Hello libertarians (and other strong supporters of liberty and--therefore--capitalism):
I contacted Jeffrey Tucker regarding the idea referred to below, and he suggested I put a post on this forum.
I stumbled upon a way to improve capitalism systemically and to accomplish everything any libertarian has dared to hope for--and more. The only thing that has to be changed is the approach to the money. This idea leaves the debate over having a metallic currency far, far behind. It actually harks back to the idea of neutral money, the concept that first attracted those who would form the Austrian School, and especially F.A. Hayek. It is impossible to summarize it in a post of this kind and do the idea, well, justice, but an essay of 3,000 words at www.ajustsolution.com presents a reasonably thorough introduction of it.
I must warn readers that the key to the idea is a money supply that is purely fiat money. Materially (as opposed to purely ideologically), the problem with fiat money has been that the supply of it can be manipulated--indeed, is designed to be manipulated--by a group of cloistered individuals making arbitrary decisions (thereby subjecting everyone else in the economy to their arbitrary wills--the very definition of injustice according to John Locke, and one that is consistent with my own account of justice). In my proposed approach to the money, the supply of it would be truly exogenously determined: No person, group, organization, or institution would have the means or the opportunity to alter the size of the money supply. Output would in turn be determined by that exogenous variable.
Again, the website is www.ajustsolution.com.
Stephen Yearwood:If I am now understanding correctly, Austrians hold that even the determination of the money supply should be outside the scope of any formal organization or institution, but purely the result of the interplay of market forces, in which some proffered monies flourish and some perish. Am I at least starting to catching on?
Impressive.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
Stephen Yearwood: If I am now understanding correctly, Austrians hold that even the determination of the money supply should be outside the scope of any formal organization or institution, but purely the result of the interplay of market forces, in which some proffered monies flourish and some perish. Am I at least starting to catching on?
If I am now understanding correctly, Austrians hold that even the determination of the money supply should be outside the scope of any formal organization or institution, but purely the result of the interplay of market forces, in which some proffered monies flourish and some perish. Am I at least starting to catching on?
:)
I read the whole thread with great interest and was very enlightened. No one addressed specifics of your plan, so I'll do that as best as I, a newbie, can.
From the website:
The solution would be a profound yet relatively simple change in our approach to the money supply. It would enter the economy in the form of individuals' incomes. It would be purely fiat money, but that part would hardly be anything new. Those being paid that income would be retirees, people old enough to work but genuinely too incapacitated to work, and those who had jobs that were paid that income. In businesses, the rank-and-file workers would receive that income; only those paid more than that amount would be paid out of the revenue of a business. (To be perfectly clear, anyone who received any pay out of the revenue of a business would not be paid the allotted income.) Everyone who worked in government would be paid teh allotted income (and legislative bodies at all levels of government would doubtlessly award additional income to various offices from the revenue of government). The cost of all common labor would at any rate be zero. No one, however, would be required to earn the allotted income; people would be at least as free as they are at present in capitalism to do whatever they wanted to earn money.
In other words, there is a minimum amount of fiat money everyone would get whether they worked or not. This is really the same as giving everyone a minimum of nothing, by the laws of supply and demand which apply to paper money as well as everything else.
The amount of the allotted income for each individual who was paid it would be the average income at the time this change was instituted. Thus, instead of the size of the money supply being determined by a handful of individuals trying to 'manage' a chaotic economy, it would merely be the total of the incomes received by those who were paid the allotted income. The size of the money supply would therefore be exogenously determined—basically, by the size of the adult population. The size of the money supply would in turn determine total output.
Total output of what? I don't get this at all. If a tree on a farm can yield, I dunno 300 apples [I'm a city boy] how would that change depending on the total money supply?
Instead of a relatively small money supply that circulates many times over in the generation of total output, the economy would have a huge money supply and a very tiny 'multiplier effect'.
Being a total newbie, I have no idea what this means.
The general idea is that the money supply would be passed along to businesses via consumers' purchases, get transferred to government, then get transferred back to the monetary agency from government. Both businesses and individuals would transfer money to government, at the end of each quarter for the former and each month for the latter. Both businesses and individuals would be allowed to retain some amount of money: For businesses, it would be a (fixed) percentage of the money in their accounts; for individuals, it would be an absolute amount—say, three months' worth of the allotted income. Before the transfer occurred people and businesses would be free to spend all of their money beyond the amount they were permitted to keep in their accounts, meaning they would contribute nothing to the transfer. (Though for a business to avoid the transfer it would have to have zero money in its account, "spending" would include pay to employees not receiving the allotted income, to include quarterly bonuses.) Even if someone insisted on calling the transfer of money to government a tax, it would be avoidable, and, if not avoided, would require no paperwork. There would in any event be no payroll taxes, no property taxes, no sales taxes, and no excise taxes.
If you had money that you knew would be taken away if you didn't spend it by the end of the week, what would you do with it? What would anyone in his right mind do in a similar situation?
Of course, who on the other hand who would sell anything if he knew the paper money he got from the sale would be taken away?
Who knows what will happen with such a scheme? People hiding it under the pillow until after tax day [after all there is no paperwork, right?]
Perhaps some clever japanese fellow would have a day before tax day sale, taking his paper money out of the country.
There is a phrase bandied about here a lot, "unintended consequences." Who knows what unintended consequences this never before tried thing will have?
The transfer of money from government to the monetary agency would also be quarterly.
I don't get this part. Why not just eliminate the middle man, and have the agency collect the money? Better yet, put a date on the money they print, having it become void after a certain date?
It would complete the circulation of the money supply, preventing an accumulation of money in the economy, which would cause inflation. The amount transferred by government would be equal to the total amount of money spent on purchases by consumers plus net exports.
It’s important to understand that the monetary agency would have no discretionary authority whatsoever. It would merely be the paymaster for the economy. Again, money would simply be printed as needed, but its total amount could not be arbitrarily determined. It could be a cashless economy, but the existence of cash does contribute to liberty. The monetary agency could be a national agency, with each nation having its own currency, or an international agency, with every nation that joined the system sharing the same currency. There are pros and cons to each of those options. The latter option would not in any way threaten the sovereignty of any nation in the system. The monetary agency would have no standing to get involved in the domestic politics of any nation. If the former option were instituted, the currencies of all nations using this system would have to be exchanged 1:1. That would preclude speculation in those currencies and prevent differentiated exchange rates from artificially skewing international trade.
Why do you think differentiated exchange rates artificially skew international trade? Are you saying that the Zimbabwe dollar would be equal to a US dollar? And Mr Zimbabwe could walk into any bank and force them to take his money in exchange for US dollars? What could be bought with his Zimbabwe dollar? They don't make anything.
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