The author makes no connection between the Fed, fractional reserve banking, fiat money, and government policy of endlessly inflating the money supply on the one hand, and the moral and social consequences of all these on the other hand. It is as if the GFC mysteriously arose out of nothing; and as if the arguments against monopoly government control of the money supply have no basis in the theory of value. However these policies of government control of the money supply have enormously negative moral and social consequences; the proof of which is in the economics.

It is a fallacy to distinguish between “extrinsic” and “instrinsic” motivations. All human action is in an attempt to produce a result that is more satisfactory from the point of view of the acting person’s subjective values. Value is not “out there” in things, as Smith mistakenly assumed. All value is subjective; from which arises the law of marginal utility.

Printing more money, lowering interest rates, and inflating the money supply, are just different versions of the same thing. It is fraud. The Fed is a machine for legal fraud. Fiat money is an institution for perpetrating fraud against the population. The law of marginal utility applies to money as much as to other things. Government cannot repeal it.

Smith thought the great virtue of paper money is that it would economise on the use of resources that would otherwise be wasted digging up gold. It never occurred to the classical economists that governments would deliberately inflate the money supply, given the machinery. Yet why should we be surprised? Kings had been debauching the money supply for centuries, by clipping coins. Central banking delivers them the perfect machinery – and one which even many trained economists don’t understand.

Government production of money originates enormous moral risk. It is an utter superstitious fallacy that it increases society’s net wealth. Keynes merely dressed up in acceptable mathematics the inflationist fallacies that economists had already refuted a thousand times.

Inflation takes from the productive and gives to the privileged. It causes money to lose its purchasing power. It penalises savings by robbing savers. It encourages debt. It encourages consumerism – consuming the future for the present. It lowers real wages. It robs the poorest most. People, in order to get ahead and provide for their retirement, must go into debt to buy appreciating assets. Those with greater financial sophistication profit most, through inflation and manipulating tax law; while those with lesser financial sophistication are exposed to much more risk. It diverts resources from production, into trying to get get other people’s wealth through legal privileges. It causes the great artificial boom – which no economist has ever denied. And it causes the following bust, with all its attendant depression, unemployment, bankruptcies and hardship. It destroys capital on a vast scale. It sends millions of people into retirement, broke. It makes the entire population more dependent on government. It benefits government and those in a position to get their hands on the newly issued money first – like banks and speculators. It is used to fund aggressive imperial wars for which the people would refuse taxation: like Vietnam, Iraq, and Afghanistan. It increases the expansion of government into any and every corner of our lives, destroys liberty. And then the government, and the ignorant, blamed “unregulated capitalism”.

The next great moral revolution, after the abolition of slavery, is to end its modernised version and end the Fed, fiat currency, fractional reserve banking and central banking.

The result would be: an end to the cycle of booms and busts; money steadily gaining in value, instead of losing value; production based on savings instead of debt; a return to the value of work and savings instead of speculation and debt; an increase in our freedom; a great reduction in privilege and speculation; a reduction in people dependent on government; a great increase in people providing for themselves and others through productive work.

The next great moral revolution is to end slavery's modernised version: end central banking, fiat currency, and fractional reserve banking.

There is little point in trying to restore faith in a financial and economic system that does not recognise ecological limits and, therefore, is destined to fail. The best thing that could happen for us would be for the "discipline" of economics to be disbanded and for thinking to be based on ecological principles.

I guess that to a hammer, Peter Hume, everything looks like a nail. So your immediate reaction to an article on the GFC is to reach for your trusty Austrian School mantra, and beat us to death with it.

>>The author makes no connection between the Fed, fractional reserve banking, fiat money, and government policy of endlessly inflating the money supply on the one hand, and the moral and social consequences of all these on the other hand<<

Did you read this bit?

>>The near meltdown has shaken people’s faith in the financial system and its institutions.<<

The words "financial system" would, I suggest, include "the Fed, fractional reserve banking, fiat money, and government policy".

