All of which explains why currency devaluation is just another word for socialism. Paraphrasing the Robert Bartley quote that begins this piece, currency devaluation is wealth redistribution . Governments sometimes employ it to shrink the value of the debt they owe, or the cost of their spending in the first place. Sadly, the socialism doesn’t stop there. It redistributes wealth in society, too. To see why, it’s useful to travel ahead in time almost exactly 100 years after England wisely chose to avoid socialism. Germany didn’t. It turns out policy matters... In 1914, World War I began. That same year, German monetary officials decided to suspend the mark’s link to gold with an eye on sharing some of the war’s costs with the producers of armaments and other goods and services necessary to go to war. Arms producers (among others) would take a “haircut” for the alleged betterment of Germany. For those a bit slow on the uptake, German monetary officials chose to devalue resource access in the future when we choose saving and investment over immediate consumption. We don’t save and invest “money” as much as we shift the economic resources that money can be exchanged for to others in return for more expansive
Quoting the great George Gilder on the matter, “History tells us that the threat to capitalism is not debt, but socialism.” What’s crucial about this is that currency devaluation is an embrace of socialism, and it’s one that England’s Chancellor of the Exchequer chose to avoid. The protection of the pound was a wise policy choice . Which brings us to a brief but important digression into currency, or monetary policy. Economics would be much better understood by the various economic religions if congregation members grasped that no one exchanges money, is paid with it, invests with it, etc. Money is merely an agreement about value that facilitates the exchange of real things. It’s products for products when you, the reader, purchase a breakfast taco at Whataburger, a flat-screen TV at Best Buy, or a house in your favorite neighborhood. You’re exchanging your production, or the fruits of your labor, for food, appliances, and shelter. The only thing is that most restaurants, retailers, and homeowners won’t accept your brilliance as a salesman, barista, or banker as payment for various market goods. The agreement about value that is money renders moot the previous problem. We work for “money,” but we’re really working for what money can be exchanged for . Just the same, we don’t save and invest “money” as much as we shift the economic resources that money can be exchanged for to others in return for more expansive resource access in the future when we choose saving and investment over immediate consumption.
American Consequences
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