It makes me very sad to see people who consider themselves either patriotic Americans, anti-imperialists, or both, to be advocating "free trade" and the "Gold Standard." If you examine history, you'll see that both policies were historically used by the British Empire to Imperially subjugate foreign nations and even their own people.
The leading causes of the American Revolution were outrageous acts of Parliament, as anyone who has attended an American grade school should know. Among those Acts were the Currency Act of 1751, the Currency Act of 1764, and the Stamp Act of 1765. Let's consider what these acts did.
Before 1751, the 13 American colonies issued their own paper currencies. For example, in Pennsylvania, the government of Pennsylvania acted as a bank, issuing loans directly to farmers or merchants for business activities. These loans carried interest, and when the government of Pennsylvania issued these loans wisely, they of course returned a profit, which could then be spent on public goods like roads and bridges without requiring taxation. The same process is used today by private banks, but the interest of course returns to the banks owners and management, instead of being used to pay for public goods.
By the currency act of 1751, the American colonies were forbidden to issue paper currency. Instead, the colonies were forced to use British Pound Sterling, the currency of the private/national Central Bank of Great Britain, the Bank of England, or hard currency like Gold and Silver.
Why would Britain wish to pass such an act? Some talk of how "British merchants" were harmed by the "inflationary" nature of the American currency, but this makes little sense. If British merchants were being harmed by American currency, why did they not privately demand to be paid in another way? Why was the intervention of Parliament needed?
Consider that in this time period, the American colonies at the time had almost no production of precious metals, and they had very little gold and silver circulating. Imagine the position of an American businessman when Britain forced America onto the Gold Standard in 1751; in order to pay a debt, either public or private, the American would have to get their hands on either hard currency or Pound Sterling. This means that to pay off any debt, this business must either;
A. export to Great Britain to obtain Pound Sterling in trade
B. borrow Pound Sterling at interest to pay off an existing debt.
C. borrow precious metals, either from Britain or abroad
D. export abroad (which was often illegal) to obtain hard currency
This was precisely the point of the Currency Act and the Gold Standard; forcing American businessmen to have to export to and borrow from Great Britain in order to conduct business with lawful currency. This is how Colonialism works; the economy of the colony is forced into an economically subservient role to the 'Mother Country.' The largest beneficiary of this policy was the British Central Bank, the Bank of England, which would then receive a 'cut' of most of American economic activity, although Britain as a whole would benefit from the artificially low prices of American imports.
Now, many people are told in American public schools that the "Stamp Act," a minor British tax, was a major cause of the American revolution. You are now in a position to understand why. The British stamp act was a direct tax on any printed material in the American colonies. A direct tax which was required to be paid in Pounds Sterling or Gold or Silver. This meant that if an American simply wished to have a legal document or read a newspaper, he was required to gain British or hard currency through export, either directly or indirectly. Now, you can see why colonists were violently opposed to a relatively minor tax. The implication was that Americans would be directly taxed in British currency just to live their daily lives, and for most Americans, this would required going into debt to borrow British currency. In other words, for most Americans, going into debt would become the prerequisite for economic activity.
Americans violently opposed this attempt by Britain to impose debt slavery on them in the event known as the Revolutionary War. The colonists used their own fiat currency, the Continental, to fight and win the war. Britain, knowing exactly what was at stake, used printing presses on offshore British warships to counterfeit the new American currency. On account of British counterfeiting and the economic havoc caused by the war, a great many Continentals were in circulation at the end of the war; far more than the new Continental American government could redeem in hard currency. It is here that two major factions emerged; on the one hand, a faction including Jefferson and Madison, who wished to maintain an honest currency, and the Hamiltonians, who wished to emulate the British Imperial system of a Central Bank issuing "gold backed" currency on fractional reserve. With angry war veterans demanding payment of their Continentals on the steps of the Capitol, the Hamiltonian faction won, creating the first U.S. Central Bank, which took the hard currency of the nation and issued out a paper currency far beyond its real reserves, using these to pay off its Continental-denominated debts. Perhaps Andrew Jackson, whose campaign slogan was "Jackson and no Bank," makes more sense historically.
