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Four thoughts for July 4

1. Why you should read this blog:

If the voters or the members of a parliament are faced with the problems raised by a bill concerning the prevention of cattle diseases or the construction of an office building, they may leave the discussion of the details to the experts. Such veterinarian and engineering problems do not interfere with the fundamentals of social and political life. They are important but not primary and vital. But if not only the masses but even the greater part of their elected representatives declare: “These monetary problems can only be comprehended by specialists; we do not have the inclination to study them; in this matter we must trust the experts,” they are virtually renouncing their sovereignty to the professionals. — Ludwig von Mises, Bureaucracy, page 120

2. Much as the effectiveness of central planning was the overarching economic policy issue of the 20th century (and a focus of Ludwig von Mises's thought for most of his life), the financial sustainability of the welfare state will be the overarching economic policy issue of the 21st century, at least of its first several decades. Some weeks from now, after I have thought about the issue more, I will have something to say about where free banking fits into the picture.

3. The term "rent seeking" describes a pervasive problem that affects banking and many other economic sectors. It is such an awkward piece of jargon, though, that economists have long sought a snappy alternative. How about "the steal industry"? (Hat tip to a commentator at Coordination Problem.)

4. In the Declaration of Independence, about the only thing the Founding Fathers did not accuse George III of was debasing the currency. That was because most of the 13 colonies had already done it to themselves, over the objections of British officials.

One comment

  1. Since there is a widespread and persistent belief that the Constitution requires Congress to issue gold or silver coinage, or at least to make it available as currency along with other metallic coinage, I would like to comment that item #4 above helps improve upon on a previous comment I made regarding the prohibitory Gold and Silver Clause of Article 1, Section 10.

    As you may know, in Article 1, Section 10, the 13 colonial governments were also prohibited from coining their own money and from directly issuing their own bills of credit, so the power of state governments to issue money is not the issue here. However, in addition to those two prohibitions, a third prohibition, the Gold and Silver Clause, targeted state-chartered banks and was designed to discourage the colonies from allowing their state banks from issuing paper notes. In other words, by requiring that state governments could only declare gold or silver coinage "a [legal] tender in payment of debts," the federal Constitution was again asserting its supremacy or "sovereignty" over the future evolution of the monetary system.

    But, in any case, the main point I'm trying to make is that these three state prohibitions have nothing to do with restricting Congress' power over the monetary system. If the framers wanted to limit Congress' coining power to specific metals, they would have done so in the Coining Clause of Article 1, Section 8, but they simply said Congress shall have power "to coin money."

    I think the sooner we can let go of this gold and silver hang-up, the sooner we'll be able to move on to more constructive solutions.

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