Economics: A Clandestine Religion Masquarading as a Science
Since 1996 the American Monetary Institute’s mission has been to independently study monetary history, theory and reform; emphasis on independent. For whatever reason, the universities have not made substantial progress in this area. They are unable to challenge the banking establishment.
Monetary systems are concerned with the larger questions of economic justice – not just how the money system is operating but with how it could and should be operating. These are called macro-economic questions and better economists are realizing that their economics is devoid of good ideas – theories, they call them – on the really big questions.
There is also growing awareness that we are all being targeted in economic warfare – all of us – your children and parents, friends, neighbors; since we can’t escape this struggle we’d better understand, and learn how to win.
This war is real and becomes more obvious in different ways every day. Not about the latest bush family misadventure in Iraq. I am referring to the deeper struggle over the direction of mankind that is more religious in nature. Not the fights with the religious right wing now threatening America’s political process. Those are real problems, but now we focus on a more fundamental battle with the new clandestine religion known as “economics”!
A year ago, Zbignieuw Brezinski, Carter’s National Security Advisor said the attempt to establish a new world order was doomed to failure because there was no universal religious underpinning to it as existed in the old world order – the Roman empire, with its emperor worship and later its Christianity.
Brezinski was probably right that it would fail, but overlooked that this new order does have a universal religious belief system called Economics. It has its own god, the Market; its own priesthood of Economists; its temples, Banks, until recently clothed in ancient temple architecture.
An example of the religious nature of economics is its promotion of market as god. We are warned:
Don’t try to legislate on the market; it is stronger than our puny laws. It is omnipotent
Don’ try to regulate outcomes, the market with input from all of its participants always knows best. It is omniscient
Do the right things and the market will reward you, the wrong things and you’ll be punished. It is beneficent
Omnipotence, omniscience and beneficence are the attributes of a god, not a mere device for buying, selling and exchanging. – A strange deity that abhors morality and where even the most atheistic libertarians have been suckered into believing in the market’s “invisible hands” like multiple Holy Ghosts.
Economics used to be based in morality. From 1100 to 1500, philosophy, religion and economics were combined in one group – the scholastics – church philosophers including Albert the great and Thomas Aquinas who defined morality in commercial dealings. They focused on prices and on usury, which was not merely taking interest. It was always permitted to take interest in certain ways. The main condition on taking interest was that there be real enterprise risk to the lender. They were really investors.
The scholastics distinguished between earning interest and the detested usury: usury being a misuse of the money system, similar to the Islamic concept of riba.
Their mentor from across the centuries was Aristotle not the bible and they drew conclusions based on his authority and on their observations; but mostly on logic and deduction, which is appropriate for moral questions.
Aristotle, the bulwark against usury wrote:
“The most hated sort [of wealth getting], and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest.” (1258b, politics) Those promoting usury found it necessary to attack Aristotle.
Francis Bacon attacked: “Aristotle so confident and dogmatical…barren of the production of works for the benefit of the life of man.” (works, p.850) Jeremy Bentham’s 1787 “Defense of Usury” attacked: ” ‘to trace an error to its fountain head is to refute it’ …. if our ancestors have been all along under a mistake… How came the dominion of authority over our minds?” One would naturally think he is going to cite the strong Old Testament admonitions against usury – particularly since his father was Jewish. But he ignores the biblical prohibitions completely; he is after Aristotle: “Aristotle: that celebrated heathen…had never been able to discover in any one piece of money any organs for generating any other such piece. Emboldened by so strong a body of negative proof he ventured… an universal proposition, that all money is in nature barren…[he did not consider] though a Daric [coin] would not beget another Daric…yet for a Daric which a man borrowed he might get a ram or an ewe…and that the ewes would probably not be barren.” That’s the same erroneous justification Calvin had used but the scholastics had shown it was the “sheep” not the coins that create more sheep, and the farmland not the coins that grew crops.
Bentham foisted the present misdefinition of usury on us, as taking more interest than normal. He promoted the idea of Utilitarianism which I summarize as forget morality – utility is what counts!
Modern economists kept the scholastics’ theoretical method using deductive logic but they ditched morality in favor of Bentham’s utilitarianism. Despite the fact that the theoretical method works better on moral questions. Despite the fact that morality – or fairness – is a most useful element in any good society. Today economics primary effect is to justify forms of usury and to empower those misusing the world’s money systems.
