Tuesday, January 12, 2010

Smashing Myths and Restoring Sound Money

Lecture from the Mises Institute

Presented by Thomas E. Woods, Jr. at "Depression, Monetary Destruction, and the Path to Sound Money": the Mises Circle in Greenville, South Carolina, 3 October 2009. Sponsored by Atlantic Bullion and Coin, and Professional Planning of Easley, LLC

A selection from the lecture:

Problems with fiat money: It's hard to save for the future.
It's hard to save for the future under a fiat system where the government can create all this money. It was the case in the 19th century that to save for the future you could simply acquire precious metal coins. Just acquire them. Now of course you could invest them, that's true, but the point is you didn't have to. You didn't have to be a speculator. You didn't have to go into the stock market. You didn't have to say, "Where can I put my money so that it will at least hold onto its value?" You didn't have to worry about the because it held its value. When these metals served as money they held their value or increased their value over time and any graph you look at and any set of statistics you look at will bear this out.

Whereas today, only a fool would save for the future by piling up federal reserve notes. You would have to factor in a depreciation factor of at least three. So, in other words, it makes it harder to save because just to hold onto the purchasing power you have earned you have to become a speculator and most people, myself included, are not fit to be speculators. We don't belong in the stock market, we don't belong in some of these financial instruments. But we feel like we have to do that as a self-defense mechanism. And that was not the as under hard money.

On the same topic, a story from Theodore Dalrymple in City Journal: Inflation's Moral Hazard

A Selection:
Yet this was a crude way of looking at things, as my father’s fate should have instructed me. He sold his business in the sixties, at the end of the period of price stability that had reigned throughout his life, for what then seemed a large amount of money. He was a man who, for both temperamental and ideological reasons, held a deep contempt for financial speculation and wheeling and dealing, with the result that he did nothing as inflation inexorably eroded his savings. He grew poorer and poorer through the remaining 30 years of his life, and might have sunk into poverty had he not moved into a house that I owned. And this after reaching a level of wealth that, relatively speaking, was greater than I shall probably ever know.

For a while, I was angry about what seemed my father’s improvidence and lack of foresight. As the current financial crisis has conclusively demonstrated, however, not everyone is blessed with foresight, not even those whose livelihood depends primarily on the claim of possessing it. My father was born of a generation that saw money as a store of value, a far from dishonorable notion—and one that, when it reflected reality, helped give a lot of people peace of mind. And as I reach the age when inflation might cause me some embarrassment, even hardship, my sympathy with my father’s plight has grown. I am no longer young enough to fight another day, economically speaking: the destruction of my wealth by inflation would be final. In an aging population, more and more people are in my position, which helps explain why an age of prosperity can be an age of anxiety, even without a financial crisis.

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