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The Ethics of Money Production

December 31, 2011 Leave a comment

Jörg Guido Hülsmann

There is a reason that this book has been translated to Chinese, German, Spanish, Czech, and there are many more on the way. This book hits the intellectual sweet spot, speaking to the issues that are driving economic events right now. We MUST deal with the money problem in a principled way, else we never get back on the course of sustainable prosperity.

By “money production,” the author is speaking not in the colloquial sense of the phrase “making money,” but rather the actual production of money as a commodity in the whole economic life. The choice of the money we use in exchange is not something that needs to be established and fixed by government.

In fact, his thesis is that a government monopoly on money production and management has no ethical or economic grounding at all. Legal tender laws, bailout guarantees, tax-backed deposit insurance, and the entire apparatus that sustains national monetary systems, has been wholly unjustified. Money, he argues, should be a privately produced good like any other, such as clothing or food.

In arguing this way, he is disputing centuries of assumptions about money for which an argument is rarely offered. People just assume that government or central banks operating under government control should manage money. Hulsmann explores monetary thought from the ancient world through the Middle Ages to modern times to show that the monopolists are wrong. There is a strong case in both economic and ethical terms for the idea that money production should be wholly private.

He takes on the “stabilization” advocates to show that government management doesn’t lead to stability but to inflation and instability. He goes further to argue against even the theoretical case for stabilization, to say that money’s value should be governed by the market, and that the costs associated with private production are actually an advantage. He chronicles the decline of money once nationalized, from legally sanctioned counterfeiting to the creation of paper money all the way to hyperinflation. In his normative analysis, the author depends heavily on the monetary writings of 14th-century Bishop Nicole Oresme, whose monetary writings have been overlooked even by historians of economic thought. He makes a strong case that “paper money has never been introduced through voluntary cooperation. In all known cases it has been introduced through coercion and compulsion, sometimes with the threat of the death penalty. . . . Paper money by its very nature involves the violation of property rights through monopoly and legal-tender privileges.”

The book is also eerily prophetic of our times:

Consider the current U.S. real-estate boom. Many Americans are utterly convinced that American real estate is the one sure bet in economic life. No matter what happens on the stock market or in other strata of the economy, real estate will rise. They believe themselves to have found a bonanza, and the historical figures confirm this. Of course this belief is an illusion, but the characteristic feature of a boom is precisely that people throw any critical considerations overboard. They do not realize that their money producer—the Fed—has possibly already entered the early stages of hyperinflation, and that the only reason why this has been largely invisible was that most of the new money has been exported outside of the U.S . . . Because a paper-money producer can bail out virtually anybody, the citizens become reckless in their speculations; they count on him to bail them out, especially when many other people do the same thing. To fight such behavior effectively, one must abolish paper money. Regulations merely drive the reckless behavior into new channels.

Hulsmann has provided not only a primer in understanding our times, but a dramatic extension of the work of Menger, Mises, Hayek, Rothbard, and others to map out an economically radical and ethically challenging case for the complete separation of money and state, and a case for the privatization of money production. It is a sweeping and learned treatise that is rigorous, scholarly, and radical.

 

Table of Contents

Preface
Introduction

  • Money Production and Justice
  • Remarks about Relevant Literature

Part 1: The Natural Production of Money

  • Monies
  • The Division of Labor without Money
  • The Origin and Nature of Money
  • Natural Monies
  • Credit Money
  • Paper Money and the Free Market
  • Electronic Money
  • Money Certificates
  • Certificates Physically Integrated with Money
  • Certificates Physically Disconnected from Money
  • Money within the Market Process
  • Money Production and Prices
  • Scope and Limits of Money Production.
  • Distribution Effects
  • The Ethics of Producing Money
  • The Ethics of Using Money
  • Utilitarian Considerations on the Production of Money
  • The Sufficiency of Natural Money Production
  • Economic Growth and the Money Supply
  • Hoarding
  • Fighting Deflation
  • Sticky Prices
  • The Economics of Cheap Money
  • Monetary Stability
  • The Costs of Commodity Money

Part 2: Inflation

  • General Considerations on Inflation
  • The Origin and Nature of Inflation
  • The Forms of Inflation
  • Private Inflation: Counterfeiting Money Certificates
  • Debasement
  • Fractional-Reserve Certificates
  • Three Origins of Fractional-Reserve Banking
  • Indirect Benefits of Counterfeiting in a Free Society .
  • The Ethics of Counterfeiting
  • Enters the State: Fiat Inflation through Legal Privileges
  • Treacherous Clerks
  • Fiat Money and Fiat Money Certificates
  • Fiat Inflation and Fiat Deflation
  • Legalized Falsifications
  • Legalizing Debasement and Fractional Reserves
  • The Ethics of Legalizing Falsifications
  • Legal Monopolies
  • Economic Monopolies versus Legal Monopolies
  • Monopoly Bullion
  • Monopoly Certificates
  • The Ethics of Monetary Monopoly
  • Legal-Tender Laws
  • Fiat Equivalence and Gresham’s Law
  • Bimetallism
  • Legal-Tender Privileges for Money Certificates
  • Legal-Tender Privileges for Credit Money
  • Business Cycles
  • Moral Hazard, Cartelization, and Central Banks
  • Monopoly Legal Tender
  • The Ethics of Legal Tender
  • Legalized Suspensions of Payments
  • The Social Function of Bankruptcy
  • The Economics of Legalized Suspensions
  • The Ethics of Legalized Suspensions
  • Paper Money
  • The Origins and Nature of Paper Money
  • Reverse Transubstantiations
  • The Limits of Paper Money
  • Moral Hazard and Public Debts
  • Moral Hazard, Hyperinflation, and Regulation
  • The Ethics of Paper Money
  • The Cultural and Spiritual Legacy of Fiat Inflation
  • Inflation Habits
  • Hyper-Centralized Government
  • Fiat Inflation and War
  • Inflation and Tyranny
  • Race to the Bottom in Monetary Organization
  • Business under Fiat Inflation
  • The Debt Yoke
  • Some Spiritual Casualties of Fiat Inflation
  • Suffocating the Flame