This continues despite that over a century ago the great reformer Henry George destroyed utilitarianism in one sentence, writing:
“[economics]…a science which…seems but to justify injustice, to canonize selfishness by throwing around it the halo of utility…” (Study of political economy lecture p. 6) George noted the purposeful corruption of economics by: “…a powerful class whose incomes could not fail to be endangered by a recognition…that what makes them…wealthy is…only robbery, must from the beginning…have beset (economics) primary step…” (Science of Political Economy, 140; also see xxxviii; xxxix; 134, and 138) Yet everywhere we look today, we see that our world is ruled by this powerful new clandestine religion! How did it happen?
It happened through control of the monetary system, society’s greatest dispenser of justice or injustice.
A good money system functions fairly, helping create values for life. A bad or unjust one obstructs the creation of values; gives special privileges to some and disadvantage to others, causes unfair concentrations of wealth and power; leads to social strife, warfare and thousands of unforeseen bad consequences – physical and spiritual.
Power-hungry elements from ancient times to the present have dominated through the money power. Their main weapon has been the manipulation of language and thought, where definitions serve as heavy artillery. Those benefiting from the corruption see that “professionals” are financed to promote their viewpoint with economic “theories.”
By misdefining the nature of money, corrupt interests seized control of the money power, dominating society and deforming mankind in the process. (See the ‘Lost Science of Money’)
Economics has never properly defined money. They are still arguing whether money is a concrete power in a commodity like gold, or an interest bearing credit issued by private banks, or as we conclude from historical cases, money is an abstract social power – an institution of the law, having value because government receives it in taxes.
Economists use poor methodology – an over reliance on theoretical reasoning. We have two basic methods of gaining knowledge – through reason and through experience. Alexander Del Mar the great monetary historian noted:
“As a rule economists…don’t take the trouble to study the history of money; it is much easier to imagine it and to deduce the principles of this imaginary knowledge.”
This failure becomes staggering when combined with their reluctance to accurately define the terms of their theories. This is not new – in 1827 Malthus wrote a book to complain about poor definitions in political economy, noting: “it is quite astonishing that political economists of reputation should be inclined to resort to any kind of illustration however clumsy and inapplicable, rather than refer to money.”
But when Malthus presented 60 “better” definitions; a definition of money is conspicuously absent!
Fortunately, Aristotle outlined a science of money in 330BC still valid today:
“all goods must therefore be measured by some one thing…now this unit is in truth, demand, which holds all things together…but money has become by convention a sort of representative of demand; and this is why it has the name nomisma – because it exists not by nature, but by law or binding custom [which in Greek is nomos] and it is in our power to change it and make it useless.”
Thus Aristotle identified money as an abstract legal power – a social invention. Its essence is not tangible wealth, but a power to obtain wealth – a crucial distinction. Plato agreed and advocated such fiat money for his Republic. We find these key principles used in both Greek and Roman systems.
Aristotle explained that money is not a commodity and in clear demonstration of that principle, the Spartans purposely destroyed the commodity value of their iron money, dipping it in vinegar while hot. He explained that society can legally create the money and can also make it useless. In clear demonstration Roman law based her money on copper. Isolating her from the gold and silver systems of the East and hence disenfranchising much of the East’s power and giving Rome the chance to control her own destiny. Roman law set the value of their fiat copper money, like the Aes Grave, which started at 12oz of bronze, with the legal value of 30oz of bronze. Then they weighed 6oz and 2oz and 1oz, still legally worth 30oz of bronze. This legal basis of money also enabled Rome to decry some money as useless during the Punic wars, demonetizing the copper money held by towns wavering in allegiance.
Remember in our own history, we had to erect systems completely independent from old world power – the Continental Currency and the Greenbacks. One gave us a nation, the other allowed us to keep it.
