Sound Money: Key to Prosperity: Because Sound Money Is a Key to Having Financial Security and Enjoying the Benefits of Liberty, It Should Never Be Taken for Granted and Never Be Allowed to Disappear

By McManus, John F. | The New American, April 14, 2008 | Go to article overview

Sound Money: Key to Prosperity: Because Sound Money Is a Key to Having Financial Security and Enjoying the Benefits of Liberty, It Should Never Be Taken for Granted and Never Be Allowed to Disappear


McManus, John F., The New American


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In addition to many other praiseworthy features, our nation has always been known as a productive marvel. People don't come here to starve; they come to enjoy what could be called "the good life." One key reason why prosperity has always been found in America is the existence of sound money. Its importance should not only never be taken for granted; it should never be allowed to disappear.

More than 50 years ago, economist Dr. Murray Rothbard stated the following very important fact about money: "Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a 'claim on society'; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange."

Medium of Exchange

The important word here is commodity, something possessing recognizable value unto itself. When a commodity is chosen to be money, it is selected because of its universally accepted value. Experience also shows that whatever is chosen as money should be durable, divisible, transportable, and relatively scarce. As soon as a commodity becomes accepted as money, the cumbersome and frequently unworkable system known as barter loses favor. A medium for exchange now exists. Now, a person can exchange his labor for money and use that money to buy goods from someone who didn't need his labor. A farmer can sell his cattle and use the money to buy a carpenter's furniture, and both are completely satisfied.

When money exists, commerce is no longer inhibited, as it is when barter prevails, by what Dr. Rothbard called "the need for a double coincidence of wants." Smith can use money to purchase goods from Jones when those goods had previously been unobtainable because Jones had been offered something he didn't want.

Immediately, we see that sound money spurs commerce, stimulates a wide diversity of labor, and helps mightily to advance civilization. Sound money is not the product of advancing civilization; it is a cause. John Birch Society founder Robert Welch made this point many years ago when he wrote:

When Tacitus said of the German aborigines nearly two thousand years ago, "we have taught them to accept money," he was boasting justifiably of this step towards bringing the benefits of civilization to some barbarian tribes.

Sound money makes it possible for some to study medicine, become teachers, create art, perform as clergymen, produce food, or undertake a wide array of professions. In a barter system, if a teacher needs shoes but a shoemaker has no desire to be taught, the hoped-for transaction doesn't occur. The teacher might then seek someone else who wants his lessons and will pay for them with something the shoemaker desires. The teacher will, therefore, accept that something for his lessons, not because he wants it, but because the shoemaker does. This is indirect exchange, a step on the way to having money.

When money is introduced into a system, the teacher who becomes employed and earns money for his efforts will find no problem using his money to transact business with the shoemaker or with anyone else. So too will a doctor, a musician, a painter, a clergyman, and many others who produce no goods but who receive money for their services and contribute to the advancement of civilization. As mentioned above, money acting as a medium for exchange allows for a wide diversification of labor, a great leap forward in any society. The claim that sound money is the cause of advancing civilization needs no further explanation.

History confirms the use of a wide variety of items for money. Valuable substances such as salt, sugar, cattle, tobacco, and shells acted as a medium for exchange in bygone cultures. But when the need for the money to be durable, divisible, transportable, and relatively scarce was recognized, experience showed that gold and silver were the best commodities to use for money. …

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