Part 3: Monetary Order and Monetary Systems

  • Monetary Order
  • The Natural Order of Money Production
  • Cartels of Credit-Money Producers
  • Fiat Monetary Systems in the Realm of the Nation-State
  • Toward National Paper-Money Producers: European Experiences
  • Toward National Paper-Money Producers: American Experiences
  • The Problem of the Foreign Exchanges
  • International Banking Systems, 1871–1971
  • The Classical Gold Standard
  • The Gold-Exchange Standard
  • The System of Bretton Woods
  • Appendix: IMF and World Bank after Bretton Woods
  • International Paper-Money Systems, 1971– ?
  • The Emergence of Paper-Money Standards
  • Paper-Money Merger: The Case of the Euro
  • The Dynamics of Multiple Paper-Money Standards
  • Dead End of the World Paper-Money Union

Conclusion

  • Two Concepts of Capitalism
  • Monetary Reform
  • References
  • Index of Names
  • Index of Subjects

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The Tragedy of the Euro

December 31, 2011 Leave a comment

Philipp Bagus

Philipp Bagus, professor of economics at Universidad Rey Juan Carlos in Madrid, is a young scholar with a large influence, having forecast all the problems with the Euro and having persuaded many economists on the Continent that this currency is no better than any fiat currency. In some ways it is much worse because it has cartelized the management of European monetary regimes and created a terrible moral hazard.

We often hear analysis of the workings of the Fed. Discussion of the European Central Bank is more rare. Bagus compares the two institutions to show a fundamental difference. Member states of the ECB can run deficits and expect them to be financed by the ECB. This is not true with the Fed. So Europe has a tragedy of the commons at work with its monetary policy that sets up very dangerous incentives for member states. For this reason, the system is unworkable.

With this book, Professor Bagus brings his scholarship to English readers, explaining the background to the idea of European unity and its heritage of sound money. He explains that the Euro is not what the older classical liberals had hoped for but instead is a politically managed money that is destined for failure.

He writes with a keen sense for economic analytics and empirical detail, offering one of the most accessible and yet rigorous accounts of the emergence of the Euro. He predicts its downfall due to political pressures, bad banking practices, and exploding public-sector liabilities.

The analogies with the dollar are indeed close, but with welfare states at a more advanced stage, it will be a race to see which paper currency will crumble first.

Professor Bagus brings theoretical power to investigating one of the most important topics in economics today. His arguments and evidence convinced even Jesus Huerta de Soto to withdraw support for the Euro. For this reason, de Soto has written the introduction to this important work.

Perhaps I lead a sheltered life, but I found The Tragedy of the Euro to read like a great adventure novel. Here we have heroes (mostly post war German bankers, resisting inflation) and villains (mostly post war Frenchmen, allied with post war German politicians, determined to keep the common German citizen paying and paying). The villains believe, falsely, that they can secure for all time their special privileges over the German citizenry—which is not the same as the German elite, who often collude with the French elite for their own privileges. But this is their great error, which Professor Bagus explains so clearly. They want to ignore the laws of economics by building coercive pan-European bureaucracies to enforce their will. But this will not work. How long it will last is the question. The European financial crisis proceeds from day to day. This wonderful book will help everyone understand what is really happening and, we hope, provide a lesson for others. ~ Patrick Barron

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Towards a Theoretical Framework for British and International Economic History: Early Modern England

December 31, 2011 Leave a comment

Sudha R. Shenoy

Mises Institute 2010

Sudha Shenoy (1943-2008) was a legendary figure in the history of the Austrian School. Her father, B.R. Shenoy, was practically the only libertarian in India in his day. His daughter, Sudha, was a student of Hayek and Rothbard and went on to teach in Australia, with a specialization in development economics. She inspired many students with her teaching and her eloquent defense of economic liberty.

This mighty treatise, her dissertation now in book format, is probably the first full Austrian treatment of development economics, with a model carved out of the writings of Menger, Mises, and Hayek. She traces an economy’s progress from consumption, to distribution, to production, and demonstrates the essential preconditions that must be met for an economy to move through this trajectory.

In the second part, she reconstructs the history of England in the 200 years before the Industrial Revolution. She shows that the Industrial Revolution was not something that just happened upon England but, rather, was the result of a long build-up of capital and a long expansion of the division of labor.

In many ways, this book earns for Shenoy a high place in the history of the Austrian School. Even though it is only now being published after her death, it is a book for which she will be long remembered.

“Professor Shenoy was brilliant, remarkably learned in the social sciences, especially economics and economic and legal history, always civil and considerate in discussions and debates,” writes Ralph Raico, “yet a feisty fighter for her libertarian ideas.”

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Menuju Titik Nadir Perlindungan HAM

December 27, 2011 Leave a comment
Categories: Social

Migrasi Tenaga Kerja Dari Indonesia

December 27, 2011 Leave a comment
Categories: Social

MENUJU UPAH LAYAK: Survei Buruh Tekstil dan Garmen di Indonesia

December 27, 2011 Leave a comment
Categories: Uncategorized

Diskriminatif dan Eksploitatif

December 27, 2011 Leave a comment
Categories: Social