Legalize Competing Currencies … I recently held a hearing in my congressional subcommittee on the subject of competing currencies. This is an issue of enormous importance but unfortunately few Americans understand how the Federal Reserve and Treasury Department impose a strict monopoly on money in America. This monopoly is maintained using federal counterfeiting laws, which is a bit rich. If any organization is guilty of counterfeiting dollars, it is our own Treasury. But those who dare to challenge federal legal tender laws by circulating competing currencies − at least physical currencies − risk going to prison. Like all government created monopolies, the federal monopoly on money results in substandard product in the form of our ever-depreciating dollars. – Ron Paul, August 14th column at The Daily Bell
Dominant Social Theme: Competing currencies are impractical and just a way for the Rothschild-driven free-market movement to dodge the issue of paper money perfection. Money worked better anyway when women solely managed it, as Ellen Brown has pointed out.
Free-Market Analysis: Here comes Congressman Ron Paul pounding the drums for competing currencies. He's been called a dreamer, a schemer and worse but long ago we arrived at a somewhat similar vision.
That doesn't mean your banking system doesn't arrive at a fully capitalized gold standard, only that if it does, market forces propel it there.
Ron Paul is a believer in what Austrians call "honest money" – but he is willing to let the market decide on when and how it arrives at its conclusion. Which seems fairly reasonable to us.
Ron Paul's good friend, Murray Rothbard, was more didactic about the issue. Back in the early 1990s, in fact, quite a battle raged between him and the monetary tag team of George A. Selgin/Lawrence H. White. Selgin and White are very interesting and creative economists.
You can see some Daily Bell interviews with Selgin and White here:
It was Selgin's and White's idea that Scottish fiat money banks, backed by nothing more than five percent gold, functioned fairly well for several hundred years or more. Rothbard didn't like it. In fact, it drove him a little nuts.
He was committed to promoting a full gold standard and even to the point of criminalizing the actions of those who contravened it. (This always struck us as a bit odd, given that Rothbard helped invent modern anarchism.)
Selgin and White, also considered "of" the Austrian school, fired back. The argument came down to whether the Bank of England had been a de facto "lender of last resort" for the Scottish banks that allowed customers to tolerate gold-backing percentages as low as five percent.
We never entirely made up our mind but during the debate we did begin to realize that no matter the rhetorical outcome of the specific debate, the market itself – consumers who made the decisions – ought to be able to choose the kind of money they were comfortable with.
Before Rothbard died, he apparently was willing to entertain this notion as well. Good for him. He was a brilliant man and could even be flexible about his core beliefs later in life.
As for Selgin and White, they've continued to propound the utility of free banking and Ron Paul, also later in life, seems to agree with this position.
Let 100 or a 1,000 currencies bloom, in other words. Many may be comfortable with honest money, fully backed paper, in other words. If they're not and they're willing to try fiat, maybe in a free-market environment they'd be paid more for that via more generous interest rates. Who knows?
Ron Paul wants to try. Of course, there are plenty of naysayers, including what we call the "paper money" crowd that has suddenly descended on the Internet the way Athena blasted out of Zeus's skull, fully grown.
The objections of these folks, so far as we can tell, is that 1) there is no free market and never can be because … well, Jews won't allow it, and 2) never in history has their been an era of competing currencies; it's not feasible.
To this we might answer that we are not sure 1) Jews infest every corner of the marketplace and since we have not lived forever, we are not sure whether 2) somewhere, at some time, a corner of the world DID support competing currencies.
So far as we know, pre-Civil War America did okay with what historians today call "wildcat" banking. Even despite the tendency of these banks to go out of business it was a time of wild prosperity in the US.
The idea that the Rothschilds controlled all the gold and silver in pre-war America is fairly preposterous. Likewise, the idea that that illustrious family controlled all the country's single branch banks.
They were single branch, of course, because that's how they were chartered. They were prone to going out of business and creating "runs" because many were forced to buy horrid municipal bonds as part of the charter.
Nonetheless, the system flourished (in a sense, anyway, despite its problems) and the US became great. Gold and silver seem to have circulated freely throughout the US, certainly in the West – especially silver, the "people's money."
