Those Things Called Money; L. E. Read

-EdWynn NEARLY EVERYONE at this moment of money madness will agree with Wynn's statement - humorous but sound. H. B. Bohn remarked: "Of money, wit, and virtue, believe one-fourth of what you hear." As to wit and virtue, Bohn may be right. But I doubt that as much as a fourth of what we hear about money is worth serious considera tion, for most of the pronounce ments stem from a premise that it is a function of government to issue money and regulate the value thereof. The premise seems wrong to me. I believe that if money is to be useful to traders as a me dium of exchange then the deci sions as to what shall serve as money must be worked out by traders in the market, voluntarily, rather than by governmental edict. If you are further interested in what I believe, reflect for a moment on the various commodities and other things that have been used for money: wampum, sea shells, salt, fur, dried fish, ivory, ciga rettes, silk stockings, gold and other metals - the list·· is long.

These are some of the things called money, but note that of those listed thus far, all are commodities that, at the time, were in common use in trade - so common that they were useful as a medium of ex change. But things of a different category, "non-commodities," also are called money - and thereby hangs our tale. German marks are things; in 1923 five billion of these things .wouldn't buy a loaf of bread. Paper dollars also are 13 14 THE FREEMAN January things called money - legal tender - government money which the law requires a creditor to accept in payment of a debt. Or to put it another way, government money, if created out of thin air by edict, is in no sense a scarce and valu able resource useful to traders but is rather a means of taxing or taking scarce resources from the market without offering anything useful in exchange. Such "money" may be a clever form of taxation, but it is far worse than useless as a medi urn of exchange.

Not Worth a Continental? Am I arguing that government money never has been "worth a Continental"? Not necessarily. If a government issues paper receipts that are fully backed by some valu able and widely acceptable item of trade - fully redeemable upon de mand by the bearer - such receipts may serve very well as a medi urn of exchange. But, of course, there's no reason on earth why the issu ance of warehouse receipts should be a governmental function. Let anyone do it who has a warehouse, and printing press, and a sufficient stock of gold or silver or whatever else the receipt calls for. And let government intervene only to see that the receipts are not fraudu lent - counterfeit. I am well aware that some gov ernments of some nations at some times have been in charge of mon etary policy with quite satisfac tory results, when the policy was to mint standardized coins and issue receipts fully redeemable in some well-·known and highly mar ketable commodity. But there is no reason to suppose that the man agers of a governmental monopoly will long function in competitive fashion if the monopoly can be exploited to gain additional poli tical power. And it doe3n't take a genius to figure how to exploit a money monopoly: just print bogus warehouse receipts and declare them to be legal tender; then pass laws to penalize suppliers of goods or services who refuse to accept the bogus receipts at face value.

Finally, this can be pushed to the point of issuing receipts based not on the fullness of the ware house but on its emptiness instead - the use of the national debt as the backing for the paper money. What would be the grossest fraud if an individual tried it has become the common practice of governments - all quite legal be cause it is a governmental mon opoly. And the result is a runaway inflation that disrupts business activities and hinders rather than facilitates trade. This is why gov ernments cannot be trusted with power to determine what traders should use as a medium of ex change. Let the traders choose.

1975 THOSE THINGS CALLED MONEY 15 Leave the decisions about money to the market. Limit the govern ment to its proper function of policing the market and punishing traders who cheat or rob or will fully inj ure other peaceful persons. There Is No Blueprint When I say that decisions about money should be left to the mar ket, I do not presume to know precisely what those decisions might be. Nor do I find much agreement among monetary ex perts as to what those decisions ought to be. Would traders insist on pure gold as money? Would they use checking accounts or Ameri can Express or credi t cards? Would they patronize banks and insist on 100 per cent reserves? I don't know, and I'm not terribly concerned that no one else seems to know precisely. What I am concerned about is that men be free to choose whatever best seems to serve their own respective pur poses. And I believe that from such freedom to succeed or fail in open competition in the market will come the most nearly perfect and tamper-proof monetary pol icy humanly possible.

How much understanding of money is required of us? No more understanding than anyone of us has about how to make a jet airplane. To support this point, let me repeat for the umpteenth time that no single person knows how to make an ordinary wooden lead pencil, explained in a brevity en titled, "I, Pencil."l Yet, the year that piece was written, we made in the U.S.A. 1,600,000,000 wood en pencils. How come? How ex plain a know-how that exists in no one of us, even remotely? My answer: It is the overall luminos ity, the wisdom in the free mar ket. When millions of people are free to act creatively as they choose, an unimaginable wisdom is the consequence. To assert that it is a billion times greater than exists in any discrete individual would be a gross understatement. Keep in mind that any single' person's understanding of how money could be made to serve us honestly and efficiently is pre cisely as impossible as under standing how to make a pencil!

It is appropriate at this point to ask a question to which no one has a correct answer: What would be the medium-of-exchange sit uation were it-left not to dicto cratic control but to the fantastic wisdom of the market? To hazard a guess would be to feign a clair voyance beyond human experience. Guessing would be as farfetched as expecting Socrates to have fore seen and described the makings of 1 See "I, Pencil." Copy on request.

16 THE FREEMAN January present-day air travel, electric lighting, the human voice deliv ered around the earth in one seventh of a second, my dicta phone, or a thousand and one other phenomena. I call these "phenomena" because no one un derstands or can describe the gen esis of these countless economic blessings even after their exis tence! The wisdom that accounts for them is not in you or me; it derives from the overall luminos ity. Why then should we not en trust money-the medium of ex change - to this same wisdom rather than to the coercive power of those now in public office? Yes, what this country needs is a good five-cent nickel. The way is clear: Relegate organized force - government - to the defense of life and property, invoking a com mon justice, keeping the peace. And leave all creative activities, including the medium of exchange - money - to the wisdom of the market. Do this or our country will end up with a five-cent thou sand-dollar bill.

Difficult ? Yes! Impossible? Who knows! One thing for certain: Turning money affairs over to the free market is no more an idealistic dream than red ucing government to its proper role. And, another thing for certain: Standing for that which seems politically expedient or feasible gains nothing; such techniques are doomed to failure. On the other hand, every boon to man kind has had its birth in the pursuit and upholding of what's right. Humanity has been graced with many boons, everyone of which was first thought to be im possible. Bear in mind that right eousness, as well as faith, works miracles. ~ IDEAS ON LIBERTY The Sources of Invention IF PAST EXPERIENCE is anything to judge by, crucial discoveries may spring up at practically any point at any time. As contrasted with the ideal ways of organizing effort in other fields, what is needed for maximizing the flow of ideas is plenty of overlapping, healthy duplication of efforts, lots of the so-called wastes of competition, and all the vigorous untidiness so foreign to the planners who like to be sure of the future.

JOHN JEWKES, from Lloyds Bank Review, January 1958 Bold Is Legal, BUT.. ROBERT G. ANDERSON 17 TODAY, as was true 42 years ago, the American people once again have freedom to own as much gold as they choose. Devotees of the free market have viewed this development with pleasure, for they have had little cause to re joice during these many years of steady erosion of individual lib erty. Socialistic governmental in tervention has steadily expanded since the denial of our right to own gold. The restoration of legal gold ownership by individuals is cer tainly a reversal of this ominous trend of government omnipotence. It has been heralded as a sign of change in the course of statism. Upon closer scrutiny, however, such optimism may be questioned, for there is a marked distinction between conditions then and now. Mr. Anderson is Executive Secretary and Di rector of Seminars at the Foundation for Eco nomic Education.