Steps Toward Monetary Freedom
May 5, 2009
We hear much chatter today about laying out the “blueprint for our future” through economics and politics. Many people have the idea that it is government’s responsibility to push forward anything that should change, but all of this is irrelevant if the central issue of economics is ignored: money. Freeing money in this country ranks at the top of the list of necessary action to bring long-term stability and sustainability to the economy.
The first essential step is to eliminate the secrecy of the Fed. It is mind boggling to allow such important policies of the economy be put in the hands of a central bank, and prohibit Congress from performing an audit of the agency. Allowing Congress and the American people to get the information they rightfully deserve is extremely important toward opening the many faults of the system to the public. Power itself is dangerous; but unchecked, secretive power is one of the most dangerous things known to mankind. Besides, it is Congress, not a central bank, who has the responsibility over money clearly laid out in Article 1, Section 8 of the Constitution.
The Congress shall have Power…
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
The second, and possibly most important step, is to the repeal the legal tender acts passed in the 1960s, which led the way for allowing only Federal Reserve Notes to be legally accepted currency in the U.S. Legal tender laws alone should be enough to make one question the quality and value of a currency. After all, if a currency is strong and preferred by the people, why would legal tender laws be necessary?
The U.S. was founded on the principles of individual freedom, which in a nutshell means the liberty to freely make individual choice. When it comes to economics, individual choice is starting to be thrown out in favor of government control. Monetary choice is vital for the long-term survival of any economy. Allowing choice means allowing competition, and as we have seen the free market demonstrate time and time again, competition strengthens a product. It is no different for money and currency.
Legalizing competing currencies does not mean requiring competing currencies. We have a system today along the lines of requiring everyone to shop at a national retailer like Wal-Mart, when we might find better deals and products with a local store or retail chain. Competition of a government-managed dollar would look a lot like competition to the Post Office. The inefficiencies of the Post Office led to the private creation of FedEx and UPS in the 20th century, giving choice to consumers but not taking away the option of the Post Office managed by the government.
What legal tender laws do is kill competition. It is then the government who decides what medium people use to buy goods, not the people. Except today, it isn’t even the government managing the money that we are required to use, but the Federal Reserve. History has shown us that when governments carry monopoly power over money, that power eventually leads to an overextended government unable to bring itself out of the hole it creates. This has caused or contributed to the collapse of great civilizations throughout history, including the Roman Empire.
The third step, and probably end objective, is to transfer the control of money from the Federal Reserve back to Congress and the U.S. Treasury, as we had with United States Notes as late as 1971. A currency backed only by gold and silver, as the Constitution outlines, is very important for keeping the monetary power in check. Since 1971, we have seen firsthand how a fiat monetary system lays out the road for growth and abuse in government at the expense of the people and economy. A great quote mentions how paper money always returns to its intrinsic value: zero.
We must realize that a backed currency alone will not keep government in check with monetary power. This is something that has been largely forgotten over the past half-century or so. Because, at the heart of it, monopoly power of money is no better off in the hands of the government than it is with a central bank. It would be pointless to get riled up over the failures of the Fed and simultaneously hand that power over to the federal government. This is why free, competing currencies play an important role in this whole equation.
A common argument against competing currencies is that it would supposedly lead to economic chaos because there would be so many different currencies. I would be highly surprised if this turned out to be the case. For one thing, the dollar managed by Congress and the U.S. Treasury (not the Fed) would still be provided, regulated, and available for use in transactions.
Competing currencies simply give people and businesses an option to opt out, so to speak, if Congress goes on a spending rampage and inflation destroys the purchasing power of the dollar, or any scenario of that sort. Rather than locking people into a currency with no questions asked like we have today, it is key that the potential choice to venture into other currencies and monetary systems, if necessary, not be put off the table.
One other item is taking away the Fed’s power over credit and interest rates. These are the last things a central bank or the government should be dealing with. Interest rates should be sorted out like anything else the free market manages: through the supply and demand of money. If people save more, interest rates go down. If people save less and the banks need more capital, interest rates adjust and go up to promote saving. In a free society, people can handle themselves with interest rates as well as credit. We don’t need a few central bankers or government bureaucrats deciding what the rate and supply of money ought to be.
By simply allowing the market to have more control over money, I am certain that a national currency provided by Congress would have to maintain stability in value and supply to not burn up in ashes. In the long run legal tender laws are helpful only to the government and not the people. If people were to decide which currency they use, the government would be much more accountable to the people, and as a result the currency would undoubtedly be managed in a more sensible and sustainable manner.
It is time that people embrace the ideas of monetary freedom, responsibility, and choice. When the power of money is denied from the people, no society or economy is truly free.