Having thus demolished the straw man you set up, the rest of your observations are pure advertorial.

The author - unlike you - does not jump to conclusions about which particular failing caused the problem. He casts a wide net, including our own attitude towards money as well as the distorted view held by bankers and the financial institutions they worked for.

Although he does so in slightly more pious terms than I would use, he makes the point that we also require an attitude adjustment, before we can again be entrusted with our small part in the process.

The question he poses whether we lead or follow.

Whether we as a society are simply looking for an opportunity to go back to the old days of laissez-faire borrowing against a future that we see as free from threats, or whether we intend to acknowledge that we are part of the problem, and mend our profligate ways.

Makes sense to me. Even though I don't see the answer too clearly.

But then, I'm not a hammer.

An interesting debate - Ian Harper's position that economic decisions have moral components fits experience. Perhaps this aligns to what has been ascribed to Peter Costello (amongst many) – the good of society emerges from allowing individuals to maximise their personal interests.

William Dilthey created the idea of Weltanschauung (world view, http://en.wikipedia.org/wiki/World_view) which “is the fundamental cognitive orientation of an individual or society”. In essence how one looks at life dictates how one behaves.

To identify the operational Weltanschauung of individuals/groups one sets up a range of scenarios and see which one fits. In the case of the GFC and ongoing debate about executive remuneration the thing that fits is a belief individual’s should maximise their personal benefit with those who hold economic power being free to achieve greatest gain.

This is a moral position irrespective of whether one agrees with it or not.

It is also interesting to note those promoting such a belief also oppose the creation of opposing powers (such as trade unions) which could gain and use power to benefit their members on the basis of society’s greater good. The whole is a morality of convenience.

The sting in Ian’s tail is the behaviour of those of lower socio-economic clout is not different to the executives/corporations being criticised. Their behaviour is identical. Their beliefs are the same.

Change must be system wide in order for the fundamental approach to change – everyone has to be included. Having worked with a number of people facing serious problems I have found those who exercise empathy and act in others interests are the ones most likely to make progress and find satisfaction in life.

I wonder if a fundamental truth of life is being ignored? A car bumper sticker gave in insightful portrayal of this – “he with the most toys when he dies wins!”

Paul@Bathurst
The most fundamental moral error is to confuse war with peace; rape with love; and social relations based on aggressive violence and threats, with those based on consent. With aggression, it is a zero-sum game, and the one gains at the expense of the other. With consensual relations, the benefit is mutual – otherwise the parties wouldn’t do it.

Power means you can force someone to do what you want, even if they don’t consent. The language of power does not describe economic ie consensual relations. It describes political relations, which are always based on a legal monopoly of force and threats of force.

The remuneration of highly-paid executives comes from the actions of consumers in voluntarily handing over money in exchange for the company’s goods, and shareholders voluntarily handing over money in exchange for the company’s shares. Both classes of payers have the right and freedom to withhold payment.

The issue with trade unions is not freedom of association, nor the right to strike. It is with using coercion to violate others’ freedom of association; it is about using violence or threats to force other people to strike.

The purpose of trade unions is to benefit their members. But it is important to understand that restricting competition forces those excluded into unemployment or lower-paying jobs. Excluding competition and reducing production do not increase society’s wealth nor confer any other net social benefit. So far as unions rely on legally tolerated coercion, the higher wages they obtain are at the expense of everyone else in society.

Those who use coercion to benefit themselves at the expense of everyone else employ a morality of convenience; not those who benefit themselves through benefiting others in voluntary transactions.

Pericles
>>The near meltdown has shaken people’s faith in the financial system and its institutions.<<

>The words "financial system" would, I suggest, include "the Fed, fractional reserve banking, fiat money, and government policy".

It depends on what people’s actual understanding is. Most people have only the vaguest understanding about these things. If they understood what they are, they would abolish them immediately.