Tamny: Stable Currency is the Goal

Tamny's point is an obvious one - money is useful only to the degree it facilitates an exchange between two parties. To that end, money should consistency measure and communicate value (like any other unit of measure). You don't want a unit of monetary measure that's constantly changing, and anchoring it to gold is only one of many ways to ensure a stable currency.  

It's Truly Scandalous That Some View Judy Shelton As Controversial
By John Tamny

The rial is no longer Iran’s currency. It was recently replaced by the toman. Why was it replaced? The answer is really simple. Since 1971 the rial has been devalued over 3,500 times. Translated for those who need translation, the rial long ago ceased to function as a currency.

In order for currencies to be broadly circulated, they must be trusted. That’s the case because no one exchanges money when they transact. In truth, they exchange products for other products. Money is just an agreement about value that facilitates the transaction.

The rial ceased to function as a currency precisely because no reasonably sensible provider of goods and services would accept that which was constantly being devalued. In other words, no sane person will hand over real goods and services for money that is exchanging for fewer and fewer goods and services by the day, week, and year.

All of the above is a reminder that when monetary authorities devalue what we call “money,” they’re robbing workers of the fruits of their work. It’s as simple as that. If money is consistently shrinking as a measure exchangeable for goods and services, so is the value of our work. It’s being taken from us. Politicians can shrink our buying power through direct taxation, or they can do so through the tax that is devaluation. Both are cruel levies placed on our work.

That currency devaluation is as old as money is explains better than anything else why Judy Shelton - whose nomination to the Federal Reserve Board was stalled Tuesday by a Senate committee vote - has been such an insightful and muscular voice in favor of credible money for decades. To know Shelton is to know how thoroughly decent she is, and how gracious she is. To know her is to want to be like her. She’s also a very compassionate person. One of the most animating factors of her work over the decades is that she rightly sees currency devaluation as incredibly unjust.

Shelton has long focused on monetary policy because she’s long been horrified by the despicable act of devaluation. In its extreme form, it’s what’s happened in Iran. The Iranians who were paid for their toil in rial saw their life’s work taken from them. Shelton views this as tragic.

Looked at through a dollar lens, U.S. monetary authorities haven’t wrecked the dollar in the way that Iranian authorities have. Evidence supporting the previous assertion is that the dollar is still accepted as “money” around the world. Its global acceptance is a consequence of it having for the most part held its value over the decades.

In Shelton’s case, the “for the most part” when it comes to the dollar’s constancy as a measure of value is what concerns her. Per Adam Smith, the “sole use of money is to circulate consumable goods.” Money should be a stable and forever measure of value. Historically it was. Gold was the market commodity used to anchor money not with the view of limiting the supply of money, but because gold has long been the commodity least affected in price by surges in its supply or demand. Gold has long been the constant, which explains why it’s defined currencies around the world for hundreds, and realistically thousands of years.

Gold-defined money existed as assurance for workers that their immense effort on the job would not be taken from them by stealth. Simple as that.

So while the dollar’s exchange value has never been a Fed function to begin with, and wouldn’t be even if Shelton were Fed Chairman, Shelton has a positive view of gold-defined money precisely because she wants to end the currency devaluations that so cruelly rob innocent workers of the fruits of their work. Translated for those who need it, Shelton’s allegiance isn’t to gold as much as it’s to workers whom she hates to see being shortchanged.

That’s why, assuming a commodity or dollar-issuing method comes along that reveals itself as more price stable than gold, Shelton would logically support that which imbued the dollar with even greater stability. Shelton respects hard work, and stable money as a measure of value is what ensures that effort in the workplace won’t happen in vain.

What’s sad is that Shelton’s views are seen by some as “controversial.” Somehow her tireless support of money that holds its value so that workers get to retain the value of their work has economists in particular up in arms. Notable here is that the Fed is the largest employer of economists in the world. Many inside the central bank view the notion of stable money as improper, or yes, “controversial.” That they don’t share Shelton’s vision of money, one that has been around for millennia, is a happy reminder of what a great addition Shelton will be at the Fed. Her presence will force the economists in its employ out of their comfort zones, and perhaps cause them to reconsider why they reflexively disagree with Shelton about money.

In the process, they might pause to consider what Shelton already knows intimately: there are no companies and no jobs without investment first. And when investors put money to work, they are buying future dollar income streams and future returns in dollars. It’s a reminder that devaluation doesn’t just eviscerate the value of our toil. Indeed, it’s also a tax on the very investment without which work opportunities would be rather limited.

Judy Shelton is pro-worker and also pro-work opportunity. Yet her decades-long support for workers and work opportunities is viewed by some as controversial. That’s truly scandalous. Though yesterday's vote revealed an uphill battle for the nominee, there’s still a chance for Shelton to be confirmed. Republicans need to make it happen.

