intelligent people conflate the impetus (i.e., aggression) and means (in this case, fiat money) for war. (I speak generally, not in particular on the Civil War.) Part of why I am partial to Mises over many like-minded economists is that he does not confuse correlation with causation with respect to war.

Maybe this is because he had first-hand experience, was a soldier himself, witnessed the rise of Hitler? Perhaps his appreciation for oft-tragic human history made him slightly cynical, in a manner similar to the ancient Greeks or the famed Bard?

Psychiatrists And Police Officers September 11, 2009 at 9:48 am

Marek N Kowak,

“Thinking that Hilter just came out of nowhere without anything or anyone contributing to his raise is a very simplistic world view.”

This sounds like a psychiatric diagnostic.
Most police officers and psychiatrists “diagnose” “mental” illness as coming from nowhere without anything or anyone contributing to the irritating behavior.

Psychiatrists and police officers in their “diagnostics” tend to decontextualize in this same sort of way.

If we can think of Hitler as a “mental” illness, then a police officer or a psychiatrist making a “diagnostic” would say that world war II was all Hitler’s fault and that Hitler did it all by himself, that he needed treatment and that it was the job of the police office to force hitler into psychiatric treatment.

Both the police officer and the psychiatrist making the “diagnostics” are oblivious to the context and environment spawning Hitler in the first place.

Same thing for what they alledge to be “mental” illness.

roy September 11, 2009 at 10:19 am

Hitler could not pay for rearmament without fiat. Read up on the shenanigans Nazis had to resort to to get people to buy their debt… eg: mefo bills.

roy September 11, 2009 at 10:21 am

nervos belli pecuniam infinitam

no money–> no tanks.

greg September 11, 2009 at 10:31 am

Printing money or not printing money does not make you richer. It is increases in productivity that make you richer.

Fiat money or the gold standard, you are going to have business cycles. Pay attention to the cycle and the psychology of the markets and you can make money off these cycles. Focus just on the money supply and you will be like Peter Schiff and stay on one side of the trade.

And if you are going to look at history, the ratio of recession years to expansion years has gone down since we left the gold standard.

danny September 11, 2009 at 10:47 am

“Is it not a little naive to suggest that if only the “good guys” hadn’t gone off the gold standard, Hitler would have been less menaceful? I comprehend the implications and ability of fiat money to fund war, but I confess I’ve never found the notion that people (or nations) who keep to themselves never attract bullies very sensical.”

Many have written very eloquently on this. Here is the condensed version: US has no Federal Reserve, US cannot fund entry into WWI. No US in WWI, settlement more favorable to Germany (no Versailles). No Versailles, no hyperinflation, no emotional swelling of the population for real and perceived grievances. No Hitler.

Yes, there will be bullies — Saddam Hussein — now there was a real threat to the US. Good thing we have the FED to fund that battle. Oh yes, and Afghanistan — and today being the anniversary of a devastating attack by 19 men and maybe a few dozen in a cave somewhere. In no way should my comments be interpreted to mean I minimize the horrendous crime of that day. However massive a crime, how does that justify the wasting of trillions of dollars and hundreds of thousands of lives? Funded by…fiat money and the FED. And we still haven’t found THAT bully.

And Switzerland is a good example of keeping to oneself and not attracting any bullies…wait, the US is bullying them pretty good right now — so you may be right.

All the money in the world, available for free and ready to be spent. What do you expect power-hungry people to do with it? To expect anything other than what we have would be a little naive and not very sensical.

Fritz wilmet September 11, 2009 at 11:03 am

As far as I could determine, the essence of Mr Murhy’s article was crystal clear, but missed by too many: without the capacity of create money out of nothing building a destructive machinery of war to conquer the world would not have been feasible for the Furher. By no means did Mr Murphy try, even if you attempt to read maliciouly between the lines, to insinuate that there would not been the rise of Hitler as a sociopath. In other words Hilter’s regime was one thing , the war he waged was another.

At any rate Mr murphy is winning the war against against the New York Times empire of lies.. Not just a battle.

