Today I have three excellent reads for you.
The first is for EVERYONE:
The Natural Order Blog has a superb post today titled "Public Sector Debt Is Immoral." Yes, indeed it is. It is the height of State corruption. I hold that it should be entirely repudiated. Murray Rothbard thought the same.
The second read I have for you today is from LRC, on Germany. This article by Michael Kreiger titled "The Selling Out Of Germany" tells you what goes wrong if public sector debt mushrooms. Germans are a very hard-working people - and most enterprising. They are being let down by their government - and by their own misplaced faith in welfarism. Putting an end to public sector debt means putting an end to "redistribution" by the State. It means an end to welfare. I hope Germans get that message.
Further, if united Germany has conclusively rejected Socialism for Capitalism, then Germans must also realize that Capitalism means "sound money" - defined by Mises as something with which human beings cannot interfere. Germans have experience with the horrific effects of hyper-inflation (Americans do not). This article says they are now buying gold in droves. This is a good thing. Gold is sound money.
Finally, I have an important article especially for serious students of Economics. It is by Joseph T Salerno on "fiduciary media" and the differences between Ludwig von Mises and Lawrence H White on the issue. Salerno classifies White as a member of the "Neo Banking School" and says that he misrepresents Mises' teachings.
It is important to note that "free banking" has serious moral and economic consequences if these free banks can issue fiduciary media at will. Fiduciary media are paper "money substitutes" that are NOT backed by gold. If this is legal, then, just as central banks cause business cycles today, so will free banks cause them tomorrow.
I stand with Mises and Jesus Huerta de Soto on the matter. This makes me an adherent of the "Neo Currency School."
In my column on the gold standard I have said the issuance of fiduciary media should be outlawed. It is indeed a great pity that Lawrence White's comment on the article, and my responses to it, have been deleted by Mint.
Sauvik, why in the case of banking do you uncharacteristicly want to prohibit peaceful voluntary practices? I fear that you don't understand them. The premises on which you found your prohibitionism are false. In fact, (1) Free banks CANNOT issue fiduciary media at will. They have to be prepared to redeem them, which is costly. Read up on Mises' theory of what limits the extent of note-issue under gold redeemability. (2) Under a gold standard, fiduciary media (banknotes, checking accounts) ARE backed by gold. Banks do hold gold reserves to redeem them. They don't hold 100% reserves of gold, but any solvent back does hold sufficient other assets in addition to gold to buy all its liabilities back.
ReplyDeleteMy response to Professor White's comment is in a separate post:
ReplyDeletehttp://sauvik-antidote.blogspot.com/2010/05/between-lawrence-white-and-me.html