Sound money advocates are often hit with the charge of being ‘doom and gloomers.’ Yes, we do warn that unsound monetary policies enable unsustainable fiscal commitments, which will lead eventually to a currency crisis.
Sound money advocates are also often portrayed as party-poopers. Yes, we do seek to take away the bottomless punch bowl of easy money and replace it with something more solid. However, we are not pessimists or killjoys by nature.
To the contrary, we are quite optimistic about the ability of genuinely free markets to generate ever greater levels of prosperity for ever greater numbers of people. To advocate hard money, as in a gold and/or silver standard, is simply to be a hard-nosed realist about the dangers of giving governments the power to issue unbacked fiat currencies.
The case for hard money is based on the proposition that real wealth is generated by productive activity in the real economy. When governments and central banks assume the power to set interest rates artificially low, to expand the supply of money and credit at will, and to bail out ‘too big to fail’ financial institutions, they are engaging in massive wealth transfers. They are stealing purchasing power away from productive workers in the real economy and transferring it to bankers and bureaucrats.
As the late economist and Nobel Laureate Friedrich A. Hayek noted, ‘With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.’
This post was published at David Stockmans Contra Corner on April 21, 2016.
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