William P September 11, 2009 at 11:13 am

danny says:
“Many have written very eloquently on this. Here is the condensed version: US has no Federal Reserve, US cannot fund entry into WWI. No US in WWI, settlement more favorable to Germany (no Versailles). No Versailles, no hyperinflation, no emotional swelling of the population for real and perceived grievances. No Hitler.”

can you say… contrivance? how does one respond to such a thing? i won’t because 1) it’s impossible 2) it’s irrelvent.

stringing together events like this is only a few steps away from conspiracy theorizing and the loss of all credibility.

it never ceases to amaze me how such analytical minds (i speak here of libertarians) can be so blind to the lessons of history. for better or for worse, all signs point to the fact that war-making is endemic to the human condition. even in a liberalized world on a gold standard, i believe, tragically, it would only be a matter of time before the human element led us into war.

the best we can do is try to avoid it.

the pertinent question is not what allowed hitler to rise – there is broad historical consensus on this issue – but through what psychology was he able to manipulate the population towards his own ends. we view him as a raving lunatic, and rightfully so, yet the german people, not so long before consistent of liberal minded westerners, were transfixed. the desperate population, ravaged by years of depression, was swept away with the collective appeals to hypernationalism, undergirded by strong undertones of the nietzschean ubermensch. well, they found him. their overwhelming bitterness was turned into hatred and focused like a laser through the oldest prejudice. ancient volk legends were brought to the fore, creating an occult mystery around the aryan race, and violent and unrelenting scorn towards inferior beings – a feat last accomplished in europe by perhaps as far back as the spartans.

this is what led to world war 2. not the united states federal reserve, but good old fashioned hate.

James September 11, 2009 at 11:31 am

I’m afraid the causes of WWII aren’t quite that simple. Of course, history is written by the victors to some extent and there is a proud tradition in the U. S. of painting opponents as Bond villains bent on world domination but there were preventable causes that led to WWII. I would recommend Buchanan’s “Churchill, Hitler, and the Unnecessary War” as a good revisionist take on the events leading up to WWII.

Sean W. Malone September 11, 2009 at 11:47 am

“but good old fashioned hate.”

I’m a little affronted by a guy claiming that libertarians like myself haven’t learned the lessons of history when the same guy is willing to skip over the entirety of pre-WWII economic history and just say that WWII was caused by “hate”.

Really? So just one day back in 1923, everyone in Germany just decided to hate people… for no reason… or just cause that’s what they’d always done, and Hitler was just a crafty villain who could lead that army of haters?

Had nothing at all to do with a collapsed economy brought on by hyperinflation or the long-term consequences of massive monetary printing. Nope. The people of Germany are so damn evil… that even if their terrible monetary policy hadn’t destroyed their economy, pure hatred of the Jews would have been enough.

What a low opinion you have of the German people.

Mike September 11, 2009 at 11:50 am

William P does bring up a very interesting point, which is the notion that human nature does appear to tend toward constantly splitting into groups and fighting.

One way of stating it is this: It’s almost as though all of our instincts (designed to serve our genes) to be part of a pack and to compete with and dominate others, leads inevitably to the emergent phenomenon of war. Or, more succinctly, war is a fundamental part of human nature.

It is a very pessimistic viewpoint, but it is worth consideration, especially since history seems to confirm it. “Statism” may merely be the implementation details of our instinctive aggression.

Fred Reed wrote a very intriguing column on this subject: http://www.fredoneverything.net/Instinct.shtml

William P September 11, 2009 at 12:02 pm

Sean, if you read what I wrote:

“the desperate population, ravaged by years of depression, was swept away with the collective appeals to hypernationalism, undergirded by strong undertones of the nietzschean ubermensch.”

…ravaged by years of depression…

i also made it quite clear that i was not discussing the what, which i probably view in a similar vein as you, but the how.

i don’t have a low regard for the german people, or any people in general.

Brad September 11, 2009 at 12:35 pm

William P,

The impetus to fight wars has always been with us, it wasn’t until the rise of the Nation State and its made up money that we got Global War. In the past territorial conflicts existed, but on a much smaller scale and had to incorporate the buy-in of massive numbers of people to support it. Since the rise of fiat money the holder of the printing press just needs to print enough money and get enough people in Congress to support it without the support of the productive sector and the people. Basically it can contrived and funded by purely political people for their own ends. So while all wars have been contrived by the well connected and fought by grunts, the rise fiat money and Nation States just made it a lot easier and a lot bigger. I think that’s the point.

geoih September 11, 2009 at 12:48 pm

“If victory is to be had, it will owe a lot to the willingness of American policy makers to set aside cherished policies and simply create money.”

And simply create money. Do you really need to say any more? All we need to do is live in a fantasy, and everything will be fine.

