At last week’s New Orleans Investment Conference, Lawrence Lepard gave a speech entitled “Fix the Money, Fix the World.” His talk provides a fundamental explanation of why solid money is so important on both an economic and a moral basis.
Lepard’s speech is just one of the most recent explanations of why a stable, solid monetary system is so important to the US and global economies. The 2014 book Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It, written by Steve Forbes and Elizabeth Ames, is a broader discussion of the subject.
Lepard explains, “Prices are the most important piece of information in a human society … the interest rate is the price of money that helps balance time preferences and match savers with investment projects. One cannot overestimate the importance of the following concept: Capital accumulation and private savings lead to investments that improve our productivity and our standard of living. “
Prices only make sense if they are set by the unmanipulated free market. Prices have maximum utility when they are quoted in a stable, solid currency whose value remains constant.
When governments inflate the money supply, it inevitably harms the purchasing power of any monetary unit. It no longer protects the property of people and the private sector. Instead, it becomes a vehicle for governments to steal from people who are saving. As a result, it discourages savings, which are the ultimate source of capital for investing in improving the economy and people’s living standards.
Later in his speech, Lepard said, “Good money is truth in the absolute sense. Simply defining truth as an accurate representation of reality, prices are the truth of what market players want in terms of available capital. “
Healthy money is not only the truth, it also offers freedom. The best way to understand this is to reconstruct the history of what happened in countries that suffered from hyperinflation – Germany and Hungary after World War I, Zimbabwe at the beginning of this century, and Venezuela today. When the purchasing power of a fiat (paper) currency decreases rapidly, the availability of goods and services decreases.
Only after the Zimbabwean currency collapsed in January 2009 did the government allow its citizens to trade in any form of money they wanted. The more stable currencies of the US dollar, the euro and the South African rand quickly circulated in this country to fill the gap. When Zimbabwe merchants were able to pay for products in currencies that sellers were willing to accept, they could put inventory on shelves for customers to buy. Within a year of the Zimbabwean dollar collapsing in January 2009, the country’s relative prosperity skyrocketed (albeit still well below the world average).
The people of Venezuela today are literally suffering from this nation’s hyperinflation. Many died of starvation because they did not get enough food to survive. Of those living in Venezuela today, the average weight of a resident has decreased by more than 20 pounds in recent years.
Unfortunately, when governments inflate the money supply, healthy money is not possible. Instead, these fiat currencies are destined to collapse. Throughout the history of unsecured paper money, the average lifespan from initial issue to failure is 40 years, which is the average lifespan is only 25 years. As this happens, it is everyday citizens who suffer. Without exception, those who owned physical gold and silver did better than those who did not.
Patrick A. Heller was honored as FUN Numismatic Ambassador 2019. He also received the American Numismatic Association’s 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. including twice in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications officer for Liberty Coin Service in Lansing, Michigan, and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals. Past newsletter editions can be viewed at www.libertycoinservice.com. Some of his radio commentary, entitled “Things You ‘Know’ That Just Are Not So And Important News You Need To Know,” can be heard on Wednesday and Friday mornings at 8.45am at the WILS in Lansing at 8.45am (the broadcast live). and becomes part of the audio archive on www.1320wils.com).
