20. Conclusion

CHAPTER

TWENTY

Conclusion

We must realize that money can operate, it can work, only if we have a system in which the government is prevented from manipulating the value of the money. We need not ask whether it is better to have a money with a higher or a lower purchasing power per unit. What we must realize is that we ought not to have a system of money in which the value of the monetary unit is in the hands of the government so that the government can operate, manipulate the money market in the way it wants to.

If the government destroys the monetary system it destroys perhaps the most important foundation of inter-human economic cooperation. What we have to avoid is permitting the government to increase the quantity of money as it wants. You will ask why do I not say we should keep the government from decreasing it. Of course, they shouldn’t decrease the money supply either. But there is no danger that this will be done. The government will not want to do that because that would be expensive; it would have to tax, collect money from the people, and then not spend it, but destroy it. What is necessary is to prevent government from destroying the monetary system by inflating. Therefore the quantity of money shouldn’t be manipulated by the government, according to the wishes of those people who want to enjoy a few minutes, a few hours, a few days, or a few weeks of good life from increased government spending, for a very long disastrous state of affairs.

The fundamental issue of money is that it must be something that cannot be increased by anybody ad libitum. The fight by governments against money had begun already long before the invention of the printing press by Gutenberg. But at that time the method was different. The method was by coin clipping, currency debasement, mixing into the silver coins a cheaper metal such as copper. Inflation is much easier now with the printing press. It doesn’t make any difference for the government in its cost of production whether it produces a one dollar bill or a thousand dollar bill. The paper and quantities of other materials are precisely the same.

Briefly, we have to say that if a government collects all that it spends by taxing the people, and if the constitutional conditions are such that the taxpayers themselves must give the government the right to collect taxes and the government is prevented from taxing, from levying any taxes that are not legally based upon the consent of the people, then we could hope that conditions would develop in such a way that later generations would enjoy a more, let us say, civilized and comfortable life than their ancestors did and that conditions would improve considerably. We could then say the conditions were better because many evils for which older generations had no remedy were no longer such evils. We could then really speak about progress. But if we have inflation, progressing inflation, then we are continually working against the vital interests of the majority of the population.

We are very proud to acknowledge the progress of technology and especially of medical technology in the course of the last centuries which has made conditions much more tolerable for a great part of the population so that today people are no longer hurt by deficiencies and problems which were really very bad dangers for the life and health of people 20,100,200 years ago. However by inflating we are creating a situation which will discourage the saving and investment that made technological progress possible. At the same time by inflating, people who are getting older are continually being punished by loss of the purchasing power of the reserves they have accumulated for their own old age and for family circumstances as they will develop in the course of time. We have to realize also that such an inflation is the necessary result of the financial policies adopted by most of the governments of the world today.

What we may say has been said again and again. Theoretically also it would be possible to have a paper currency created by the government without inflation. Perhaps! But we must realize that it is not to blame the statesmen and the members of parliamentary bodies that have to determine these things when we say they are not angels. If they were angels, one could trust that they would never make any mistakes. But for common men there remains—and this is the great problem—the dilemma to which I have referred before: the dilemma between a very unpopular tax and a very popular expenditure on the eve of an election campaign

While people are talking about many things as bad and making suggestions concerning the improvement of many conditions, they do not realize that there is one factor which brings about, not only an impairment of economic conditions for the greater part of the population, but also destroys the political scene by continually creating new causes of unrest. That is inflation. But it is clear that the governments who are responsible for the inflation always want to blame other people, to find that the actions of other people, not their own actions, brought about the inflation.

We must say that what creates the inflation is the famous “remedy” for the government’s problems, the “remedy” which people believed was discovered some few years ago, but which was really discovered by the Roman emperors—deficit spending. Deficit spending made it possible for the government to spend more money than it had and that it collected from the people. As everybody knows, deficit spending, that is spending more than one’s income, is very bad for the individual. The great error is that people believe that what is bad for the individual is not necessarily also bad for all the individuals together. This is the great mistake. And if this mistake is not eliminated very soon, all our technological and scientific improvements will not prevent us from a tremendous financial catastrophe that will destroy practically all that civilization has created in the last several hundred years.

What we have to deal with today is the fact that with a strict gold standard and gold exchange standard, we can arrange conditions in a way in which this metal gold can be used as a medium of exchange. What if you or somebody asked, what would you have suggested if there had not been any gold and any silver in the world? What would you have suggested? There is a very simple answer to this. The answer is that gold and silver are not necessarily the only media that can perform the function of a monetary system if people realize that the quantity of money must be strictly limited by some method. We have now no such other method.

As we see the situation today, even the most powerful, most moral, I would say, the most intellectual governments of the world—even if I were to ascribe all these attributes to the American government—are not prepared to resist inflation, to go away from increasing the quantity of money.