From the Invisible Hand to the Invisible Sleight-of-Hand
Why are we using state money instead of market money? Put another way, why can’t we select the money we want to use? Cryptocurrencies are a market alternative, but they haven’t put state money out of business yet. If they ever threaten to do so, the state can prohibit them.
Market money is sound because of two essential features. First, it represents the market’s choice of a universally accepted medium of exchange, and second, it shackles government to a great extent, liberating the people. A state that prowls foreign lands in the name of freedom and democracy and keeps its domestic population in line with free stuff and threats has no interest in a currency it can’t will into existence. For this reason, governments hate sound money.
Even worse, people hate sound money. Sound money means taking responsibility for their own lives, relying on savings or charity when life gets ugly. They can’t turn to the government for help because governments without printing presses tend to let the chips stay where they fall.
Almost no one today comprehends sound money. Besides, they might retort, if sound money were once gold, look at the problems it caused. We were plagued with panics when gold was enthroned (forgetting that gold was corrupted by fractional reserve banking). And when recessions hit, the economy suffered because there was no printer of last resort to proliferate “unsound” money to jump-start its productive engine (not admitting that unsound credit expansion created the problem in the first place).
The better people are proactive—they don’t like to sit and let matters take their course, as they did with nineteenth-century crises. That’s why enlightened elites created the Federal Reserve. Things are better today with a central bank ready to fend off catastrophe with liquidity injections. Sometimes humongous injections. Sound money is an unsound idea for a modern, industrial economy that’s gone woke. Gold is a barbarous relic, with the emphasis on barbarous.
If history and theory didn’t prove otherwise, we might be tempted to believe the gold detractors. Granted, some of the history is hypothetical, but it’s a strong hypothesis.
Those Who Produce and Trade
Archeological findings show us that people once lived much like wild animals, hunting and gathering their food. When they discovered they could grow some of their food and domesticate certain plants and animals, they formed settlements. Agriculture provided a surplus of food and allowed people to spend less time trying to feed themselves and more time working on other productive pursuits, thereby creating a diversification of labor.
With specialization came the opportunity to trade, beginning with barter and advancing to indirect exchange. All other discoveries that have raised our standard of living are contingent on the simple process of trading one good for another good that is highly liquid. (A house is highly valuable but not at all liquid, whereas a carton of eggs is both liquid and valuable.) With this
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