One of the recent feedbacks I received is the attribution that sound money can’t be compatible with democracy. The implication is that inflationism is an indispensable instrument for democratic survival.
Of course, this assertion accounts no less than an arrant bunk (nonsense) for the following reasons:
One, this serves as an example of argumentum ad populum (appeal to popularity), where the belief of the many holds that the argument is true.
Just because many seek to live off at the expense of the others this doesn’t mean that their demands are necessarily justifiable or valid and should be provided for.
This is similar to the unwisdom of the crowds which we have recently critiqued. Moreover, these proponents seem oblivious to the fact that populist policies tend to self-destruct overtime. What is unsustainable won’t last.
Second, the alleged incompatibility is also misleading because this operates on the premises of the 'tyranny of the majority' or the rule of the mob.
Say for example, 10 persons get stuck in a remote island where only one of them is a woman. Yet 6 of the male elected to force themselves on her. Is the majority’s action justified? The answer is obviously NO. The means to an end isn’t justified by mere numbers.
What is needed is the rule of law, of which inflationism chafes at.
As Friedrich A. von Hayek wrote in the Decline of the Rule of Law, Part 1
The main point is that, in the use of its coercive powers, the discretion of the authorities should be so strictly bound by laws laid down beforehand that the individual can foresee with fair certainty how these powers will be used in particular instances; and that the laws themselves are truly general and create no privileges for class or person because they are made in view of their long-run effects and therefore in necessary ignorance of who will be the particular individuals who will be benefited or harmed by them. That the law should be an instrument to be used by the individuals for their ends and not an instrument used upon the people by the legislators is the ultimate meaning of the Rule of Law.
Three, the collectivist charade is to sell popular wisdom to the economic ignoramus. The collectivists forget to tell everyone that inflationism is a redistribution scheme which benefits the minority at the expense of society.
As Jörg Guido Hülsmann wrote in Deflation and Liberty (emphasis added)
``Inflation is an unjustifiable redistribution of income in favor of those who receive the new money and money titles first, and to the detriment of those who receive them last. In practice the redistribution always works out in favor of the fiat-money producers themselves (whom we misleadingly call central banks) and of their partners in the banking sector and at the stock exchange. And of course inflation works out to the advantage of governments and their closest allies in the business world. Inflation is the vehicle through which these individuals and groups enrich themselves, unjustifiably, at the expense of the citizenry at large. If there is any truth to the socialist caricature of capitalism—an economic system that exploits the poor to the benefit of the rich—then this caricature holds true for a capitalist system strangulated by inflation. The relentless influx of paper money makes the wealthy and powerful richer and more powerful than they would be if they depended exclusively on the voluntary support of their fellow citizens. And because it shields the political and economic establishment of the country from the competition emanating from the rest of society, inflation puts a brake on social mobility. The rich stay rich (longer) and the poor stay poor (longer) than they would in a free society.”
Fourth, what collectivists see as essential is actually the opposite. History reveals that democracy and sound money has had and can have a symbiotic relationship.
In The Gold Standard, Indirect Exchange section of the epic Human Action, Ludwig von Mises wrote, (bold emphasis mine)
``The gold standard was the world standard of the age of capitalism, increasing welfare, liberty, and democracy, both political and economic. In the eyes of the free traders its main eminence was precisely the fact that it was an international standard as required by international trade and the transactions of the international money and capital market. It was the medium of exchange by means of which Western industrialism and Western capital had borne Western civilization into the remotest parts of the earth's surface, everywhere destroying the fetters of age-old prejudices and superstitions, sowing the seeds of new life and new well-being, freeing minds and souls, and creating riches unheard of before. It accompanied the triumphal unprecedented progress of Western liberalism ready to unite all nations into a community of free nations peacefully cooperating with one another.”
Finally, the hucksters of false promises of inflationism are no less than blinded by economic dogma whose foundations seem to operate outside the realm of the law of scarcity—yes fantasyland.
As Ron Paul wrote on Why Governments Hate Gold, (bold emphasis mine)
``Time and again it has been proven that the Keynesian system of big government and fiat paper money are abject failures in the long run. However, the nature of government is to ignore reality when there is an avenue that allows growth in power and control. Thus, most politicians and economists will ignore the long-term damage of Keynesianism in the early stage of a bubble when there is the illusion of prosperity, suggesting that the basic laws of economics had been repealed.”
Hardly does any of these fanatics have ever explained why throughout the centuries, experiments with paper money has ALWAYS failed.
Of course if one believes redistribution is a way or a path to prosperity, then apparently they are merely deluding themselves.
As Henry Hazlitt once wrote,
Any attempt to equalize wealth or income by forced redistribution must only tend to destroy wealth and income. Historically the best the would-be equalizers have ever succeeded in doing is to equalize downward. This has even been caustically described as their intention.
The collectivists amuse us with their logical fallacies, incoherent theories, misleading definitions, short term nostrums, and misinterpretation and deliberate twisting of facts.
For them it’s not about being right, but about blind faith.
Beware of false prophets.