William P September 11, 2009 at 1:20 pm

Brad,
I’d hope that was the point alone. But with a title such as “How Else You Gonna Kill 600,000 Americans?” I fear the good doctor has veered into the realm of propaganda. I have trouble comprehending that someone as intelligent as Murphy could make a direct causal connection with fiat money and killing. In my mind this is a childish argument.

Ultimately the question that must be asked is whether Lincoln was justified in waging war to preserve the union. Now, in the context of the rest of his article, it would seem that Murphy disapproves of the entire effort, and would have rather seen the south secede. That’s a perfectly legitimate argument to make, even if I disagree.

If one reaches the conclusion that the Constitution is a binding document and justifies the war this way, as Lincoln did (again, to be clear, I do not wish to engage in historical debate, nor do I have the knowledge) the next logical question involves the funding. A legitimate point may be raised in that fiat money allows for surreptitious taxation and much less public backlash. Is this immoral? I would argue yes. But as Mises makes clear in Nation, War, and Economy, there are only so many ways to fund war, and direct taxation may not be the best route (I believe he opposed credit expansion either way).

I suppose I’m just curious as to whether libertarians, many at least, are fully cognizant that their hard-line against war at all times sounds very naive. Adding to my own personal displeasure with the anti-war “right” is their insinuation that those who support winning wars are somehow pro-war. We certainly are not pro-war; we just realize that some things are forced by events, and prefer winning to losing. To justify this mindset, we turn to history. To be sure, there are those jingoistic loudmouths who get too much media, but the vast majority don’t take to war and killing lightly.

To further muddle the topic, their constant decrying of fiat currency BECAUSE IT NECESSARILY leads to war sounds to me like propaganda. I think it’s much fairer to say that once war has been decided upon, governments wisely (I am not using that in a positive connotation) choose credit expansion to minimize the immediate realization by the public of necessary sacrifice. Finally, whether governments are fully aware of the events described by ABCT I tend not to think so, given that the academy is in full denial.

Copped And Shrinked September 11, 2009 at 1:24 pm

Geoih,

“Do you really need to say any more? All we need to do is live in a fantasy, and everything will be fine.”

It’s called psychiatry and that’s what cops do, they are hired to bring forced “customers” so psychiatrists can stay in business.

With cops and shrinks, everything will be fine, everybody will be mentally healthy and there will never be any problems in the world.

I thought at first that cops were supposed to go after bad guys, but I guess their real job is to go after mad guys.

It’s a lot easier to go after mads than bads.

Copped And Shrinked September 11, 2009 at 2:13 pm

William P,

War costs enormous sums of money, the only way to pay for it is through inflation and monetary debasement.

You then don’t have to rob it from people or force them to pay war taxes etc. They are simply forced to pay for it by seeing the value of their cash drop.

His argument is that hard money could not be inflated enough to create the monstruous wars and war machines of modern times.

Yes there would still be wars, but of much less proportions and magnitude that we see today.

The extremely wasteful and ressource intensive manhattan project would not have been possible without fiat currency.

Cops And Shrinks sleep in the same bed September 11, 2009 at 2:18 pm

William P,

“I think it’s much fairer to say that once war has been decided upon, governments wisely (I am not using that in a positive connotation) choose credit expansion to minimize the immediate realization by the public of necessary sacrifice.”

But without fiat currency, governments would not have that option and it would be much more difficult to fund the war and deceive the public in the first place.

So the availability of a fiat currency system is a temptation to go to war.

If governments could not inflate their way to war, they would have a much harder time declaring it in the first place.

That is the point.

Caveman September 11, 2009 at 3:39 pm

William P,

For starters, you should ask yourself whether it’s necessary to be personally offended by the opinions of those who disagree with you. “Adding to my own personal displeasure with the anti-war “right” is their insinuation that those who support winning wars are somehow pro-war.” Like it or not, all you can do is clearly and consistently explain your position. You can’t control how others interpret it.

I was wondering why you were so bothered by Murphy’s rather straightforward thesis that fiat money allows for armies and wars of a larger scale. But, your last post made clear that this isn’t what bothers you. What bothers you, it seems, is that some libertarians are pacifists. “I’m just curious as to whether libertarians…are fully cognizant that their hard-line against war at all times sounds very naive.”