Now consider free-trade. During the 18th and 19th centuries, Britain had the most advanced industrial technology in the world. When Britain demanded that a subject nation adopt "free trade," what it really meant was the removal of import duties against British finished manufactured goods. The head-start the British economy had in the industrial revolution, combined with intellectual property laws, all but guaranteed that colonies, like India for example, could not catch up in terms of industrialization. Without being able to develop industrially, British colonies were forced to export only what they currently were able to produce, which was either labor or raw materials. The goal of free trade was to keep less advanced economies as permanently backwards, raw material exporting colonies in service of British industry.
Today, of course, nationalism plays far less of a role in the global economy. "Free trade" today serves not the interest of first-world nations so much as it does the interest of major corporations. A third-world nation which has free-trade imposed upon it by military coercion, coup or IMF loans, basically ensures that advanced production will NOT be developed internally; instead, foreign corporations will import their proprietary technology and exploit the third world nations labor and national resources. If another nation becomes a more attractive site for production, the major corporations will simply move, taking their proprietary technology and capital infrastructure with them, leaving no lasting benefit for the previous host nation. This type of deindustrialization and stagnation is largely what America itself has seen over the past 30 years.
On this Memorial Day, we should reflect that the reason we Americans are relatively prosperous and not British subjects is because the colonists before us resisted the imposition of the British fractional "Gold Standard," and paid for their resistance with a fiat currency. After defeating the British Empire, Americans resisted British imports with high tariffs and import duties, allowing America's once unrivaled industrial production and thriving middle classes.
Hopefully, Americans will soon rise up and oppose the American Empire's current Opium War in Afghanistan, and the despoilation of our lands at the hand of foreign and domestic corporations, like British Petroleum, which rivals the predation of the British East India and British Hudson Bay Corporation of days gone by. If Americans don't demand policies which benefit Americans, certainly history proves that no one else will.
It makes me very sad to see people who consider themselves either patriotic Americans, anti-imperialists, or both, to be advocating "free trade" and the "Gold Standard."
For the case of anti-imperialis, I'm curious.
These loans carried interest, and when the government of Pennsylvania issued these loans wisely, they of course returned a profit, which could then be spent on public goods like roads and bridges without requiring taxation.
There is taxation. It's through inflation. This makes the taxation covert instead of overt.
By the currency act of 1751, the American colonies were forbidden to issue paper currency. Instead, the colonies were forced to use British Pound Sterling
Just about anyone here would agree that forcing people to accept some kind of standard of money is unacceptable. I do understand what you are saying here, in relation to those who prefer he government to enforce a gold standard on its people.
For starters, this Act greatly restricted the amount of money available for use in the colonies, resulting in a contraction of economic activity, a depression which seeded the discontent which later erupted into the American Revolution.
That's not true. There is no such thing as "not enough money" in an economy.
They were paid with American notes which lost value with inflation. If they demanded a different form of payment, they would likely not make a sale at all. This is how it was harmful to British merchants.
This was precisely the point of the Currency Act and the Gold Standard; forcing American businessmen to have to export to and borrow from Great Britain in order to conduct business with lawful currency.
Even if this is true, it has nothing to do with libertarianism and does nothing to show the superiority of a centralized monetary authority. In fact, it helps to show the danger of such a thing.
You have one little problem. That is that fiat money systems (paper and worse electronic money systems) are falling apart all over the world under crushing debt loads and lots of money printing. The one in the USA has interest rates near zero but failes to stimulate the economy. The latest downturn in the business cycle is the result of the current fiat money system. Clearly the fiat system, the EURO is is in complete distress and only marginally worse off than the British Pound and the US Dollar. The fiat money system will have to come to grips with the reality that just making more money does not increase the wealth of society.
Austrians do not want central monetary control. Austrians for the most part believe that free markets should determine what money is and how it is valued. The late 1800s to early 1900s gold standard survived despite continued attempts by the governments of the world to interfere with it. Now if markets did determine what money is, then the precious metals: gold and silver, and maybe copper would be the most likely candidates as these have historically been used as money.
