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Source link: http://archive.mises.org/9460/the-right-and-wrong-of-money-production/

The Right and Wrong of Money Production

February 18, 2009 by

We now have the definitive answer to the question, is government monopoly of money production ethical? Moreover, writes Michael King, it is explained in a way they can easily understand and hopefully pass on. I am talking about the wonderful new book by Jörg Guido Hülsmann, The Ethics of Money Production. As my students can attest, it would be difficult to overstate my appreciation for this book. In fact, I am tempted to conclude my review here and simply say, get it, read it, and then read it again! FULL ARTICLE


Pat February 20, 2009 at 1:48 pm

Ehmoran: “Concerning Creation and Evolution; IT really doesn’t matter what happened; DOES IT?. Its just an argument to see who’s smarter than the other. There is and never will be a CONCLUSION.”

You are right and I agree with you. But when you have a worldview that depends on the truth of one theory (Especially if it affects your well-being), it is important to have a conclusion that favors your worldview. Which is why it is not easy to accept alternative views. That is what makes free speech vital. And so hated by those who would rather maintain the monopoly of ideas. Of course, a little humility wouldn’t hurt a person.

ehmoran February 20, 2009 at 1:50 pm



Alex February 20, 2009 at 3:29 pm


I completely agree with your first paragraph. As you say, “In a loan agreement, the gold becomes the banker’s property for some specified period of time (during which he presumably, but not necessarily, lends it out to someone else) and the customer has no claim on it until that time.” And this is the deal involved in present frb, is it not? I was not aware that in the context of today’s banking that some people claimed that depositors enter into some implicit agreement with the banks and FDIC that is, in fact, not a loan deal (with taxpayer guarantee), but something between a loan and a warehousing agreement.

DNA February 20, 2009 at 3:58 pm


I’m not really commenting on the current monetary/banking system (which all austro-libs would agree is rotten to the core), I’m addressing those defenders of FRB who contend that, even on a free market, FRB would be completely legitimate if done honestly. I reject that it can done honestly.

DNA February 20, 2009 at 4:07 pm

Or put differently, if it *is* done honestly, then it is either a warehouse arrangement or a loan contract. There’s no other alternative.

fundamentalist February 20, 2009 at 4:20 pm

Ehmoran: “Concerning Creation and Evolution; IT really doesn’t matter what happened; DOES IT?.” Its just an argument to see who’s smarter than the other. There is and never will be a CONCLUSION.”

I don’t guess anything really matters. It’s part of the journey to discover truth. I see the evolution/creation debate much like the socialism/austrian debate. The socialism/austrian debate has been going on at least since the French revolution. In that debate their will never be a conclusion in the sense of uninimity. Of course, Austrians have been losing the debate for the past 80 years. We’ve lost in academia and in politics, so in that sense there has been something of a conclusion.

The evolution/creation debate is a version of the ancient debate about the existence of God which has gone on at least since Solomon ruled in Israel in the 10th century BC. So, no, there will never be a conclusion in the sense that there will be unanimity. There has been something of a conclusion for quite a while since the consensus in the scientific community is all evolution. Just as the consensus in economics is all Keynesian.

Should the fact that Austrians have lost the debate cause us to give up? Is it really worth the effort? The only answer I can give you is that I care about the truth. I have no illusions about transforming the US into a capitalist economy. But I want to keep the flickering flame of truth alive in case someone in the future is interested. The same is true with creationism.

Pat: ” Which is why it is not easy to accept alternative views. That is what makes free speech vital. And so hated by those who would rather maintain the monopoly of ideas. Of course, a little humility wouldn’t hurt a person.”

In order to recognize truth, a person has to put himself in a frame of mind in which he doesn’t care about the consequences; he wants the truth more than anything else. People don’t accept the truth because something else is more important to them. For socialists that might be keeping alive the socialist dream of utopia. For evolutionists it could be many things, but as Stein depicted in his film, it’s often a fear of career damage.

I’m not sure how humility applies in such debates. Its opposite, arrogance, is thinking you know more than you do. At least that is how Hayek uses it in “Fatal Conceit.” I don’t think evolutionists or creationists are arrogant. Both have good arguments on their sides. I happen to think Creationists have the better science on their side. The alternative is to be agnostic, but that’s not humility. It’s laziness.

ehmoran February 20, 2009 at 4:36 pm

fundamentalist ,

The only problem with the economic debate is we have no reference point: Austrian economics has NEVER been instituted. There has NEVER even been a true “FREE-MARKET”. Throughout history, Gov’ts have always been involved and in direct competition with private enterprise. They’ll never allow the institution of Austrian Economics into the Establishment. IT threatens the Powers to BE.