Frankly, what difference does it make? Whether you or anyone else thinks my beliefs sound naive doesn’t alter the reasoning behind my beliefs. I am aware that there are many persons who believe that striving for the seemingly impossible is naive. This misses the point.

Very few pacifists would argue that we can ever have a world completely free of violence. However, do you want to argue that because it’s impossible to live in a world without violence that we shouldn’t strive to reduce violence as much as possible?

If it’s true that fiat money allows for bigger and more destructive wars resulting in greater human suffering it represents one more reason to do away with fiat money. That’s all Murphy is saying.

wuzacon September 11, 2009 at 3:47 pm

It seems to me that William P raises an interesting question: to what lengths should a government go to win a war to protect its citizens?

Is theft OK? Is elimination of Habeus Corpus OK? Is slavery OK? How do we know? What do we measure these losses of freedom against?

It seems to me that Libertarians are against war because, philosophically, it is typically conducted by coercion (fiat currency, extraordinary taxation, draft, etc.) and it often exceeds the force needed for self-defense and defense of others and because, pragmatically, it usually leads to enhanced power in the state and loss of freedoms by the individual long after the war is over.

When the costs of war are borne by the populace, unlike when fiat currency is used to implement the war, then at least to some extent the people have determined that the costs of the war are worth it. When the printing presses are running to pay for the war, the invisible theft may not show up in the real economy for some time. Therefore, the public has no awareness of the true costs. To a Libertarian, both involuntary taxation and printing money are theft, but at least when the people are taxed they know that the money is being taken from them.

The difference between wars conducted with taxation and those conducted with fiat currency is that wars conducted with taxation will be limited to the legitimate self-defense and defense of other justifications, whereas wars backed by fiat currency often involve extensive nation-building, state power grabs.

Ultimately, I am not sure that William P’s assertion that the use of fiat currency is justified because it helps to win wars is correct. The civil war data implies the opposite is true (the North did print paper money, but to a much lesser degree than the losing South). It would be interesting to look at victors and losers in wars and compare their victorious status to their ability to print money. Excessive money printing devalues the currency and can have a hugely deleterious effect on the government’s ability to raise money over the long term or trade for valuable goods.

Russ September 11, 2009 at 3:51 pm

William P,

I agree and disagree with you.

I agree that war is probably, sadly, part of human nature, and lack of fiat money will not get rid of it. In fact, I could see where a lack of fiat money could prevent a nation from expanding its military in times of need, and thus cause it to be defeated by another nation that is not so scrupulous.

I disagree in your assertion that an analysis of historical causation vis a vis WWII constitutes a conspiracy theory. I would say that if the people involved had listened to Keynes and not demanded immense reparations on Germany after WWI, the hyper-inflation would never have happened, and Hitler never would have come into power in the first place.

William P September 11, 2009 at 4:04 pm

@caveman, you say:
“What bothers you, it seems, is that some libertarians are pacifists.”
Not really. I wish everyone were a true pacifist, honestly. What bothers me is the dishonesty of telling people that ending fiat currency will somehow end wars. Much of what I hear from the anti-war right (for lack of a better term) sounds suspiciously like what that claim should be classified as: propaganda. Further, I apologize for the poorly written post above (awfully written, I admit); I do not support fiat money. I just believe it’s going to be with us always – to be clear, I still do not support it – in times of war. Why? Human nature.

@wuzacon:
I was not trying to justify its use. What I was trying to do from the beginning was to correct the cause and effect – war causes fiat currency and hence inflation, not the other way around – that irritates me to no end. It may sound quaint, but it’s always hate that starts wars. Once the desire is in place for an unscrupulous leader (or congress), fiat money emerges as a matter of course.

Now, just to show I’m not some quack or hack or whatever, let me affirm my belief that under a sound currency and market economy, peace will reign (generally) because of the social cohesion created by the market system. In other words, true capitalism reduces greatly the likelihood of war, but we’d be idiotic to think that sound currency would rid us of the scourge. At least that’s how I interpret history.

William P September 11, 2009 at 4:08 pm

@Russ
“I would say that if the people involved had listened to Keynes and not demanded immense reparations on Germany after WWI, the hyper-inflation would never have happened, and Hitler never would have come into power in the first place.”

Hazlitt more or less dismantled the whole Versailles’ reparations thing for me in his “The Inflation Crisis and How to Resolve It,” making it rather clear that by no means was it inevitable.

Alright, weekend time!