Paper money, fiat money, regional interest rates – along with regional slumps and rebounds – were all part of a wonderful monetary experiment.
No wonder it had to end! The grumpy New York banks and their European masters couldn't bear it. Using their paid henchmen, Abraham Lincoln along with his opposite, Jefferson Davis, they created a war between the states to stamp out monetary freedom once and for all.
See our article about Jefferson Davis here:
After the war everything changed. The New York Stock Exchange began buying up other NY exchanges and Money Power was finally regnant.
The rest is history, as they say. First "they" killed silver – which they hated – and then they killed gold, which they hated worse. And now the US and the world are grappling with a second great depression.
Ron Paul has an answer: competing currencies. It was apparently foundational to American greatness and can be so again.
Of course, those who are currently propagating pure fiat systems and claiming that gold (for some reason they don't mention silver) is a gateway to several kinds of Hell will have none of it.
And yet, as we've pointed out, there is a strange authoritarian streak to such arguments. Many proponents of pure fiat seem to be affiliated either with "green" eco-projects or have worked directly for the United Nations.
You can see some of our articles on this apparently predictable partnership here:
The reason we use the word "predictable" is because there's something, well … authoritarian about some of these paper promotions. We're not surprised their backers end up working for the UN or UNESCO.
Silvio Gesell, for instance, wanted to use government to hand out depreciating currency to the masses. Henry George wanted to force everyone to give up property rights while paying a "land tax." Major Douglas was convinced that government ought to pay people money outright using a "perfected" formula of his devising.
So many of these theories seem to count on government force for their installation. Contrast them, then, to Ludwig von Mises and "Human Action." Not for him were paper money schemes demanding massive government intervention and a kind of militarized society to accomplish.
No. Von Mises spent much of his later life promoting the idea that people inevitably pursue their own enlightened self-interest and individual destinies. Government schemes – laws, regulations, economic systems – attempting to predict human nature were bound to fail or at least not perform as predicted.
What could be more generous than this? The nobility of the intellectual gesture is virtually unparalleled in modern economics – in any school of philosophy, as a matter of fact.
Of course, it made von Mises – and modern Austrian economics generally – into a kind of collective pariah. If one adopted Austrian economics, one threw econometrics away. And that made it kind of difficult for sundry bureaucrats and prognosticators to make a living.
Nonetheless, of late, even this most noble of perceptions has come under enthusiastic attack. We are told there is no such thing as "human action" anymore than there is a "free market."
It is explained to us that von Mises, in his insistence on building the intellectual basis for freedom, was merely baiting the trap of tribal monetary primacy. If one adopts the idea, therefore, that people have the property of self-determination, one might as well join a Temple and begin to recite the (Babylonian) Talmud.
Even the great poetic genius Ezra Pound rejected this "stupid, suburban prejudice" late in life. Pound, an exquisite intellect, realized finally that the key to living life well was a certain nobility of soul, a generous appreciation of the best of human nature.
He'd spent his life advocating theories like those of Douglas and Gesell, but finally at the end of life he likely saw it was not so simple. That there was neither one single monetary panacea nor one single mortal enemy.
This, in a sense, is what Ron Paul has realized as well. Life is too complicated for any one solution to hold sway.
Let monetary systems compete, he has decided. Let there be a rich tapestry of currency and fiscal solutions – including even Greenbackerism, Georgism and social and mutual credit – that allow people and the larger society to choose what best suits them.
This doesn't seem to be such a hard concept to grasp but those of late who have taken to propounding paper promotions will have none of it.
And yet … in our view, it is a kind of faux economics to preclude certain monetary solutions and advocate others with frenetic purity. Whence comes this certainty? And from what personal experiences springs the bitter bounty of absolutism and prejudice?
We will close by quoting from Ron Paul's most recent column:
As Austrian economist Ludwig von Mises explained, sound money is an instrument that protects our civil liberties against despotic government. Our current monetary system is indeed despotic, and the surest way to correct things simply is to legalize competing currencies.