Right from Aristotle’s time, we find evidence of the battle to control the money system. His term for money, nomisma, is seldom found in early Greek texts. This concept of money was probably suppressed in an ongoing struggle between oligarchic forces – a kind of “old boy network” relying on personal relations, arrayed against public money, and the developing, more democratic, public sphere of the Greek polis, which introduced and controlled the nomisma payment mechanism. (Lost Science of Money, Ch.1)
This private versus public struggle over the monetary power is the main political divide of the struggle to this day. In Greece it was the Old Oligarchy versus the Polis. In Rome it became the Plutocracy versus Rome. After the Punic wars weakened Rome’s money system, she regressed to silver then gold, and then civil war contenders privately issued coinage. Wealth concentrated and the general population regressed into slavery. The breakdown of law and money worked the one upon the other for centuries in a downward spiral of societal decay. Even crude commodity money came close to vanishing in the dark ages in the West.
Charlemagne attempted to reinstate commodity money in the West, working slaves to the death in silver mines to produce his pennies. The system faltered with his death and the unavailability of both slaves and mines.
In England the struggle became the goldsmiths versus the monarchy representing society. Later it was the bank of England versus Society. Until then England’s money power was in the monarch’s hands. But from that point, Bank of England credits would be substituted in place of public money. This promoted confusion between credit and money, to this day. But they are different things. Credit depends on the creditor remaining solvent. Real money does not promise to pay something else. Money is on a higher order than credit.
Those behind the bank of England obscured the real source of the bank’s power – its legal privilege – its notes were accepted in payments to the government. Recovering the science of money, for the private profit of a small group produced harmful results: 120 years of continuous warfare spawned an unpayable national debt leading to excessive taxation leading to horrors like the Irish potato famine. Before then, when a nation’s money system was used for taxation, the revenue generally aided the society. But, the Bank of England concentrated society’s resources in the wrong hands, crippling the possibility for government to function properly, leading to a growing contempt of government.
Adam smith vs. Aristotle
For public consumption, Adam Smith helped erect a mythology of money obscuring the science of money. The “Father of Economics” himself promoted confusion by attacking the legal concept of money in his definition:
“By the money price of goods it is to be observed, I understand always, the quantity of pure gold or silver for which they are sold, without any regard to denomination of the coin.”
Smith’s primitive misdefinition of money as a commodity insinuated a mythology of money into economics in 1776, from which it has not recovered. He did this despite the earlier work of Berkeley, Locke and Franklin, from 1729 to 1735, in his library which more accurately identified money’s abstract nature.
The Bank of England had advanced to abstract money; not in theory, but in practice. Smith regressed in theory from coinage to metal by weight, where the concept of money had been before the Romans arrived in England. His theory applied to their practice caused confusion and created mystery to this day. Interestingly, Marx did little better.
A priesthood of economists was recruited, trained and rewarded to promote the myths; ignoring the evidence to the contrary; disregarding its bad effects on the people. Thus the great 19th century English reformer Thomas Michael Sadler observed: “economists are the pests of society and the persecutors of the poor.”
Today it is still the bankers versus the society. In philosophical shorthand it can be expressed as Adam Smith, or present day economics versus Aristotle. At base, the battle remains private money vs. Public money. The outcome determines whether the money system operates to serve the few in control, or the whole society.
The outcome of the struggle is determined by society’s concept of money – its definition of money.
Mankind can live under various forms of government from dictatorship to republic, but the best systems are those in harmony with human nature. Likewise many things can be made into money, but the best will be the ones in harmony with the nature of money.
Remember: do not confuse money with tangible wealth. Yes, commodities can be improperly monetized by law. The result will make the money system hostage to the commodities situation; hostage to the people, companies, countries that control the commodity. Ultimately it removes the monetary power from society and places it into the hands of the wealthy.
And do not confuse money with credit – either private or public credit. Yes private credits can be improperly monetized by law. But that gives great privilege to those whose credits have been monetized, to the detriment of the whole society. The money system then becomes an engine of injustice – as it is now.
Accountants have confused this by calling different things by the same name. When money is placed into an account, it can be recorded as a credit there, but that does not make the nature of money a credit. Monetizing private credit removes the monetary power from society and places it into the hands of the bankers. I ask you to make an effort to separate these concepts in your mind, and see where it leads you.
Today there is an effort to completely remove the concept of money from our language and replace it with a concept of credit.
[Any questions up to now?]
Our American monetary experience contains many of the best case studies for understanding money. Two features set American history apart:
First, we have always been a great monetary laboratory. Almost every conceivable monetary solution has been tried at some time here.