In the late 1790′s, Hamilton issued Treasury bills looking for Private investment. Now who’s going to compete with a Military State for MONEY.

In the early 1900′s, we incorporated Socialism and have become Socialist. And the present state of the US proves Socialism is a COMPLETE failure. Imagine that. Has anyone ever thought of this????

The biggest problem today is the majority want to be told everything is fine, they want to be told what the truth is.

“Questioning everything or questioning nothing, this is the path of least resistance and requires the least amount of learning.” and this is amazingly true today.

Many assume that all the information they need can be found on TV. In this World of rapid information deployment through the internet, there’s no excuse for ignorance, as long as curiosity and personal advancement remains intact.

Gerry Flaychy February 20, 2009 at 6:40 pm

Concerning the question of the ownership of money, here’s a way we may see it.

To own something is to own rights on this thing. Among those rights, there is, among others, the «title to property», and the «right to use».

For example, if I rent my house, I keep the «title to property», but I lose the «right to use» for the term of the rent.

If I lend a certain amount of dollars, or gold, I keep the «title to property» on this amount, but I lose the «right to use» on this amount for the term of the loan. It is precisely because I keep the «title to property» on it that I can claim this amount at the end of the term. I cannot claim something if I have no right at all to property on it.

In the case of demand deposit, I neither lose the «title to property» nor the «right to use». But the «right to use» is also conferred to the banker: both the depositor and the banker have the «right to use» on the same amount, but the banker has it as long as the amount stay in my account at the bank. If I want it back he has to give it to me, or if I make a check, he has to honoured it. It’s a kind of priority of use.

How does is sound to you ?

newson February 20, 2009 at 8:14 pm

another great book by hulsmann, and a perfect complement to huerta de soto’s “money, bank credit and economic cycles”

DNA February 20, 2009 at 9:06 pm

Gerry Flaychy,

If the banker has to return the amount of deposited money on demand, I cannot see how both banker and depositer have some sort of common right to use; the banker’s right is severely restricted by precisely his obligation to honor a request for redemption. Warehousing and lending are completely different functions.

Gerry Flaychy February 20, 2009 at 10:39 pm

DNA, first of all, I think that warehousing should definitively be discarded because warehousing is for specific goods, and it is this very same specific goods that has to be returned, no other one.

For example, if I have a 100 $ bill with a specific number and I want to have back this specific good on demand, no other 100 $ bill, I cannot do that with a demand deposit account, because what I deposit in this kind of account is an amount of money, which is not a specific good. I cannot have back the specific good that I gave to the banker, only the same amount of money.
Moreover, if I deposit a check of 100 $ instead of a 100 $ bill, the only way that the banker can give it back to me,
it’s when that check has bounced ! !

fundamentalist February 20, 2009 at 10:52 pm

ehmoran: “The only problem with the economic debate is we have no reference point: Austrian economics has NEVER been instituted. There has NEVER even been a true “FREE-MARKET”.

That’s true, but we have had periods of less state intervention to compare to periods of greater intervention. Compared to today, the US in the 19th century was pure capitalist fee markets.

And we can compare across countries today. For example, we can use the Heritage Foundation’s index of economic freedom and compare growth. And the US is almost as socialist as Europe, but we enjoy greater wealth, faster growth and lower unemployment. Then we can compare individual countries such as those of Eastern Europe, Russia and China before and after they abandoned socialism.

The evidence is there for those who care about the truth.

DNA February 21, 2009 at 7:20 am

Gerry Flaychy,

You should definitely read de Soto’s
outstanding book Money, Bank Credit, and Economic Cycles for some clarification on these issues. It can be downloaded for free from this website.

Gerry Flaychy February 21, 2009 at 11:52 am

DNA, thank you for your suggestion of the De Soto’s book. I already read the first chapter and did a fast reading of the second.

It’s interesting but we have to be aware that his text is based on the Spanish Civil Code and spanish jurisprudence, which is not necessarry the same laws and jurisprudence that the ones in the USA. For example, I don’t think that in Spain they have the Common Law as in the english countries. We have also to be aware that his text may contain his personal views or interpretations on the subject.

I have also remarked that he is using the word «ownership», which is a general word who can be interpreted in different ways, instead of using the name of the specific right he is refering too, which can be misleading. As I have already said, we do not own things but rights on those things, and each one of those rights on a particular thing may be owned by a different owner. So it is important to know to which right precisely we are refering to.

That will be all for the moment.

Nicholas Page April 21, 2009 at 12:46 am

Oh Boy. An evolution vs creationism debate here as well. Any place is good enough for these guys and their fist fights. The stupid creationists are everywhere are they not? Correction, the stupid creationists who resent being called stupid.

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