Over the last few years some have asked me what persuaded me to move over to the Market Monetarist camp. Prior to sighing on to the Market Monetarist philosophy in 2009, I was just average Jane with a deep interest in history, unemployed after having been laid off at the onset of the recession, trying to figure out why the economy and our world were falling apart. Being of a more libertarian mindset, I was in with the inflation-nutter crowd.
Having plenty of time on my hands and an excitement for self-study, I had been studying some of the old school free market philosophers, like Bastiat; and then worked my way forward to Milton Freidman. I also had some exposure to Hume, although indirectly from a speech about monetary deflation that was given in 1838 by Abraham Lincoln.
History is such an interesting puzzle to put together, and it can greatly inform on the present. Even in 1838 the visible effects of monetary deflation were known. Taking a look around, I was seeing very much the same things happening as illustrated in Lincoln’s 1838 speech; and it put some very deep questions in my mind about what was really going on.
I found a great history book about the rise and fall of the American Whig Party; and in it, one can find a large chunk of the political history of banking and bank notes in the United States. One can also find in it an understanding of the uniting force behind the Whigs who were very dissimilar in political belief regarding nearly every topic but one – economics (Lincoln, very much a self-made man, was a Whig). They were for banking and the benefit of bank notes. Although some could say it was accidental that they ended up as free-marketers, it was that idea that fueled their popularity and brought them to national party status. I think one might be able to compare the rise of neo-liberalism in the Republican Party during the Reagan years as being a very similar phenomenon.
Whig opposition, the Democrats, on the other hand, stood for nothing but gold and silver. They wanted nothing to do with banks or banking. Some say that their stance on banks came from a healthy skepticism of the power of money. Of that, I am not so sure because money is power; they had power most of the time, and they didn’t just stop at destroying The Bank of the United States. In the book, Andrew Jackson is quoted as saying something like, “What do farmers need with bank notes?” In the ensuing years, the Democrat Party tried in many ways to thwart banking and the circulation of bank notes by banning the use of small notes in the states – the ones average people were most likely to use.
Now if that isn’t a reach into the pocket books of average people, I don’t know what would be. And they said the same things back then as we have been hearing now – making average people poor is for the best for all. The real question is: Best for whom? Another question might be, is that pro-economic freedom – or is it tyranny?
I think everyone needs to answer those questions on their own, but I am firmly against the idea that monetary disinflation and deflation is good for anything. It destroyed our banking system. It destroyed countless lives. It shoved a great many of those on the margins into poverty – and for what good purpose? I see none.
Market Monetarism, in my opinion, brings sanity, stability, balance between growth and inflation, and transparency and accountability to the monetary authorities while protecting free market principles and economic freedom. It is the best answer to the greatest question of our time – what really is best for all?