Second, America has been a nation of paper money. Our development was inseparable from it right from colonial days. Without it there would not be a United States.
English and Dutch laws forbade sending coinage to the colonies, placing them in continual monetary distress. The intent was to extract raw materials, not for the colonists to trade with each other. Around the 1640s more people were going back to Europe than were coming here. The colonies had to devise monetary innovations.
In the country pay period (1632 – 92) various commodities were monetized by law at specified prices. But everyone wanted to pay with the least desirable commodity, in the worst condition. Tobacco failed.
1652 – Hull’s Mint in Massachusetts stamped the gold and silver “tree coinage.” But it quickly flowed to England and was melted down.
Private land banks were set up from time to time, but were shunned by the colonists, who considered money a prerogative of government, as it was in England until 1694.
Then in 1690 Massachusetts embarked on a radical course and issued paper bills of credit, spending them into circulation. Rather than a promise to pay anything, they were a promise to receive them back for all payments to the commonwealth. The colony thrived. Other colonies copied them and infrastructure arose.
Some long lost principles of money began to resurface:
Money need not have intrinsic value; its nature is more of an abstract legal power than a commodity.
They found that accepting the government paper back in taxes was the key feature needed to give them circulating value.
They learned that the quantity of money in circulation had to be regulated to maintain its value.
The colonists observed that the paper money helped to build real infrastructure.
Their governments did not issue more money than their legislatures authorized.
In 1723 Pennsylvania adopted a similar system, loaning the bills into circulation, charging interest on them and using it to pay colonial expenses. Ben Franklin wrote:
“Experience, more prevalent than all the logic in the world, has fully convinced us all, that paper money has been, and is now of the greatest advantages to the country.”
In Franklins’ words, you see the tension even then, between theoretical argument and practical experience, a continuing battleground in economics today.
Unfortunately the colonial monetary experience has been miscast as irresponsible inflationary paper money. This was originally the result of Boston’s Dr. William Douglas’ inaccurate writings. This error was corrected by Alexander Del Mar in 1900, but was completely ignored. It was authoritatively cleared up again by Professor Leslie Brock in 1976 and again ignored. Many economists and especially the libertarians still have not got the message that colonial government paper money was crucial in building the colonies.
In 1764, England’s lords of trade and plantations blocked all colonial legal tender and that was the underlying cause of the American Revolution, not some tax on tea.
The continental currency became the lifeblood of the revolution. $200 million were authorized and $200 million issued. But the British counterfeited billions. Nevertheless the continentals carried us over 5½ years of revolution to within 6 months of final victory. Tom Paine, father of the American Revolution wrote:
“Every stone in the bridge that has carried us over seems to have a claim upon our esteem. But this was a corner stone, and its usefulness cannot be forgotten.”
How private central banking started in America in three steps
First step: our constitutional convention, considered two grand themes on humanity: first whether mankind could be self-governing – known as the American Experiment. It is still in doubt today because the convention mishandled the other grand theme over the nature money.
They met from May to September 1787 but the money subject did not come up until August 16th. Jefferson and Paine were not there. Franklin was too old to speak.
A curious book on money appeared, written anonymously by Calvinist clergyman John Witherspoon. The book attacked government money and promoted Adam Smith’s primitive view that only gold and silver are money. It stonewalled our hard won colonial monetary experience.
The power for government to create money, long considered a necessary part of sovereignty was already in the articles of confederation, but the federalists who supposedly called the convention in order to strengthen the national government, fought to exclude this crucial power from the new government, arguing that it could not be trusted with it! Some of them intended to get hold of the power privately as had been done in England.
The supreme importance of understanding the nature of money now becomes evident:
If money obtains its value from “intrinsic” qualities, it could be viewed more as a creature of merchants and bankers than of governments.
If money’s essence is an abstract social institution obtaining value through law, then it is a creature of government and the constitution had better deal with it adequately. Describing how a uniform currency is to be provided, controlled and kept reasonably stable, in a just manner. The Constitutional Convention faltered on this crucial question.
The delegates accepted Adam Smith’s primitive concept of money and didn’t firmly place the money power into government’s hands, leaving it ambiguous.
