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« From Correction to Crisis | Main | Mises and Rothbard on Value-Free Economics »


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What is needed is to relearn what the older liberals of the 19th century had learned from their own experiences from inflationary paper money – that only removing the hand of the government from the monetary printing press can permanently end cycles of booms and busts.

This requires a return to a commodity-backed currency such as gold. It was explained with great clarity by John Stuart Mill, in his "Principles of Political Economy" (1871):

"No doctrine in political economy rests on more obvious grounds than the mischief of a paper currency not maintained at the same value with a metallic [money], either by convertibility, or by some principle of limitation equivalent to it. . . . All variations in the value of the circulating medium are mischievous: they disturb existing contracts and expectations, and the liability to such changes renders every pecuniary engagement of long date precarious. . . .

"Great as this evil would be if it depended on accident [gold production], it is still greater when placed at the arbitrary disposal of an individual or body of individuals who may have any kind or degree of interest to be served by an artificial fluctuation in fortunes; and who have at any rate a strong interest in issuing as much [inconvertible paper money] as possible, each issue being itself a source of profit.

"Not to add, that the issuers have, and in the case of government paper, always have, a direct interest in lowering the value of the currency, because it is the medium in which their own debts are computed. . . . Such power, in whosoever vested, is an intolerable evil."

We can only hope that this greater wisdom will eventually supersede the legacies of Big Government and monetary mismanagement that continue to linger eighty years after Keynes labelled gold a "barbarour relic" in his "Tract on Monetary Reform."

Richard Ebeling

Thanks Richard for the Mill's quote. Do you have any idea as to what in practice could be done to influence the thinking of policy makers and the population on tnis issue? Start a "Return to Gold" lobby group, perhaps?

The gold that is missing from the global marketplace is the golden rule. Capitalism is best governed by people who understand and uphold western ethics in business. That puts the interest of the stock holder above the interests of CEO socialist political preferences and self interest.

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