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> Why would it be good to free currency from government regulation? Obviously this is a huuuuge question, but it's such a good one. The simplest compact answe
by jMyles 6y ago
> Why would it be good to free currency from government regulation?
Obviously this is a huuuuge question, but it's such a good one.
The simplest compact answer, at least to me (and it may in fact be an oversimplification) goes something like this:
* Nearly invariably (and with a decreasing number of exceptions as technology advances), states which have control over both sides of the economic equation (ie, monetary concerns as well as national finance) find themselves unable to resist devolving into empire, and a specific type of empire called a "welfare-warfare" state, where the money supply is carefully controlled in such a way as to produce just enough support (often through pseudoscientific 'macro-economic' analysis and 'unemployment' prevention) to preclude revolution, while also projecting military power on poorer parts of the world in order to capture resources in a misguided effort to service the never-ending debt that accompanies the fiat money system.
In this view (and to be clear, it's one I hold), states with these powers (a clear conflict of interest, IMO) will continue to plunder the earth and attempt to enslave its people indefinitely, and can only be practically stopped by the economic adjustment that comes from the introduction of a hard currency (which causes the cycle of debt service to become impossibly onerous, even for an empire state).
* For a less oversimplified version, I might recommend Ron Paul's book "End the Fed", which is an introduction to the history of hard-money economics and can be read in a day or two.
* For an even less oversimplified version, you'll need to delve into the "Chicago School" and / or "Austrian School" of economics. Milton Friedman and Ludwig Von Mises are probably the best known scholars of each.
- hakfoo 6y agoI'm not sure I understand the welfare-warfare model. It seems like it requires a bunch of preconditions: * The cycle of debt needs to be bootstrapped. You need some initial borrowing well beyond current (expected) repayment capacity. This implies both some overspending and lack of due diligence by lenders willing to extend the rope. * The debt is denominated in a currency the borrower doesn't control. If you're American borrowing dollars, or Russia borrowing roubles, you can always deflate the currency to moot the debt. * The state has no legal leverage against lenders. A continuation of the tactics above-- I could imagine a desperate nation simply refusing to redeem its bonds, or even prosecuting people attempting to claim then. There may be incentives and default-approaches that encourage the growth of empire to feed a debt addiction, but it's far from the only way. In the worst case, you end up with a default and limited to dealing with lenders who are legally required to deal with you (i.e. requiring pension plans or state-owned enterprises to sponge up government bonds) until someone else is willing to take a punt.
- notahacker 6y agoThe problem with an argument that welfare states 'nearly invariably' devolve into empire is that even the most cursory examination of the world's welfare states makes it clear they nearly invariably don't. The reverse argument actually works much better: throughout millenia of metallic standards countries regularly fought wars to plunder gold reserves from weaker states to repay their debts or boost their economy. And didn't even make enough from doing so to be able to afford welfare. Now they don't have to acquire shiny metal every time things are bad, they very seldom fight wars and even relinquished control over the empires they'd built under the gold standard. If there is a causal relationship between monetary systems and empire building, it's quite clear that it works the opposite way round and fiat money reduces the tendency to use military power in service of economic growth.