But the money power would still exist. What I am suggesting is that human affairs require government to have four branches, not three; the fourth branch to administer the money power. You can’t expect the legislative, executive or judiciary to fully understand the money area.
The constitution left the money power up for grabs. Alexander Hamilton wasted no time in grabbing.
The second step: the bond theft. The constitution went into effect in late 1789. Hamilton’s first move as Secretary of the Treasury, was to assume $15 million of the state debts…an extremely unpopular act. Why?
The worthless debt was held by the revolutionary soldiers, farmers, manufacturers and merchants who furnished its supplies. As congress secretly passed the bill behind closed doors, the country was overrun by speculators, buying up the certificates for pennies on the dollar. Madison tried to have the law distinguish between speculators and original holders but was voted down.
The Third step: Hamilton and associates, having kept the monetary power out of government, moved to assume it themselves. Arguing that the bank of North America was only a State Bank, Hamilton suggested it come forward if it wanted to alter itself for the national purpose. It was the only bank in the U.S. being formed during the revolution on Tom Paine’s initiative. Curiously, the bank of North America took no steps toward this obvious increase in profit and power.
Hamilton’s Federalists quickly put through legislation chartering the first bank of the United States, as a privately owned central bank on the bank of England model. The bank would be issuing paper notes not really backed by metal, but pretending to be redeemable in coinage, on the one condition that not a lot of people asked for redemption! They never had much coinage.
Thus the real question was whether it would be private banks or the government that would issue paper money. Will the immense power and profit of issuing currency go to the benefit of the whole nation, or to the private bankers? That’s always been the real monetary question in America.
Gold and silver served as a smoke-screen. What the bankers counted on were the legal considerations of the money. They knew that all that was needed to give their paper notes value was for the government to accept them in payment for taxes; that and not issuing too excessive a quantity. Under those conditions, the paper notes they printed out of thin air, would be a claim on any wealth existing in the society.
And we see why the Bank of North America was not put forward for this purpose: the U.S. government had owned 60% of it. Thomas willing resigned the presidency.
Of the Bank of North America, to become president of the First Bank of the U.S. the government would only own 20% of the new bank.
Just where did the money for first bank of the U.S come from? Remember the bond theft?
The $10 million subscription for the banks’ shares, was oversubscribed within 2 hours. Only 1/10 of it was ever paid in gold. The rest was accepted in the form of bonds – the government bonds that Hamilton had turned from pennies on the dollar to full value. The money for the private bank actually came from the American people.
Even if the bank had “faithfully” stuck to gold and silver, the nation’s monetary power would still have been alienated to the east – to the European holders of those commodities. Same people we’d just fought the revolution against!
Thanks to Jefferson’s efforts, the bank was liquidated in 1811. Three quarters of it was found to be owned by English and Dutch.
WE PROPOSE THE FOLLOWING REFORMS:
Nationalize the Federal Reserve System. Reconstitute it in the US Treasury, to evolve over time into a fourth branch of government. Only the government would create money. What would such government money look like? Well you have some in your pockets right now. Coin Vs Paper Money.
Remove the privilege which banks presently have to create money. This is done through an elegant process which automatically turns all the previously issued bank credit into real American money. 100% reserves are reached not by calling in loans but by increasing reserves. UNDERSTAND this is very different from simply demanding 100% reserves, which would wreck the economy.
Institute programs for automatic, constitutionally determined government money creation, starting with the $1.5 trillion which the American Society of Civil Engineers need to bring our infrastructure up to acceptable levels. From there we go forward carefully determining how to best run the monetary system, and thoughtfully use Aristotle’s method, we learn by doing.
THE ATTACK ON GOVERNMENT/SOCIETY/HUMANITY
Interestingly we found that the modern 250 year attack on government, on society’s one organizational form capable of standing up against the plutocracy began with Adam Smith’s vicious attack on England originated largely in Adam Smith’s efforts to keep the monetary power within the Bank of England. Smith glorified the Bank and obscured its private ownership writing that it operated as a “great engine of state.” He attacked English government issued money.