I disagree with your argument that the American Colonists revolted because of a money standard vs taxation. There were also the Intolerable Acts which included the Quartering Act that really fired up the Colonists. The Stamp Act was the first but there were other things like the monopolies on tea and other goods that also caused unrest in the colonies.
"The one in the USA has interest rates near zero"
Not really. You show me where I can get a near-zero percent loan and I'll believe you. It's the private market banks that get 0% interest and then turn around and loan that same money out to the public at 8% or higher.
As for the Revolution, my understanding was that the Quartering Act was so objectionable in part because, without being able to issue their own sovereign currencies to pay for the quartering and unwilling to endure the taxation or borrowing necessary to get the Gold or Silver or Pounds Sterling to pay for it, the colonies were forced to just tell colonists "pay for it yourself."
As for the "inflation tax" being the ultimate evil, please. If you want to save money, no one is forcing you to use an inflationary currency. Exchange your inflationary currency for commodities, stocks, metal coins, real estate, land, old bourbon or art. Problem solved, you can now save all you're able to without inflation. Inflation is no better or worse than any other tax; taxation is only deplorable when it's for private gain at public expense and not accountable to the people being taxed.
I'll grant you though that our modern private-bank-created Federal Reserve Notes certainly do have this loathsome characteristic.
As for "free market money," please tell me how an Austrian Economist would have responded to British Imperial attempts to subjugate the economy? Specifically, how would the free market have fought off the British Empire? You're presenting a false choice; the alternative to organized Imperialism is organized resistance; relying on mystical unorganized market forces to ward off an aggressive, organized foe is just a fancy way of proposing surrender.
As for the "inflation tax" being the ultimate evil, please.
No one said that. Then again, why should people be made to move to commodities to try to keep purchasing power? What about all the other laws in place which force people to use legal tender? What about avoiding income tax through putting money in retirement plans and such?
As for "free market money," please tell me how an Austrian Economist would have responded to British Imperial attempts to subjugate the economy?
Those are two seperate issues. An austrian economist might have died in a conlfict against the British empire.
What anarchocapitalism suggests, is that people voluntarily give money to private defense agencies which in turn defend them from such attacks. People would clearly see a danger and band together to stop it. There is no need for government or force to create this organization.
As for free market money... money was created from the free market. There is no other source. http://mises.org/daily/1333
This doesn't preclude the government from using force to monpolize money.
This entire post is an association fallacy, it's the equivalent like saying cars are evil because people get hit by them.
This post is really flawed actually. As someone else said- it's fallacy by association. Just because the British tried those ideas doesn't mean they were wrong. In fact they were successful for them for a long time. So, shouldn't we take it that they were actually a good thing? We can have the same policies... without the imperialism and the British king. What people disliked about Britain was their association with imperialism. We can have all of those things without the bad things Britain did.
It's a Benjamin topic, so how surprising? Thanks for sparing me the time.
Democracy means the opportunity to be everyone's slave.—Karl Kraus.
Benjamin:Not really. You show me where I can get a near-zero percent loan and I'll believe you. It's the private market banks that get 0% interest and then turn around and loan that same money out to the public at 8% or higher.
You could get something like 1% negative amortization loans five years ago - and many people thought this teaser rate was permanent (judging from the comments of many idiots who bought way too much house for their money) - do you think the housing bubble was a good thing?
The "inflation tax" is the ultimate evil and has destroyed more civilization than just about any other force in mankind and has unleashed the the most violent and brutal people the human race has ever seen. I can give you a longer list but Rome and the British Empire are two of the best examples.
As for a response to the British: There were two:
1. Peaceful. Start black markets and other extra government money systems. And this is exactly what happened on the frontier. Infact the later USA actually attacked a bunch of poor distillers in the Whiskey Rebellion. You can not discount this behavior as really setting the British up for failure especially in Boston. The semi-peaceful and sometimes violent riots in Boston really caused the British to increase their violence on the colonies leading to new taxes and other policies that annoyed the rest of the colonies.