Caveman September 11, 2009 at 4:14 pm

“In fact, I could see where a lack of fiat money could prevent a nation from expanding its military in times of need, and thus cause it to be defeated by another nation that is not so scrupulous.”

Russ, are you assuming that winning a war is always preferable to losing? Not saying you are, that’s why I ask. E.g., is Germany worse off today because the Nazis were defeated? I’m not sure there’s an answer to that question or that it’s even a valid question to ask, but I think it’s worth considering whether it’s possible to “win” by losing and vice versa.

danny September 11, 2009 at 4:26 pm

Thanks to all who came to my defense. I have spent the last few hours watching the authorized Time-Life DVD history of the war so I could regain my “enlightenment.”

Now for a couple John Wayne movies…

Sean September 11, 2009 at 4:34 pm

“Is it not a little naive to suggest that if only the “good guys” hadn’t gone off the gold standard, Hitler would have been less menaceful?…I’m baffled how intelligent people conflate the impetus (i.e., aggression) and means (in this case, fiat money) for war. (I speak generally, not in particular on the Civil War.) Part of why I am partial to Mises over many like-minded economists is that he does not confuse correlation with causation with respect to war.”

I think Mises would have agreed that inflating money is a key source for funding a war and without it, even the aggressive tyrants would not be able to fund wars to the extent they wish. Quoting Mises: “one can say without exaggeration that inflation is an indispensable means of militarism. Without it, the repercussions of war on welfare become obvious much more quickly and penetratingly; war weariness would set in much earlier.”
It seems rather rational to believe that a tyrant spouting radical and aggressive reform is only able to come into power when a country is in troubled times. Would Germany have accepted the rise of such a radical dictator if they were not in depressed times stemming from hyper-inflation? probably not. And the World Wars certainly would not have dragged out to the extent they did. Central banks allow governments free-spending on projects now, with the impacts of such spending coming to fruition later–a blatant problem of human nature and the political cycle. Certainly without this power, such wars or other public projects could not have been funded so quickly, irresponsibly, and easily.

William P September 11, 2009 at 4:59 pm

While you could make an argument that America’s Great Depression certainly contributed to Germany’s continued economic stagnation (prosperous neighbors on friendly terms usually help your domestic economy because of the benefits of trade), and the abandonment of sound money contributed to America’s prolonged stagnation, entering into historical speculation that the Fed led to WW2 is in truth just one of many millions of what-ifs. I don’t know… I guess I don’t see the value in such thinking.

Now it’s really weekend time. Peace!

Russ September 11, 2009 at 4:59 pm

Caveman wrote:

“Russ, are you assuming that winning a war is always preferable to losing?”

Not necessarily always. There could always be exceptions, but they only serve to prove the general rule.

“E.g., is Germany worse off today because the Nazis were defeated?”

Hard to say. I would hazard a guess that they wouldn’t have their Muslim immigration problem, or be essentially paralyzed by political correctness, as they are today. Whether they would be better off; who knows?

Paul September 11, 2009 at 7:38 pm

Couldn’t say the article was any worse than Krugman stuff. And at least it quotes Jim Grant.

Francisco September 12, 2009 at 12:44 am

Hello,

A and B are two neighbour countries using fiat money, with similar military, economy and international relations.

Hate sparks and they start a war.

Country A has a Elbridge Gerry Spaulding in their ranks, so they start printing fiat money to fund their military efforts.

Country B has a Justin S. Morrill in their ranks, so they don’t print additional fiat money and they increase taxation to fund their military efforts.

If A and B get the same amount of additional money to fund the war efforts (producing and importing war supplies) which country will have an edge from their monetary policies?

Cheers

Francisco

Antiwar September 12, 2009 at 9:15 am

@Francisco

Ask yourself other questions, too:

In which country, A or B, will resistance grow faster? In the country with high taxation, which causes people to see the financial resources used in the war much faster?

Or in the other one, where nobody knows a damn thing at first where the “money is coming from”?

I HATE psychiatrists September 12, 2009 at 3:01 pm

Sean W. Mallone.

As any psychiatrist and he will tell you that homeless people have a higher percentage of mental illness than well to do people.

So, the inflation of 1923 induced a lot of homelessness and joblessness and people became mentally ill and there was not enough police officers to foce people to see a psychiatrist to solve their mental illness problems and there was not enough psychiatrist to help people become better more socially acceptable productive people.