“A revenue of this kind has even by some people been thought not below the attention of so great an Empire as that of Great Britain…But whether such a Government as that of England – which, whatever may be its virtues, has never been famous for good economy; which, in time of peace, has generally conducted itself with the slothful and negligent profusion that is perhaps natural to monarchies; and in time of war has constantly acted with all the thoughtless extravagance that democracies are apt to fall into – could be safely trusted with the management of such a project, must at least be a good deal more doubtful.” (Adam Smith, Wealth of Nations; p.358 – in the Great Books collection, vol. 39)
Smith’s lying attacks on the English Government mark the modern beginning of a relentless attack on society – the belittling and smearing of its organizational form – government: the single organization potentially able to block plutocracy’s encroachments. Smith also inadvertently illuminates the major purpose of this attack: – to keep the money power in private hands.
Every day in America we see examples of how this disease has reached epidemic proportions. It has spread from the Austrian economists, and Hayek and Ayn Rand to their intellectual heir Rush Limbaugh and his propaganda radio. Its not entertainment. It has long gone beyond political error and propaganda into treason.
Furthermore we find that the fraudulent monetary attack on government is also at the base of sources of the freedom diversion as practiced by the Libertarians. An example is how Robert Nozick launches his State, Anarchy, Utopia book, one of the Libertarians bibles, on Menger’s false notion of the Origin of Money right on page 18. Thus AMI Research Paper # 1 is A Refutation of Menger’s Theory of The Origin of Money.
The attack on government is bad enough, but it becomes really obnoxious when combined with the attack on humanity. Henry George eloquently described Smith’s Selfishness error:
“Dr. Buckles understanding of Political Economy was that it eliminated every other feeling than selfishness.” Where Smith ‘generalizes the laws of wealth, not from the phenomena of wealth, nor from statistical statements, but from the phenomena of selfishness; thus making a deductive application of one set of mental principles to the whole set of economical facts. He everywhere assumes that the great moving power of all men, all interests and all classes, in all ages and in all countries is selfishness…indeed Adam Smith will hardly admit common humanity into his theory of motives.’” (SPE, 89, 90)
Consider the negative impact on humanity of Smith’s selfishness assumption: If Man is defined in such a base manner and systems of laws with their rewards and punishments are enforced along those lines, then over time, they will tend to create a form of humanity in “harmony” with their false concept of an economic mankind.
This de-evolutionary process, encouraging a lower form of humanity has been ongoing especially in the English speaking world for well over 2 centuries. The work of great English novelists such as Charles Dickens may have slowed it, but didn’t stop it. Henry George saw exactly where it would lead:
“Nor can we abstract from man all but selfish qualities in order to make as the object of our thought…what has been called ‘economic man’, without getting what is really a monster, not a man.“ (SPE, 99)
George substituted a different concept for Smith’s destructive error:
“The fundamental principle of human action … is that men seek to gratify their desires with the least exertion.”(P&P, 203)
Then taking a giant step, he poetically described the essence of humanity-
The Force of Forces:
“It is not selfishness that enriches the annals of every people with heroes and saints… that on every page of the world’s history bursts out in sudden splendor…that turned (Buddhas’ back to his royal home or bade (Joan of Arc) lift the sword from the altar; that held the Three Hundred (Spartans) in the Pass of Thermopylae, or gathered into Winkelreid’s bosom the sheaf of spears…Call it religion, patriotism, or the love of God – give it what name you will; there is yet a force which overcomes and drives out selfishness; a force which is the electricity of the moral universe; a force beside which all others are weak…I call this force destiny toward human nature – a higher, nobler nature than we generally manifest…And this force of forces – that now goes to waste or assumes perverted forms – we may use for the strengthening, and building up, and ennobling of society, if we but will…”(P&P, 463)
[We have a lot more to talk about in the question period]
COMPARING THE RESULTS OF PRIVATE VERSUS PUBLIC CONTROL
A Science of money shows that issuing money belongs in the hands of the nation to be used for the common good. A Plutocracy counters with a mythology – the slur that government – the organized expression of our society can’t handle it. Centuries of propaganda raise the fear of inflation and abuse under government money, even though the record shows much greater monetary abuse by private systems. In this campaign they still advertise the 700 year old cases of monarchs “debasing” their coinage, but NEVER give the context that this period occurred after the collapse of European monetary order with the fall of Byzantium in 1204. Not mentioned is that much of the Kingly alterations were a necessary form of taxation, or that REPUBLICS fared much better than monarchies or that private bankers caused greater problems.