2. Not so peaceful. Destroy the property of one of the monopolies and really aggrivate the British.
2.5 Aggressive. Form an armed rebellion.
Key point you seemed to have missed:
Abuse comes from the state. A free people, who choose their own form of currency, are far better off than the thralls who live by the state's dictates, regardless of monetary policy.
Key point you seem to have missed:
IT ALREADY IS!
The government doesn't create a single dollar! Our dollars are created on the ""free market" by private banks and their Federal Cartel right now! Yes the government regulates money creation, but they don't do it or derive a benefit from it; it is "out of their hands."
The alternatives to getting money out of the hands of your nations government are:
- putting the money power in a foreign state
- putting the money power in private fractional reserve banks (what we have)
Get rid of the government, but keep fractional reserve banking, and the fractional reserve banks will pool their funds and buy a new government for themselves by sunrise tomorrow. If you don't want to have a sovereign government with sovereign money, you are simply asking to be ruled by either foreigners or banks, take your pick.
Money is 99% a creation of law, not something that just happens spontaneously on a market, as has been known since Aristotle. The only question is who is writing the laws; US or THEM, and for whose benefit.
"Money, then, has been made by agreement, as it were a substitute for demand, and is so called because it exists not by nature, but by law, and it is in our power change it and make it useless for the purpose. It is call, "nomisma" (from "homos," law), because money is not a natural product, but exists only through law, and it lies with us to change it and rob it of its utility as we will."
Aristotle, Ethics
Anyone that thinks the federal reserve is a creation of the free market is sadly mistaken.
Britain was mercantilist.
So many errors in the posts, so little time.
Anyone who thinks the Federal Reserve is part of the Government is sadly mistaken. The Federal Reserve is a private cartel given a license to create money by our government. It is a cartel representing the nations private market banks.
And yes, cartels do happen, spontaneously, on the "free market." Any cartel of sufficient wealth and power will attempt to subvert the existing government or create its own. '
The Federal Reserve is the table around which its owners, the private market banks, sit and set policy. Getting rid of the Fed and taking no further steps is a laughable as trying to fight the mafia by kicking them out of the hotel where they hold conferences.
You just proved my point about the fed not being a creation of the free market. Thank you.
Remind me when and how the Federal Reserve system began. How is the head of the Fed chosen? What is a legal tender law?
The Federal Reserve is like if the people who owned the nations biggest lakes, streams, aquifers and water pipe factories got together and bribed Congress to pass a law that only they would be legal providers of drinking water. This water cartel then uses their new advantage to consolidate and buy up the rest of the drinking water sources and pumping equipment in the nation.
Then 100 years later someone comes along and says, 'Hey, we should take away these guys monopoly license to produce drinking water!'
Let's say they succeed - the cartel loses their government license to be a drinking water cartel. What changes? Almost everyone still has to go to the same cartel to get a drink of water. The cartel own almost all of the "water capital," and they can just have their cartel privately although without the benefit of ties to the government.
Some people in the right place and with enough money could drill their own well, so things would be a bit better at the margins, but the overall situation would be almost identical.
Get rid of the Federal Reserve, go back to a gold standard even, and it will be the same banks running the new system. Then there will be a few bank runs and currency fluctuations, and the same banks will buy lots of advertisements to tell everyone about their new solution, Federal Reserve II.
Money is not a scarce, natural resource like water. Your analogy does not make sense.
Do you really think the banking system is unregulated?
It depends what you mean by that. I think they largely write their regulations for themselves these days, through their pet Congressmen.
If I make up my own regulations for myself, would you call me regulated or unregulated?
Money is not a scarce, natural resource like water.
I agree about that.
That would be corporatism/fascism, which has nothing to do with free trade or a gold standard or free markets at all.
You are inadvertantly making arguments for a more minimal state in general and for free market capitalism specifically.
The biggest issue is legal tender laws and capital gains taxes stopping alternative currencies from arising on the free market. The check on banks printing fiat money is the freedom to use another currency/commodity. We do not have this.
NO actually. My point is that "A government is like fire, a handy servant, but a dangerous master."
Further, my point is that those who think fire is the solution to everything are just as obtuse as those who say "fire is dangerous, let's extinguish it as much as possible."
