I. Introduction

0:00Chapter 1. Introduction. Few economic subjects are more tangled, more confused than money. Wrangles abound over tight money versus easy money, over the roles of the Federal Reserve system and the Treasury, over various versions of the gold standard, etc. Should the government pump money into the economy or siphon it out? Which branch of the government? Should it encourage credit or restrain it? Should it return to the gold standard? If so, at what rate? These and countless other questions multiply, seemingly without end. Perhaps the babble of views on the money question stems from man's propensity to be realistic, that is, to study only immediate political and economic problems.

0:52If we immerse ourselves wholly in day-to-day affairs, we cease making fundamental distinctions or asking the really basic questions. Soon, basic issues are forgotten and aimless drift is substituted for firm adherence to principle. Often we need to gain perspective, to stand aside from our everyday affairs in order to understand them more fully. This is particularly true in our economy, where interrelations are so intricate that we must isolate a few important factors, analyze them, and then trace their operations in the complex world. This was the point of Crusoe economics, a favorite device of classical economic theory.

1:38Analysis of Crusoe and Friday on a desert island, much abused by critics as irrelevant to Today's World, actually performed the very useful function of spotlighting the basic axioms of human action. Of all the economic problems, money is possibly the most tangled, and perhaps where we most need perspective. Money moreover is the economic area most encrusted and entangled with centuries of government meddling. Many people, many economists, usually devoted to the free market, stop short at money. Money, they insist, is different. It must be supplied by government and regulated by government. They never think of state control of money as interference in the free market.

2:26A free market in money is unthinkable to them. Governments must mint coins, issue paper, define legal tender, create central banks, Pump money in and out, stabilize the price level, etc. Historically, money was one of the first things controlled by government, and the free market revolution of the 18th and 19th centuries made very little dent in the monetary sphere. So it is high time that we turn fundamental attention to the lifeblood of our economy—money. Let us first ask ourselves the question, can money be organized under the freedom principle? Can we have a free market in money as well as in other goods and services?

3:13What would be the shape of such a market? And what are the effects of various government controls? If we favor the free market in other directions, if we wish to eliminate government invasion of Person and Property, we have no more important task than to explore the ways and means of a free market in money.