As an island community, English Kings did pretty well on money:
In 1346 Parliament tried to gain control over money but was refused. In 1414 Parliament tried to get veto power on money but was again refused. Breckenridge thought parliament failed because the English King’s long standing monetary prerogative had been used responsibly. Shaw’s History of Currency, written in 1896, could identify only one case of monarchical coinage irresponsibility:
“This instance of debasement (1545-46 under Henry VIII) is the only one on record in English currency history,” he wrote, and it amounted to a grand debasement of about 15%! WHAT’S THE BIG DEAL? If your mental impression of that case is a lot worse, it shows how effective the propaganda is.
The reigning error on government and money has taken billions of dollars to create. Its epitomized in The distinguished conservative journalist Henry Hazlitt’s introduction to Andrew Dickson White’s essay, Fiat Money Inflation in France, a classic attack on government:
“(The) world has failed to learn the lesson of the Assignats. Perhaps the study of the other great inflations – of John Law’s experiments with credit in France …; of the history of our own Continental currency …; of the Greenbacks of our Civil War; of the great German inflation that culminated in 1923 – would help to underscore and impress that lesson. Must we, from this appalling and repeated record, draw once more the despairing conclusion that the only thing man learns from history is that man learns nothing from history?”
Hazlitt really believed history backed up his viewpoint, but it does not, when one bothers to look.
THE CONTINENTAL CURRENCY of the American Revolution. $200 million were authorized and $200 million issued. They functioned well until General Howe made New York City the center for British counterfeiting. The Brits counterfeited billions of our Continentals. If you ever find out how many, please let us know for the record! Newspaper ads openly offered the forgeries; yet General Clinton complained:
“The experiments suggested by your Lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried; but still the currency…has not failed.”
The Continentals carried us over 5½ years of Revolution to within 6 months of final victory. Tom Paine wrote:
“Every stone in the Bridge, that has carried us over, seems to have a claim upon our esteem. But this was a corner stone …to suppose as some did, that, at the end of the war, it was to grow into gold or silver… was to suppose that we were to get 200 millions of dollars by going to war, instead of paying the cost of carrying it on.”
The Continental Currency gave us a nation.
France’s Money System was brought down by John Law a fugitive Scottish gambler.
But Law’s operations were structured as private companies despite his recommending governmental structures. After an initial widely hailed success in 1720, his main focus became raising the price of the private company shares. Law’s system was thus largely a failure of private money speculation. The more obvious lesson is that it is not a good idea to turn your nation’s money system over to a professional gambler wanted for murder in his home country! DUH.
France’s later Assignats from 1789 were government issued, but in a society ruined by aristocratic extravagance and revolution. In the money battle White’s short book Fiat Money Inflation in France is a major propaganda weapon against government money and is direct evidence of how the battle is fought. But the book was written in 1876 during the Greenback battles, 100 years after the Assignats, to block the Greenbacks. Stephen Dillaye writes us that White, whose inherited fortune arose from banking, neglected to mention that Britain counterfeited far more Assignats than the French ever created.
This was documented in English court cases where the counterfeiters sued each other! Whites book has somehow been continuously kept in print by conservative foundations, the latest being the Cato Institute; Dillaye’s important essay, out of print for 125 years is quite rare but we managed to find one, and will reprint it.
Does Germany’s 1923 Hyperinflation condemn government money?
NO! – In fact that occurred under a privately owned and privately controlled Reichsbank. Furthermore the hyperinflation began the very month that all German governmental influence on the bank was removed and placed in private hands at the insistence of the occupation forces. Furthermore Hjalmar Schacht tells us in his 1967 book The Magic of Money, that this private Reichsbank actually facilitated the hyperinflation by financing the speculators short sales of the mark. He didn’t mention these things in his 1928 book on the subject. Do you see the pattern that emerges from these monetary fiascos?
And the American Greenbacks?
Again this case does not stand scrutiny. $450 million were authorized and $450 million were printed. Counterfeiters could not duplicate the Greenbacks. Every Greenback was eventually exchangeable one for one with gold coin. The Greenbacks were our best money system to date.