Laissez faire vs. authoritarian government is a false dichotomy, and a third option is a publicly created currency which acts as the servant of the people, not its master.
You would not say these things if you seriously studied economics.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
The reality or the academic discipline?
I'm reading up about Charles Henry Carey right now, interesting figure.
Henry Charles Carey (December 15, 1793 – October 13, 1879), a leading 19th century economist of the American School of capitalism. He is now best known for the book The Harmony of Interests, to compare and contrast what he called the "British System" of laissez faire free trade capitalism with the "American System" of developmental capitalism, throughtariff protection and government intervention to encourage production.
He was born in Philadelphia, Pennsylvania in 1793 and was a chief economic advisor to Abraham Lincoln during his presidency.
Carey was the son of Mathew Carey (1760-1839), an influential economist, political reformer, editor, and publisher, who was born in Ireland but for many years lived in Philadelphia. Matthew Carey was a member of the publishing firm of Carey & Lea, which was long the most conspicuous in America. When Henry Carey was 28 years old, he succeeded his father as a member of the publishing firm. Among Mathew Carey's many writings had been a collection (1822) of Essays on Political Economy, one of the earliest of American treatises favoring Alexander Hamilton's idea of protection and promotion of industry.
In 1835, Carey co-founded the famous Franklin Fire Insurance Company of Philadelphia. He retired from business in 1838, almost simultaneously with the appearance (1837-1840) of his book Principles of Political Economy. This treatise soon became the standard representation of the American school of economic thought, and was translated into Italian and Swedish, With some variance. It dominated the US economic system until 1973.
Carey's first large work on political economy was preceded and followed by many smaller volumes on wages, the credit system, interest, slavery, copyright, etc.; and in 1858-1859 he gathered the fruits of his lifelong labours into The Principles of Social Science, in three volumes.
Principles is a comprehensive and mature exposition of his views. In it, Carey sought to show that there exists, independently of human wills, a natural system of economic laws, which is essentially beneficent and spontaneously increases prosperity of the whole community, and especially of the working classes, except when it is impeded by the ignorance or perversity of humankind. He rejected the Malthusian doctrine of population, maintaining that the only situation in which the means of subsistence will determine population growth is one in which a given society is not introducing new technologies or not adopting forward-thinking governmental policy. Population regulated itself in every well-governed society, but its pressure on subsistence characterized the lower stages of civilization. Carey denied as the universal truth, for all stages of cultivation, of the law of diminishing returns from land.
His position relates to the antithesis of wealth and value. Carey held that land in industrial life is an instrument of production formed by human labour. Its value was due to the labour expended on it in the past (measured by the labour necessary under existing conditions to bring new land to the same stage of productiveness). He studied the occupation andreclamation of land with peculiar advantage as an American, for whom the traditions of first settlement were living and fresh, and before whose eyes the process was indeed still going on. The difficulties of adapting a primitive soil to the work of yielding organic products for human use can be lightly estimated only by an inhabitant of a country long under cultivation.
Carey believed that the overcoming of these difficulties by arduous and continued effort entitles the first occupier of land to his property in the soil. Its present value forms a very small proportion of the cost expended on it, because it represents only what would be required, with the science and appliances of our time, to bring the land from its primitive into its present state. Thus, property in land is only a form of invested capital, a quantity of labour or the fruits of labour permanently incorporated with the soil. The owner of this capital is compensated, as any other capitalist, by a share of the produce. The owner is not rewarded for what is done by the powers of nature, and society is in no sense defrauded by his sole possession.
The so-called Ricardian theory of rent is a speculative fancy, contradicted by all experience. Unlike what the theory supposes, cultivation does not move begin with the best soils and move progressively towards poorer soils. The light and dry higher land is cultivated first; only when population becomes dense and capital accumulates is low-lying land attacked and brought into occupation. Low-lying land is more fertile but also has morasses, inundations and miasmas. Rent as a proportion of the produce sinks, like all interest on capital, but increases as an absolute amount. The share of the labourer increases both as a proportion and an absolute amount. Thus, the interests of these different social classes are in harmony. But, Carey proceeded to say, in order that this harmonious progress may be realized, what is taken from the land must be given back to it. All the produce derived from the land is part of it, and must be restored to avoid its exhaustion. Hence the producer and the consumer must be close to each other; the products must not be exported to a foreign country in exchange for its manufactures, and thus go to enrich as manure a foreign soil. In immediate exchange value, the landowner may gain by such exportation, but the productive powers of the land will suffer.
