North Texas Objectivist Society (NTOS) Message Board › Is the production of money a valid function of government?

Is the production of money a valid function of government?

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Old Toad
OldToad
Group Organizer
Dallas, TX
Post #: 431
Jeff wrote on another thread:


I think the production of money, legal tender, is a valid purpose for government, in order to defend the individual from fraud.

Pytheus

This seems like a good starting point for a new discussion thread.

Is producing of money a valid function of government? If so or if not, what is the rationale?

I think in the early days of the U.S., various banks used to print different "brands' of bank notes. Why would that not be sufficient to protect against fraud?

-- Todd
A former member
Post #: 35
As I understand it, one function of government is to protect the individual against fraud. I'm unclear by what standard individual "brands" could be evaluated. At least in the current environment. Now, if you are suggesting that perhaps money not backed by gold is a bad idea, I might agree with you.

Circulating literally THOUSANDS of different "brands" of money in the US economy would be a nightmare and create a playground for fraud. How would the individual be able to conduct business?

Pytheus
Sherry
SherryTX
Plano, TX
Post #: 414
Hmmm this is interesting thread.
I guess the fraud could somewhat be prevented when perhaps debit and check cards are used, if the banks back the credits in gold.
The states producing their own money didn't really work out too well, however, I think perhaps nowadays a working solution could be resolved.

The government does need to protect property rights, so I can see Jeff's point on fraud, since it involves property. However, if the goverment is producing the money...and no one else can...hmmm....
Lathanar
Lathanar
Dallas, TX
Post #: 271
If I remember correctly, there was no national bank from the time Jackson killed it in the late 1830's until 1863 when they had to finance the war. I haven't really thought about this one too much, not even sure the government should even set the standards on what the money can be. I can see it more for international trade than anything, that's about as far as it should go probably. Electronic transactions, stocks, bonds, credit cards, etc. all are forms of money if you think about it, and all are different brands of money. None are created by the government, merely backed by the government with the intention of stopping fraud by honoring the contracts between the parties. A bank note is nothing more than a contract, an IOU.

- Travis
A former member
Post #: 36
Well, a "dollar" is an IOU. It's backed by the full faith and credit of the US Government. And that means...what?

Let's suppose you have private banks issuing private money...even gold. How do you ensure it really is gold? What do you do if it isn't? What if you have MANY private institutions issuing "not gold" coins? What if you have private banks issuing paper money backed by gold they don't have? WHO audits the bank? How do you regulate the transfer of gold beween banks or individuals?

So, the government maintains the gold, how do you regulate the flow of gold between individuals in the US and foriegn countries? And how would you prevent private banks from printing the currency of other private banks?

With various private "brands" of money, how do you value company stock? What standard do you use? Oh, and what about currency exchanges? Would you have thousands of different exchange rates?

If you think this weeks stock market selloff was bad, what would happen in a world with unlimited "brands"?

Now...private transactions happen ALL the time. Private stock and bond trades, gold, silver, fiat money all change hands between individuals.

I'm certainly NOT a big fan of the Federal Reserve, but a world filled with various private brands is a chaos I'm not prepared to embrace.

Pytheus
David V.
HeroicLife
Shanghai, CN
Post #: 95
Circulating literally THOUSANDS of different "brands" of money in the US economy would be a nightmare and create a playground for fraud. How would the individual be able to conduct business?
Creating thousands of different "brands" of BREAD in the US economy would be a nightmare and create a playground for fraud. How would the individual be able to know which bread was edible and not poisonous?

What about insurance companies? Banks? Credit cards? Real-estate agents? Computers? Diamonds? Vacuum cleaners?
A former member
Post #: 37
Bread????

Bread...would not be possible in a complex industrial economy without CAPITAL. Capital, as in Capitalism. A stable, standard medium of exchange is required to facilitate the exchange or goods and/or services.

Bread, vaccuum cleaners, staples, computers and on and on and on, are possible in vast quantity and low price because of access to capital. A common, standardized method of which everyone knows the value would be destroyed in a system of private brand money. Even B2B transactions would be hindered. Personally I'm not in favor of anarchy or of wild, speculative private brand money.

The analogy to bread is silly. In the REAL world, people don't trade in bread, or windshield wipers, or slippers or anything like that. Unless of course you live in a barter economy a la The Dark Ages. People exchange money (capital) for those goods. Leaving aside the opportunity for fraud for the moment, the practical application of such a private money system is beyond my ability to understand.

Pytheus
A former member
Post #: 200
I have a very brief essay on my website regarding the issue of fraud related to money being issued by private institutions that might help to settle some of these issues. It was written for a thread on another forum, but I think there is enough context to establish what some of the issues are. I called it Optimum Price of Gold

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$­$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Philosophic essays based on the philosophy of Ayn Rand

www.appliedphilosophyonline.com­

Applied Philosophy Online .com

Where Ideas Are Brought Down to Earth!

tmiovas@appliedphilosophyonline.com

All rights reserved 2006 by Thomas M. Miovas, Jr.

Scott Connery
Scott_Connery
Dallas, TX
Post #: 7
First I would like to state Rand's position on the issue:

"When I say 'capitalism,' I mean a pure, uncontrolled, unregulated laissez-faire capitalism ? with a separation of economics, in the same way and for the same reasons as a separation of state and church."
("The Objectivist Ethics" in 'The Virtue of Selfishness')

The orginal quote says that a valid pupose of goverment is to defend the individual from fraud. I agree with this. I fact the only thigns a just government can do is protect its citizens from force and fraud.

The mistake is made when you propose to pre-emptively stop actions because some people might use the process to commit fraud. A just goverment would only punish those that do commit fraud.
A former member
Post #: 39
This conversation has become alittle like putting the cart before the horse.

1) I don't see any conflict with capitalism in the Treasury Dept printing currency as a common medium of exchange to faciliate commerce.

2) I would like to see the "dollar" backed by gold, but I don't foresee a return to gold backed currency anytime soon.

3) You can, today, buy gold and silver, in the open marketplace. If you want to buy, own and hold gold, go ahead. It's legal. Many people buy gold as a hedge against inflation, which seems to be the major argument for backing dollars with gold.

4) Private banks issuing currency is a bad idea in our current economic environment. A massive amount of change and consumer education would need to take place before this could even be considered for widespread implementation.

While this MAY be an "ideal" situation (of which I am not convinced), a change to private issuance of currency is filled with danger. None of these changes has been explored on a detail level. The sense that I get from the discussion is an argument I've heard from collectivists in the past: "Just do it, the businessman will figure it out!"

Check out:

http://www.bullionvau...­

A brief quote from the company website:

"You may be surprised that your gold is not stored in a vault run by a bank. Why not?

The short answer is that nowadays banks operate the wrong kind of business to be willing and reliable custodians of your gold.

Modern banks make their money by providing credit, and by executing transactions. They have little enthusiasm for a low margin role as physical custodians of bullion. Very few of them actually manage bullion vaults at all.

They will - nevertheless - be pleased to provide you with unallocated gold which in most cases is probably not the form of gold which properly informed private buyers are looking for."

(emphasis added)

So, if you want to trade in gold...then trade in gold, no one is stopping you. If you want to juggle the currency production of the weathliest nation on Earth, please have the thing well thought-out.

Regards,

Pytheus
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