But Greenbacks were not promises to pay money later – they were the money. Since they were not borrowed, they did not give rise to interest payments and did not add to any national debt. The U.S. Treasury printed them and spent them into circulation. Neither were they public credit! Knowledgeable reformers – Butler – apparently aware of this conceptual problem referred to them as certificates of value – MONEY is the better term!
And what if instead of being spent on destruction, they went into building infrastructure and canals and roads? Spending such money on infrastructure need not be inflationary.
THE GREAT LESSON OF THE GREENBACKS is that in times of crisis - and other times too - our nation has Power to do what is financially necessary. We do not have to beg or borrow from the wealthy and create an astronomical national debt; or tax the middle class into oblivion, or cancel necessary programs. We can use the nations’ sovereign money power far more than we presently have been allowed to realize.
Summarizing Four Destructive Thrusts of Adam Smith/Economics:
Beware of the Money “error”, the Attack on Society/Government; the Smithian Free Trade Trap; and Smith’s Selfishness Assumption.
THE FREEDOM DIVERSION
In addition to Smith’s monetary error and his attack on government – an attack on society really – there is what’s been referred to as “the Smithian Free Trade Trap.” To understand that trickery as it relates to international trade, now Globalization, you simply must read Frederich List’s National System of Political Economy.
List showed that while England aggressively promoted Smith’s “free trade” ideas to other countries, she herself pursued a very different policy herself, which was to import raw materials and apply mechanical power to them in a production process. England was thus applying the principles of the industrial revolution, but tried to hide that fact from other nations.
The “Freedom Mantra” is now placed on all sorts of doubtful practices to cleanse their image and shield them from closer scrutiny. For example, the Iraq horror is officially termed operation “Enduring Freedom.” By labeling any activity, however criminal, with the word “free,” you are expected to kneel and worship it.
“Free Market” Worship shows itself to be more a religion to be obeyed, rather than an economic policy to be analyzed and critiqued.
The Free Banking Movement is one example. They set aside the universal condemnation of free banking as mere “anecdotal evidence” which they think they can whitewash with theories. But in my book I point out the six major errors of this so-called “free banking” movement (Ch.16), including their misidentifying the free banking period in America.
There is now a danger that the Austrians will try to channel local currency advocates toward a form of free banking. We have already been down that dead end road, and it would be a shame to divert otherwise healthy people into wasting energy there.
HENRY GEORGE offers a cure for the anti-government malaise, especially in Social Problems. Some brief excerpts:
On The Purpose of Government he wrote:
“As society develops… it becomes necessary for government,…that social organ by which alone the whole body of individuals can act, to take upon itself… certain functions which cannot safely be left to individuals…” (Soc Pr, 177)
On The Problem of Corruption:
“(Corruption) is no reason why we should shrink from political action, for it is only through political action that we can improve conditions which produce corruption.”(Standard, Jan 7 1888)
On The Abuse of Government:
“But beneath everything…there lies as the vital danger to the Republic, the increasing inequality in the distribution of wealth….but consider what is the cause? …the power of government has been deliberately and continuously prostituted to make the rich richer and the poor poorer.” (Standard, Sept 14, 1889)
A Forgotten Principle of Government:
(*)”…Any considerable interest having necessary relations with government is more corruptive of government when acting upon government from without then when assumed by government….” (Soc Pr, 185-6)
On Government Efficiency
“…In regard to public affairs we too easily accept the dictum that faithful and efficient work can be secured only by the hopes of…profit or the fear of…loss.”
There! Take two aspirin and re-read as needed. Its stupid to hate your own government/society. Its all that can stand between you and a strange form of corporate slavery – what I refer to as “Disney Fascism.” Time to grow up, fellow Americans, and help us fix this obnoxious dead end road some woefully foolish and sick people are misleading us on to. It will take a touch of moral courage, won’t it? Its not so easy to identify evil to its face, because we don’t really want to believe in the existence of such evil. Comedians understand that we’d rather joke about it. Some of the worst politicians are always trying to put us off with their little jokes. Yet we must develop that courage, now, before the inescapably disastrous results of anti-human economic policy are too far gone to avoid cataclysm. Because then mankind would become a joke, and that is not what God, or natures’ God intended for humanity. Courage Friends.