Did 2016 Republican presidential candidate just finish reading a copy of Murray Rothbard’s “What Has Government Done to Our Money?” Did he watch a couple of Ron Paul videos from his last two runs for president? After questioning United States monetary policy, it may seem like he did.
Speaking in an interview with Marketplace last week, Carson discussed fiscal policy and noted that he would not approve of any government spending increases if he were president. Right now, the U.S. faces a $19 trillion national debt, in addition the $120 trillion in unfunded entitlements and liabilities.
Carson believes the only way the U.S. can maintain that level of astronomical debt is through fiat money. This seems to have come out of nowhere because Carson, echoing Austrian economists, hasn’t espoused on monetary policy this election cycle.
Here is what Carson said:
“Now the only reason that we can sustain that kind of debt is because of our artificial ability to print money, to create what we think is wealth, but it is not wealth, because it’s based upon our faith and credit. You know, we decoupled it from the domestic gold standard in 1933, and from the international gold standard in 1971, and since that time, it’s not based on anything. Why would we be continuing to do that?”
Although it appears most GOP and Democratic presidential candidates are avoiding the issue of debt, it seems that voters are still interested in the topic. With interest rates inevitably set to rise, this means the federal government will have increasing debt servicing payments, and this will generally affect government spending as a whole. As the IOUs come in, the government will have to either inflate, inflate, inflate or admit these debts can’t be paid.
Carson later added: “I mean if we continue along this, where does it stop? It never stops. You’re always gonna ask the same question every year. And we’re just gonna keep going down that pathway. That’s one of the things I think that the people are tired of.”
Well, as long as you have a Federal Reserve sponsoring this entire ordeal and dubious premise then it will persist.
Ostensibly, Carson’s remarks seem to have irked the mainstream media for whatever reason.
The Washington Post‘s Matt O’Brien, for instance, chastized Carson for his complimentary nature and “flirting with the idea of a gold standard.” O’Brien is concerned about how a gold standard may affect interest rates. Simply put: he just wants the brilliant minds at the Fed to determine when to hike and when to decrease interest rates.
Thankfully, the Mises Institute’s Ryan McMaken laid the smackdown on O’Brien by writing:
“So O’Brien’s problem is with the fact that the market does not follow his Keynesian models on how interest rates should behave. Like most self-proclaimed ‘economic wonks’ in DC, O’Brien can’t imagine a world in which the Fed is limited in what it can do to respond to a recession.”
He added: “Perhaps it’s time for Mr. O’Brien to read about the Forgotten Depression.”
Or perhaps O’Brien needs to read this passage from Rothbard’s aforementioned work in which he writes about the government going off the gold standard:
“In the twentieth century, governments, rather than deflate or limit their own inflation, have simply “gone off the gold standard” when confronted with heavy demands for gold. This, of course, insures that the Central Bank cannot fail, since its notes now become the standard money. In short, government has finally refused to pay its debts, and has virtually absolved the banking system from that onerous duty. Pseudo-receipts to gold were first issued without banking and then, when the day of reckoning drew near, the bankruptcy was shamelessly completed by simply eliminating gold redemption. The severance of the various national currency names (dollar, pound, mark) from gold and silver is now complete.”
Rothbard further writes:
“When a country goes off the gold standard and onto the fiat standard, it adds to the number of ‘moneys’ in existence. In addition to the commodity moneys, gold and silver, there now flourish independent moneys directed by each government imposing its fiat rule. And just as gold and silver will have an exchange rate on the free market, so the market will establish exchange rates for all the various moneys. In a world of fiat moneys, each currency, if permitted, will fluctuate freely in relation to all the others. We have seen that for any two moneys, the exchange rate is set in accordance with the proportionate purchasing-power parities, and that these in turn are determined by the respective supplies and demands for the various currencies. When a currency changes its character from gold-receipt to fiat paper, confidence in its stability and quality is shaken, and demand for it declines. Furthermore, now that it is cut off from gold, its far greater quantity relative its former gold backing now becomes evident. With a supply greater than gold and a lower demand, its purchasing-power, and hence its exchange rate, quickly depreciate in relation to gold. And since government is inherently inflationary, it will keep depreciating as time goes on.”
The gold standard institutes checks and balances on the government. The fiat monetary system has been a failed experiment. A dollar buys a nickel’s worth, debt is astronomical and seniors and savers become victims of misguided policies of the central bankers. Carson is, to say the least, on the right track. Let’s see what he’ll say next.
–AM
Rabelrouser says
I will be watching closely on follow up comments to this degree from Ben Carson.