In March 1865, Carey published a series of letters to the Speaker of the House of Representatives, Rep. Schuyler Colfax, entitled “The Way to Outdo England Without Fighting Her”. In these letters, Carey advocated the continueance of Abraham Lincoln's Greenbacks policy of debt-free, government-issued money as a way of freeing America's economy from British capitalists who sought to control America's wealth. (They eventually accomplished this by shutting out Greenbacks and putting America on a gold standard with the Coinage Act of 1873.) He also suggested raising the reserve requirements on private banks up to 50%. Here are some excerpts from Carey's work, which history shows fell upon deaf ears, as the subsequent Long Depression of 1873-96 plagued America with financial panics because of the inability of the National Banking System to provide the public with all the currency it needed:
“The Executive [Lincoln] is frequently compelled to affix his signature to bills of the highest importance, much of which he regards as wholly at war with the national interests. “To British free trade it is, as I have shown, that we stand indebted for the present Civil War. Had our legislation been of the kind which was needed for giving effect to the Declaration of Independence, that great hill region of the South, one of the richest, if not absolutely the richest in the world, would long since have been filled with furnaces and factories, the laborers in which would have been free men, women, and children, white and black, and the several portions of the Union would have been linked together by hooks of steel that would have set at defiance every effort of the ‘wealthy capitalists’ of England for bringing about a separation. Such, however, and most unhappily, was not our course of operation. Rebellion, therefore, came, bringing with it an almost entire stoppage of the societary movement, with ruin to a large proportion of those of the men…” “As a consequence, poor as was then our Government, and unemployed as were then so large a portion of our people, we were compelled to [loan from abroad] millions upon millions of dollars worth of the machinery of war, and there to encounter all the obstacles that could decently be thrown in our way by men who prayed openly for the success of the rebellion.” “When the present war shall have been closed there will be another to be fought, and that one will be with England…but it is not now with [cannons] that she chiefly seeks to fight us. It is in the Halls of Congress she is to be met.” “The whole South now requires reorganization, and one of the first steps in that direction should be found in furnishing machinery of circulation…If the Government does not supply that machinery, who is there that can or will do so? Look carefully, I pray you, my dear sir, at the vast field that is to be occupied, and at the great work that is to be done, and then wonder with me that the Government should permit its soldiers to perish in the field, while it is debating the terms of a loan to be made to it by men all of whose interests are to be promoted by a diminution of the circulation and an increase of the rate of interest. Let our soldiers be paid, let the credit of the Government be once again re-established, let the rate of interest be kept down, and let the Treasury reassert its independence, and all will yet go well… “A single decade of the system above described would suffice for placing us, in this respect, side by side with England. At the close of another, [England] would be left far behind, and we should then have vindicated our claim to that position in the world of which our people so often talk.”
In 1868, Carey was elected a foreign member of the Royal Swedish Academy of Sciences.
Carey, who had set out as an earnest advocate of free trade, accordingly arrived at the doctrine of protection: the coordinating power in society must intervene to prevent private advantage from working public mischief. He attributed his conversion on this question to his observation of the effects of liberal and protective tariffs respectively on American prosperity. This observation, he says, threw him back on theory, and led him to see that intervention might be necessary to remove (as he phrases it) the obstacles to the progress of younger communities created by the action of older and wealthier nations. But it seems probable that the influence of Friedrich List's writings, added to his own deep-rooted and hereditary jealousy and dislike of English predominance, had something to do with his change of attitude.[citation needed]
The academic study of economics is a study of reality rather than fantasy. Hope that helps.
p.s. A link would do if you wish to 'share' a large section. (I fail to see the relevance...)