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The Money Monopoly

Many of our readers have probably seen this widely circulated article at the WSJ: “Secret Talks Behind Central Banks' Bets”, in which the Fed's favorite  press mouthpiece Jon Hilsenrath talks about the 'secret meetings' the world's central bankers regularly hold in Basel at the BIS (the Bank for International Settlements, the nexus of global central banking).

So these unelected bureaucrats, who are among the most powerful men in the world due to their control over the fiat money system, hold 'secret meetings' where they discuss their policy steps and agree on coordinated actions far away from the glare of the public eye.

As is usually the case with mainstream articles of this sort, Hilsenrath's article is actually a kind of promotion: it is in not exactly critical of the fact that these men make decisions affecting the lives of billions of people in secret with no accountability whatsoever. After all, we are supposed to accept the State's monopoly on money without questioning, including the manner in which it is organized. As Hans-Hermann Hoppe writes on this topic:

“You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)

Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") — and the more so the cheaper the money commodity.

In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).”

The important point here is that one should not make the mistake of believing that the money monopoly is an abstract, value-free arrangement. It benefits certain people and certain groups and that is the reason why it was established in the first place. There would be no requirement for such a monopoly in a truly free society; people would be free to choose for themselves what kind of money they wanted to use. That this monopoly exists proves ipso facto that our society is not truly free.

Along similar lines, one should refrain from regarding the State as somehow being synonymous with 'we' (that is to say, all of us). The State is not some abstract, inherently benevolent presence hovering around us in order to serve us. It is populated and led by people who have their own agendas and desires. It is the one actor in the economy that claims of itself to be fully legitimized to obtain resources by political instead of economic means – this is to say by coercion and the threat of violence instead of by voluntary exchange. That this is so is due to its historical roots: the State has come into being by means of violent conquest, the subjugation of one set of people by others by military means. Over the course of its development from its feudal antecedents to its  modern 'democratic' version, it has never lost its essential characteristics. No-one inhabiting a region over which a State claims a territorial monopoly can possibly 'opt out' from it. We also know from practical experience that the right to vote does not substantially alter this fact.

The money system too is ultimately enforced by the threat of violence. If we had competing currencies issued by private entities, then we would have freedom in monetary matters – however, as Hans-Hermann Hoppe relates above, a fiat money system cannot possibly hope to prevail as a viable alternative if it has to compete. Hence the coercive monopoly.

The Same Errors All Over Again

We want to take a look at a few of the facets of modern-day monetary policy matters discussed in Mr. Hilsenrath's article.

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