Jekyll_text

142 THE CREATURE FROM JEKYLL ISLAND
THE BARBARIC METAL
effectiveness,
planned increase
of its
in
gold-unit.
the money
There is
supply, for
no need whatever for a* 1 )'
the supply to rise to offset %
prOCesS does not end there '
however. When the miners see
that fK
are no better off than before in spite of the extra work, and
pecia y when they see the teilors making a greats profit for no
143
any condition, or to follow any artificial criteria. More money does not
supply more capital, is not more productive, does not permit
"economic growth."
GOLD GUARANTEES PRICE STABILITY
The Federal Reserve claims that one of its primary objectives is
better off? There is no corresponding increase in the quantity
f
to stabilize prices. In this, of course, it has failed miserably. The
property, so everyone would bid up the prices of existing pieces
irony, however, is that maintaining stable prices is the easiest thing
until they became twice as expensive. In other words, the law of
in the world. All we have to do is stop tinkering with the money
supply and demand would rapidly seek exactly the same equilibrium
as existed with the more limited money supply. When the
ically stable under a commodity money system, and this is particu-
supply and let the free market do its job. Prices become automat-
quantity of money expands without a corresponding increase in
larly true under a gold standard.
goods, the effect is a reduction in the purchasing power of each
Economists like to illustrate the workings of the marketplace by
monetary unit. In other words, nothing really changes except that
the quoted price of everything goes up. But that is merely the quoted
creating hypothetical micro and macro economies in which everything
is reduced to only a few factors and a few people. In that
price, the price as expressed in terms of the monetary unit. In truth,
spirit, therefore, let us create a hypothetical economy consisting of
the real price, in terms of its relationship to all other prices, remains
only two classes of people: gold miners and tailors. Let us suppose
the same. It's merely that the relative value of the money supply
that the law of supply and demand has settled on the value of one
ounce of gold to be equal to a fine, custom-tailored suit of clothes.
That means that the labor, tools, materials, and talent required to
mine and refine one ounce of gold are equally traded for the labor,
tools, and talent required to weave and tailor the suit. Up until
tow, the number of ounces of gold produced each year have been
over the sudden increase in wealth. By New Year's day, however,
roughly equal to the number of fine suits made each year, so prices
prices would have doubled for everything, and the net result on
have
the
remained stable. The price of a suit is one ounce of gold, and
the
world's standard of living would be exactly
value
zero.
of one ounce of gold is equal to one finely-tailored suit.
The reason so many people fall for the appealing argument that
Let us now suppose that the miners, in their quest for a better
dard of living, work extra hours and produce more gold this
year ftan previously—or that they discover a new lode of gold
reflect on the consequences of the total supply increasing, the
jjtocii greatly increases the available supply with little extra effort.
Now things are no longer in balance. There are more ounces of gold
^an there are suits. The result of this expansion of the money
"pply over and above the supply of available goods is the same as
our game of Monopoly. The quoted prices of the suits go up
^^se the relative value of the gold has gone down.
closet and proposes that the currency from that be added to the
game under progress. By general agreement, the little bills are
distributed equally among all players. What would happen?
The money supply has now been doubled. We all have twice as
much money as we did a moment before. But would we be any
has gone down. This, of course, is the classic mechanism of
inflation. Prices do not go up. The value of the money goes down.
If Santa Claus were to visit everyone on Earth next Christmas
and leave in our stockings an amount of money exactly equal to the
amount we already had, there is no doubt that many would rejoice
the economy needs a larger money supply is that they zero in only
on the need to increase their supply. If they paused for a moment to
nonsense of the proposal becomes immediately apparent.
Murray Rothbard, professor of economics at the University of
Nevada at Las Vegas, says:
We come to the startling truth that it doesn't matter what the sttppty
of money is. Any supply will do as well as any other supply. The fre€
market will simply adjust by changing the purchasing power, ot
1 . Those who rushed to market first, however, would benefit temporarily from the
old prices. Under inflation, those who save are punished.
^olorrHi a R°thbard What Has
' Government
n.
Done to Our Money?
^oo:
(Larkspur
Pine Tree Press,
V
1964), '
p. 13.