From Gold To Paper Bills- How The Government Was Financially Involved
Socialism was unpalatable to Keynes since its ultimate purpose was to increase individual liberty. Rather of focusing on concerns like individual liberty, Keynes believes that the ultimate objective should be for the government to dominate the economy to his liking.
Author:Stefano MclaughlinReviewer:Camilo WoodMar 11, 2022107.9K Shares1.6M Views
Socialism was unpalatable to Keynes since its ultimate purpose was to increase individual liberty. Rather of focusing on concerns like individual liberty, Keynes believes that the ultimate objective should be for the government to dominate the economy to his liking. Let's discuss from gold to paper bills- how the government was financially involved.
Three Key Areas Where Government Is Crucial
When it comes to central banking, "the purposeful control over the currency and credit by a central institution" has been a core principle. Also in connection with this, Keynes believed that the government should decide "the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments, and whether the current organization of the investment market distributes savings along the most nationally productive channels. As things stand now, we believe that these decisions should not be left solely to the discretion of private individuals and corporations.
Keynes also felt that the government should develop "a determined national strategy regarding what amount of population, whether higher or lower than now or the same, is most expedient. When the policy has been established, we must next put it into effect. The community as a whole may have to pay more attention to the quality of its future members as well as the quantity of them.
Government Control Of Two Vital Sectors
Keynesian economics, which has shaped most textbooks on economics, is based on a man who wanted government control over two important areas of life: first, the control of money, credit, savings, and investment decisions, which meant the totalitarian centralization of capital allocation and the destruction of free investment.
And unlike socialists, Keynes did not desire this amount of control over people in order to improve their freedom in the long term, but rather to construct a bigger vision of society as he deems proper. When it comes to government slavery, Keynes desired it for its own sake, whereas socialists may have had the grace to claim that they were doing it for the sake of mankind as a whole. Murray Rothbard's statement, "There is just one positive thing about Marx, at least he was not a Keynesian," may have been motivated by this point.
It's Called The Bezzle
More economic resources and human labor will be devoted to the manufacturing of money if it is readily generated. The buying power of money is more essential than its exact amount, since money is obtained for the purpose of exchanging it for other products and services. Therefore, any action that increases the amount of money has no societal advantage.
Since the new money supply is so little in comparison to the total quantity already in existence, anything takes on a monetary function in a free market has a consistently high stock-to-flow ratio. This assures that the least feasible amount of society's labor and capital resources are allocated to manufacturing more monetary media, and is instead dedicated to the creation of valuable commodities and services whose absolute quantity, unlike that of money, is important..
Due to a lack of fresh gold output, gold mining became a very risky and unproductive endeavor, resulting in a shift in the world's capital and labor toward the creation and distribution of nonmonetary products.
Converting To Government Paper Money
Moving away from the gold standard was a major selling point for John Maynard Keynes and Milton Friedman since it would reduce expenses of gold mining by using government-issued paper money, which has a far cheaper cost of manufacture than gold.
Even though they were aware that gold has a relatively small amount of resources invested in it compared to other goods that can be easily inflated, the authors of this paper underestimated the true costs to society of a form of money that can be expanded at the will of a government susceptible to democratic and special-interest political pressures. Not the actual printing press costs, but rather all economic activity lost when productive resources run after newly produced government money instead of engaging in economic output, are the true costs.
Summary
While it's impossible to know for sure what proportion of the global economy is consumed by the pursuit of government-printed money rather than the creation of goods and services that benefit society, we can gain some insight into this question by examining which businesses and industries thrive because they pass the free market's test and which ones only exist because of government handouts—fiscal or monetarily.
Stefano Mclaughlin
Author
Camilo Wood
Reviewer
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