So, with a lack of police officers and psychiatrists, Germany fall into a systemic mentally ill hate that was caused by chemical imbalance.

This is how the war began.

tlpalmer September 12, 2009 at 5:37 pm

Until people stop glorifying the non-defensive wars of the past (US Civil as example) the future will be more war.

Anonymous September 13, 2009 at 9:44 am

“I agree that war is probably, sadly, part of human nature”

War is not part of human nature. The belief that war is part of human nature is at odds with reason.

“the greatest accomplishment of reason is the discovery of the advantages of social cooperation, and its corollary, the division of labor” (Omnipotent Government, 121).

Labor under the division of labor is much more productive than isolated labor. This provides incentive for peaceful cooperation between individuals and nations:

“The greater productivity of work under the division of labor is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare, rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals” (Socialism, 261).

Governments are institutions of coercion and compulsion. Governments disrupt the international division of labor, thereby destroying the incentive to social cooperation. The inevitable result is war:

“Interventionism generates economic nationalism, and economic nationalism generates bellicosity” (Human Action, 828).

N. Joseph Potts September 13, 2009 at 12:35 pm

Wars are started and fought by and for hate.
Economic crises are started and grow because of greed.
Airplanes crash because of gravity.
These things are all undeniable. Does this information help in doing anything about it?

N. Joseph Potts September 13, 2009 at 12:39 pm

Doug French has published a book showing that increases in the money supply are dependably behind EVERY speculative bubble.
His next subject should be similarly linking monetary debasement with the initiation and conduct of aggressive war.

N. Joseph Potts September 13, 2009 at 12:44 pm

I think Bob Murphy’s linking (Lincoln’s and Davis’s) monetary debasement to the slaughter of 600,000 Americans is sheer expository genius, propagandistic or no.
Cause and (enabling) effect. We need these things spelled out VERY clearly, and Dr. Murphy is doing this for us. And even more important, for THEM.

JD September 13, 2009 at 3:29 pm

Interesting article….

At this point anything contrary to the establishment’s opinion of history is welcomed. This site being the 1st beacon of reason for me. There is much correction of modern thought, because by-in-large the populous has been duped on most issues, and have been given a clinical division/side to choose from.

I believe Murphy’s analysis is consistent with Misean/Rothbardian warnings of Central Banking’s/Fiat Currency’s ill effects at least in the realm of the modern state. It is a mere tool for the Central Planners to allow shananigans in every endeavour.

Both sides committed the sin of debasement of currency to fund the war. I’m not excusing the South’s exercise of this, but it may have been more of an act of desperation, than anything else since it was up against a relatively wealthier opponent, but we can’t deny that this war was the catalyst or stepping stone for the United State’s emergence and eventual position as another Empire. The most powerful ever. That desire was here since the beginning. “Perpetual Union” propaganda made it a lot easier to est. a Federal Bur. and the Central Bank made it a reality.

The worse thing you can do is cartelize Central Power, and feeding it with a central bank allows for the greatest attrocities man can do to one another. You will have violent tendencies, always, but you want to keep that side of man very localized if possible. Basically a containment of sorts.

On a side note……I always wondered where the phrase “National Interest” derived from? Does that not have a Communal/Socialist tone to it? And not only undermine Real Property Rights?

.

Reason September 13, 2009 at 4:53 pm

Anonymous,

You cannot have social cooperation when all aspects of social interraction are coerced by governments.

JD,

Psychiatry is the greatest atrocity man can do to one another ! Libertarians should realize that involuntary psychiatry has probably got to be the greatest atrocity every created by mankind.

Bob Roddis September 13, 2009 at 8:52 pm

While jousting with Yglesias’ statist commenters about the constitutionality of paper money, I was provided the following link which to an article which allegedly “proves” that paper money is constitutional:

http://www.geocities.com/CapitolHill/Senate/3616/flaherty3.html

Two points stood out in the article. First, the Constitutional Convention voted to take out a proposed clause which provided for paper money (bills of credit):

“Eventually, the convention voted 9-2 to strike the clause, thereby denying the federal government the specific power to emit bills of credit.”

Then, the author, wanting to show that Madison was ultimately on the side of paper money, wrote:

“As President, Madison approved of a $36 million non-legal tender paper money issue to help finance the War of 1812. His actions seem to have spoken louder than his words.”

Really? Madison’s actions again prove Dr. Murphy’s point.

