"Politicians and pundits worldwide have all sorts of explanations for the crises and malaise: greed, reckless speculation in dangerous currency markets, excess debt, inequality, and American capitalism itself. But the true cause is the ignorance of policy makers, who ideas about money have been handed down from the mercantilists of the Middle Ages. These officials have been unable or unwilling to grasp a simple truth: money is not wealth. It is like a scaler or a ruler--a measure of value."
So writes Steve Forbes in his recently released "Money: How the Destruction of the Dollar Threatens the Global Economy -- and What We Can Do About It." Juxtapose these words with the following five-year chart of the money supply, and one would be hard-pressed to argue that the political class has internalized Forbes' lesson.
In the wake of the various rounds of quantitative easing, and associated persistent argument that if we can just generate inflation, the economy will take off, the following simple but perpetually ignored message from Forbes' new book on the purpose of money in and of itself is worthy of a read:
Money is a standard of measurement, like a ruler or a clock, but instead of measuring inches or time, it measures what something is worth.
Imagine what the world would be like if the number of minutes in an hour changed each day or if the number of inches in a foot kept changing. Life would become infinitely more difficult. How could a music teacher know what to charge for an hour-long music lesson if one hour was composed of 60 minutes one week and 70 minutes the next? How could an architect design a house if a foot consisted of 12 inches on a given day but a short time later it was 15 inches? Imagine how tricky it would be to bake a cake if the recipe called for 45 minutes in the oven, and you had to figure out of those were nominal minutes or inflation-adjusted minutes.
Just as we need to be sure of the number of inches in a foot or the minutes in an hour, people in the economy must be certain that there money is an accurate measure of worth. When the value of money fluctuates, as it so often does today, it produces uncertainty in addition to unnatural and often destructive marketplace behavior--artificial booms and busts that breed malignant economic and social consequences. Graphic examples include Germany after World War I and the United States during the 1970s, as well as in the past decade.
Check out "Money" for a clear, concise, commonsense and comprehensive look at the importance of a sound currency, and how to go about restoring it.
Note: The links to the book in this post will give you an option to elect to donate a percentage of the proceeds from the sale to a charity of your choice. Mercury One, the charity founded by TheBlaze’s Glenn Beck, is one of the options. Donations to Mercury One go towards efforts such as disaster relief, support for education, support for Israel and support for veterans and our military. You can read more about Amazon Smile and Mercury One here.