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Professor Herbener very well presents the case that prices
are the most effective and valuable communication system ever invented by man,
and that profit and loss is the best system devised to ensure the wise
utilization of resources. To the degree either
of these two systems is not allowed to function freely, wealth destruction
occurs in direct and opposite proportion (no, I don’t have a mathematical
formula that proves this).
However, I have a not-so-minor quibble with the professor. He makes a compelling case for the free
market in money, yet he proceeds to prescribe his non-market based, centrally
planned solution:
The primary step in monetary
reform, then, is to turn FRNs into 100-percent-reserve redemption claims for
gold coins…. The other step along this path to a market monetary system is to
establish a 100 percent reserve of money against bank-issued fiduciary media.
Once this transition was
accomplished, the government should permit private production of money and
money certificates according to the general laws of commerce.
Why are the first and second steps necessary? Applying “the general laws of commerce” will
suffice. Why not just advocate for the
private production of money – necessarily entailing the end of legal tender, the
end of taxation on saving and use of alternative monies (taxation in all forms,
including sales tax and income tax), and allowing the contract to rule the
relationship? Most importantly, this
step would require that the banking system operates without government support.
In this case, the cartel known as today’s banking system
could continue to operate for as long as the market found its services
acceptable. Or the cartel could change
its model. In other words, it isn’t necessary
for the professor to recommend a centrally planned solution for this market
actor. The market will clear. Good money will drive out bad.
The professor’s path is more direct – it has the appeal of
getting to sound money faster. But “more
direct” is the mantra of all who desire the use of government intervention into
the market. “More direct” always ends up
in the hands of those who desire political power.
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