the voluntary state
A New Political Concept
 
 

IF The Voluntary State gives us responsible officials they would, first of all, need to be honest.  That would permit us to adopt honest money  _  gold  money.


Gold-backed  money  takes  care  of  itself.  It  does  not  allow  men,  meeting  in  secret,  to manage the process of confiscating men’s savings, without their knowledge, through inflation.


Gold  is  the  oldest  money  in  the  world generally  recognized  as  money.  It  has  a  stature as  a  store  of  value  that  is  unrivaled.  Over  time  it  varies  less  than  anything  else  as  a   unit   of account.  It is an unquestioned    medium   of  exchange,  as  long  as  the  government  doesn’t outlaw  it  to  banish  the  gold  from  sight  to  conceal  its  own  inflation.


Its last reign as an international gold standard  was  from  1870  or  so  to  1914,  with the United States,  Great  Britain,  Germany  and  France participating. It was not a totally untroubled period.  Perfect solutions to money problems do not  exist,  because  the  money  problems  usually  originate  from  unresolved  political   problems.


But gold money is a workable solution because  it  prevents  inflation.


  There are many books on the history of gold, and      discussions on the variations of a   gold   standard  that  are  possible.  There  are variations  in  the  kinds  of  banking  that  should be  permitted  under  a  gold  standard,  including what  is  known  as  free  banking.


We really could spend a lifetime studying gold.   But  we  don’t  need  to  do  so.


If  a  currency  has  a  one  hundred  per  cent backing in gold, people know they can trust it.   That  is  what  people  want  to  know.


It  would  be  worth  a  great  deal  to  a society  to  know  that  the  bickering  and arguing  over  the  subject  is  at  an  end, and  that  going  all  the  way  to  a  one  hundred  per  cent  gold  backing  would  allow  people  to  get  on  with  their  lives  without  worrying  about  keeping   what   they   have   honestly   earned.


Income  on  money  invested  is  a  different subject,  and  we  need  to  understand  it.


As long as one keeps the capital he has saved as gold he would have security, leaving others who prefer income to take risks to get it.


Free  will  would  have  no  better  test  in  a political society than the opportunity to make this choice in life. The society would have permitted  one  to  use  his  time  and  attention  for  other  matters  beside  worrying  about  the  loss,  through  inflation,  of  what  he  has  saved.


What would be the drawbacks to the society,  if  any? 


Those keeping their money as gold could not    so    easily     make     it      available      for      investment  in producing   goods  for  the  benefit  of  the   market.  However,  once  the  currency  had  the confidence  of  the  people,  many  savers  would  put  it  in  a  safe  bank  paying  a  low  rate  of  interest,  and  the  bank  would  use  the  money  for  investment  purposes  _  at  some  risk,  of  course,  but  little  in  a  safe  bank.


It is true that prosperity would grow no faster than the savings that were put to use in  productive  tools.  


But  it  is  fundamental  to  understand  that savings  are  what  makes  a  capitalist  system capitalist.  Without accumulated capital from savings  to  pay  for  machine  tools  for  mass production, we cannot progress from hand labor and  scarcity  to  plenty   for     all.     So,  because,   in  the  long  run,  an  economy  can  grow  no  faster  than  the  rate  of  saving,   honest  money  would give  us  the  maximum  growth  possible  with   a  steady  economic  system  that  is  free  from booms and busts.  Faster or increased growth, due to inflation, is a false stimulus which will demand a compensating slowdown elsewhere,  or  everywhere  in  the  long  run.


There  are  economic  laws  which  operate whether we like it or not, and one of them teaches us  that  inflation  is  not  a  free  good.  It  always  carries  a  penalty  of  some  sort.


The  only  ones  deprived  in  a  society  that  has  a  one  hundred  per  cent  gold  standard  would be the politicians,  who would no longer  have  an  inflationary  slush  fund  to  help  in  their  re-election.


The economy would grow steadily, without overall damaging cycles and with only rolling readjustments  in  industries  which  had  poor management or became outdated by new methods  or  products.

The stock market would still have speculators,  but  people  could  safely  invest  in   it  over  longer periods.  The bond market would provide boring but  steady  income  in  the  safer  issues.  It  would   no   longer   be   the   hotbed  of   speculation   it   can   be   with   questionable   currencies.

Now to the big question _ no-one wants to carry  gold  coins  for  use  as  money  any  more, and no country wants to ship its gold to balance  international  accounts.    Is  either  necessary?


The answer is, no.  Gold-backed currency eliminates the need to carry the metal.  As to governments shipping gold, there is one useful lesson that we could borrow from the Bretton Woods  agreement,  that  if  a  country’s  currency is  gold-backed  (the  dollar  wasn’t  fully  backed,  in  that  case),  then  that  currency  can act  as  a   reserve   just   as   well   as   gold.


If our currency were backed one hundred per cent, it would be an impregnable reserve unit for any country without sufficient gold,  or one wishing to keep what gold it has safe.  This would allow all our gold to remain in our national vaults, so that the dollar would never be threatened.  There would need to be citizens’ committees to oversee the safe storage  of   the  gold.


British pounds and American dollars have each, at different times, provided the world with currencies  that  commanded  the  confidence  of  most  countries.


There wouldn’t be anything so different about, again, creating a reserve currency out of the  dollar,  except  for  the  advantage  of  having  a  one  hundred   per   cent   gold   backing  that  is permanently  guaranteed  by  the  gold  being  kept  in  our  vaults.

The  same  discipline  as  our  shipping  gold  to  other  countries,  to  balance  international accounts, would be in operation.   We would lose  our  dollars  to  the  other  countries  if  we  bought  more  from  them  than  we  sold  to  them.  There is no escaping from the self-discipline necessary  to  solvency.


In  the  future  our  one  hundred  per  cent gold-backed dollar would represent a weight of gold.   Gold would vary somewhat in price as the supply and demand for it varied, but the history of gold  is  that  one  ounce  of  gold  has  almost consistently,  over  long  periods  of  time,  bought  a  man’s  suit. 


Because gold holds its value in this way,  our dollar,  based  on  a  weight  of  gold,  would   be money the world could trust. Americans would, once  again,  trust  their  own  money  and  would,  again,   begin   to   save   and   to   invest   in  production  for  the  market.


Most  important  of  all  would  be  the improvement in people’s lives that an honest dollar  would  bring  to  American  citizens.


With a safe refuge for savings, the accumulation from such a large economy as the   American    would    shortly    become    massive.


This would ensure enough capital for the market  to  provide  rising  living  standards _ including  an  education  and  ownership  of  a  home  _  for  everyone.


We would be able to lend money to the world again, instead of being the biggest borrower.  Americans  would  again  be  proud  of  their  country.


Any other country, wishing for such blessings,  could   pattern   themselves   after    such   a  successful   example.   Human  nature  is  the  same  everywhere  _  good  means  bring  about   good   ends.



                                                

 

Chapter 10

A GOLD STANDARD