If This (Horror) Story of Government Spending Doesn't Change You, Nothing Will


By John Tamny
March 07, 2019

That 90% of Silicon Valley start-ups fail is often mentioned in these columns, and it’s in many ways the theme of my upcoming book, They’re Both Wrong. Investor and writer Andy Kessler alerted me to the number, and it’s one that anyone aiming to understand economics should internalize.

The 90% number is a reminder that bad ideas in Silicon Valley quickly fail. The Valley’s immense wealth isn’t an effect of constant success; rather it’s a certain consequence of persistent failure that forces constant learning and improvement. What makes no sense dies with great rapidity in northern California, so that good ideas can be born.

The truth about Silicon Valley’s economics is an inconvenient one for members of the right convinced that the center of technological innovation is a hive of socialists. Please. The latter is a myth that the overly sensitive have chosen to focus on in order to promote their alarmist narrative about the U.S. going the way of Venezuela, or Greece, or Zimbabwe.

Just the same, the Valley’s relentlessly capitalist ways similarly mock members of the left who defend government spending as compassionate. No, it’s waste. Plain and simple. All wealth is initially created in the private sector, and government spending is the wasteful consequence. We know it’s wasteful because we know that bad ideas in government almost never die. What’s mindless persists. Government is the polar opposite of superrich Silicon Valley.

Let’s never forget that all government workers used to not be government workers. And all money that funds government activity used to not be held by government until politicians taxed it away for political consumption. Stated simply, government spending is the private sector minus merit, and minus the persistent failure and possibility of failure without which talent and innovation cannot be realized.

While what fails in the private sector is mothballed, what belly flops in the governmental sphere is frequently rewarded with more taxpayer funds. That’s why government waste is a first order redundancy. Of course it's waste. Absent the possibility of investor withdrawal whereby what makes no sense is rapidly starved of resources, what’s ridiculous just grows and grows.

Which brings us to a front page Wall Street Journal article from Tuesday. Even though airplanes can transport passengers from Chicago to St. Louis in less than 1 hour, Amtrak (our national train service) has a train route in place that can similarly transport passengers between the two cities. The problem is that what takes less than an hour by plane takes 5 ½ hours by train. Sadly, the Amtrak story gets worse.

As the Journal went on to report, “a fast-rail project is under way in Illinois.” It’s hard not laugh while typing, but this project will push the top speed of Amtrak trains traveling from Chicago to St. Louis up to 110 miles per hour, thus “shaving just an hour” off a trip that as previously mentioned takes 5 ½ hours. Fear not, the story gets even worse.

You see, $2 billion was spent so that Amtrak trains traveling between STL and Chicago would take 4 ½ hours instead of 5 ½. Unsurprisingly, this non-improvement isn’t or won’t impress passengers. The present expectation is that, assuming top speeds of 110 mph, “the share of people who travel between the two cities by rail could rise just a few percentage points.” On its own, American Airlines already flies seven times per day from Chicago to St. Louis. In an hour.

So while there are countless stories and lessons about the folly of government spending, the waste of $2 billion on something that makes no economic sense loudly exposes the horrors of Congress controlling so much of the wealth first created in the real world. The waste is monstrous. And this is just Amtrak. Ideally the Amtrak story instructs.

Ideally it’s a reminder that with government spending, it’s not a Democrat or Republican thing. Politicians exist to spend, so the cost of government grows and grows regardless of the Party in charge.

Readers would be wise to consider how the money is spent. The federal government costs close to $4 trillion each year, and with Amtrak in mind, readers might imagine all the other waste taking place across various federal programs. Crucial here is that the nearly $4 trillion used to be in the private sector.

Now it’s not, which means close to $4 trillion is annually allocated by politicians in obnoxiously obtuse fashion. That it’s misallocated is a blinding glimpse of the obvious. When failure doesn’t inform one’s actions, the inevitable result is economy-sapping waste.

It cost Amtrak $2 billion to “improve” service that was never necessary, while $500,000 was all it took for Peter Thiel to purchase 10 percent of Facebook in 2004. With the long history of nosebleed federal spending very much in mind, how many Facebooks have been suffocated by government waste that economists laughably tell us stimulates economic growth?

This is not a partisan issue. It’s one of common sense. Government, whether run by Republicans or Democrats, can only mis-appropriate what’s precious. Sane people on each side should energetically oppose the falsehood that is “government spending” simply because it’s not government spending.

"Government spending" is a horror story that cannot be stressed enough simply because it has everything to do with suffocating the amazing under the gargantuan weight of what has to be flamboyantly dumb by virtue of failure informing none of it. Call "government spending" what is: freedom-sapping economic contraction that robs us of trillions worth of experimentation necessary to employ us much better, improve our living standards, and substantially elongate our lives.


John Tamny is a speechwriter and writer of opinion pieces for clients, he's editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). His new book is The End of Work, about the exciting explosion of remunerative jobs that don't feel at all like work. He's also the author of Who Needs the Fed? and Popular Economics. He can be reached at jtamny@realclearmarkets.com.