Gil September 14, 2009 at 12:07 am
How Else ? Here's How : September 14, 2009 at 7:17 am

Question:

“Fiat Money: How Else You Gonna Kill 600,000 Americans?”

Answer:

By adopting the president’s health care reform. Even if their partisan ads claim that it’s far from socialism, it is still a step in that direction and a dangerous precedent in that direction.

What if individuals DON’T want insurance and want to SAVE their money. Now the president will force everybody to spend on insurance, that’s unacceptable.

He’s a LIAR when he says that his health care reform will be self-sufficient and entirely paid by premiums and NOT by taxes.

Forced premiums IS taxation !!!! And it will be deducted from the salary just like income taxes.

So it would appear that Obama is playing on words and renaming a tax a “premium” doesn’t make it less of a tax.

Lots of people will die on waiting lists, care rationning, even Canadians will die because they will no longer have the American option.

But the most unacceptable part of Obama’s proposal is the fact that he won’t accept NO as an answer. This is dictatorship, this is tyranny !

A. Viirlaid September 14, 2009 at 10:37 am

“It is strange that so few of those who are passionately opposed to war also come out strongly against fiat money.”

One of “those few” is of course Dr. Ron Paul.
http://www.house.gov/paul/congrec/congrec2006/cr021506.htm

New or higher taxes always incurred the disapproval of the people, so it wasn’t long before Kings and Caesars learned how to inflate their currencies by reducing the amount of gold in each coin– always hoping their subjects wouldn’t discover the fraud. But the people always did, and they strenuously objected.

This helped pressure leaders to seek more gold by conquering other nations. The people became accustomed to living beyond their means, and enjoyed the circuses and bread. Financing extravagances by conquering foreign lands seemed a logical alternative to working harder and producing more. Besides, conquering nations not only brought home gold, they brought home slaves as well. Taxing the people in conquered territories also provided an incentive to build empires. This system of government worked well for a while, but the moral decline of the people led to an unwillingness to produce for themselves. There was a limit to the number of countries that could be sacked for their wealth, and this always brought empires to an end. When gold no longer could be obtained, their military might crumbled. In those days those who held the gold truly wrote the rules and lived well.

Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people– just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.

The point is that “printing money” unshackles the hands of politicians to do more grievous harm than they otherwise could do.

Sure, they can always do harm like leading us into wars regardless of what money system we use.

But that the politicians can do MORE harm using a fiat currency, than they otherwise would do, is Robert P. Murphy’s main point IMO.

The American Constitution specifically allowed only for Real Money to be used to transact the nation’s economic affairs. As we all know the Constitution is a marvel of Checks and Balances. But as we often don’t acknowledge, one of the most important Checks and Balances (that is, the retention of real power in the people’s hands) is the absolute prohibition against the use of Fiat Currency.

Dr. Ron Paul’s thesis is a very integrated and sound one IMO. He is a “Strict Constitutionalist” —- any deviation from the American Constitution especially by government officials, who are after all sworn to uphold that Constitution above all other activities, is of extreme concern to Dr. Paul simply because of the grievous harm that deviation from the Constitution entails. That the American nation has survived so well for so long is in no small thanks to its Constitution notwithstanding all the ‘deviations’ from it that the Nation has had to endure at the hands of its political master class.

Now Dr. Ron Paul has written his latest book END THE FED to even more clearly enunciate his arguments.

http://www.thenewamerican.com/index.php/reviews/books/1860-a-review-of-end-the-fed-by-ron-paul

The sad fact (which I think most of the contributors at the Mises site can agree with) is that the Nation can only deviate so much and for so long from the basic principles of the American Constitution before the grievous harm such deviation entails truly and mortally wounds the Nation and her People — that is, past the point of Redemption.

Let’s not kid ourselves — at some point we really won’t be ‘able to go home again’.

Is that what we want?

END THE FED comes to the market at a very propitious time IMO. The next correction is just around the corner.

We Miseans and Real Money advocates know that The FED’s and The Treasury’s shenanigans notwithstanding, there is no chance that they have ‘saved’ the Economic System — they have simply delayed the inevitable. And they have made the resulting harm even greater than it would otherwise have been.

Morality? It is such an old-fashioned and quaint idea, isn’t it?

We live in an Age of Betrayal of Trust, of Consequentialism, of Expediency, and of Ignorance.

Why would we expect The FED or the Government to do anything but what they are doing?

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