In today's political environment there seems to be two sides: 1) those who think the government can and should be in charge of solving our problems, and 2) those who think the government is evil and should be restrained. These are oversimplifications, to be sure, but I believe they at least come close to making a little sense of where people stand.
Each of these viewpoints can easily run to extremes. Those of the first viewpoint can readily get caught up in theories of government that, in the past, have led to totalitarian states, oppression, and state-sponsored genocide. Those of the second viewpoint tend to take the form of "founding father worship," a condition whereby we deify the men who gave us America's founding documents as though they were infallible.
It is with this second viewpoint I wish to take momentary umbrage. For, although I believe America's founding to be a spectacularly singular event in the history of freedom, I do believe the founders were fallible, fallen human beings like the rest of us.
I also believe they made at least one huge error.
Yesterday evening I was out with my family. Somehow, the topic of the game of Monopoly came up. Recently, my two youngest children, six and eight years old, have been completely enamored with this game. And boy, are they good at it! In one knock-down-drag-out-winner-take-all match, my six year old son cleaned my clock and left me destitute, all the while subsidizing his sister, who was not in much better shape than myself. I marvelled at their mathematical skills, their grasping of the concept of mortgages, and the agility with which they would quickly become real-estate tycoons. In yesterday's discussion, it came up that in a game between just the two of them things had progressed so far that they actually broke the bank.
"What do you mean?" I asked, smelling a rat.
"We made sooooo much money the bank ran out," answered the six-year-old with pride.
"Yeah, so we made more," chimed the eight-year-old with a freckled grin.
"You did what?" I asked.
"We made more money."
"Just like that?"
"Yup. It was easy, actually."
Now I knew I was onto something, so I pressed further, asking, "Who gave you the authority to do it?"
They both shrugged their shoulders and answered, "We did."
"And why did you think it was ok to do?" I asked, going for the jugular.
"Because we were in charge of the game, silly!"
Out of the mouth of babes! You see, what my two cherubs had done was nothing more than the obvious - nothing more than governments have been prone to do any time and every time they find themselves in a similar jam, and, "being in charge of the game," who's to stop them?
The founding fathers put into documentary form many principles from the greatest minds of statehood from throughout history. They sought to chain the monster of government and make it subservient to the dictate of the people. Balances of powers, states' rights, a Bill of Rights, and the rule of law were enshrined in founding documents that began a great experiment in freedom unmatched in world history. However, they overlooked at least one enormous point: whoever controls the money controls the game. By assigning exclusive control of the money supply to the government alone, they dangled a carrot of irresistable size in front of the noses of power mongers and opportunists. It was only a matter of time before such a towering source of power would be abused. Without competition, due oversight, or powers of restraint provided to the people, the exclusive authority to control the money supply could eventually be the Achilles heel of the entire government.
Which brings us to today. Both sides of the political divide (the two viewpoints stated above) have found that once in office, the magic machine of money creation is easily at hand to enact their policies (no matter what their campaign rhetoric had been). The benefit is that the populace does not have to be asked, and no new taxes need be imposed. One political side promises more big government as the answer, and funds it with trillions of dollars created out of thin air. The other side yells and screams about the socialism of such programs, and then, once in office, reaches for the same easy-money spigot. The bottom line is this: when something as powerful as controlling the money supply is governed only by the false notion of self-restraint, there will be no restraint.
"What happened next?" I asked my young Federal Reserve Chairmen.
"We made more, why?"
"Oh, just wondering," I said.
"But Dad," interrupted the eight-year-old, sharp enough to see where I was heading, "It didn't cause prices to go up!"
I was so proud of her, for she remembered the lesson of inflation I had tried to teach them a couple years ago. But she was also missing another aspect of the game.
"That's because the rents are fixed," I answered. "They are printed on each card and cannot change. If they weren't fixed, they would go up every time you expand the money supply." (Don't even get me started on the evils of price-fixing! That's another monster altogether!)
"I know, I know, Dad," she said with a coy smile, "But it's just a game!"
She was right, of course, and Dad didn't feel like infringing any further upon childhood joy with real life economics. But when it comes to real life, it is not just a game.
So what could the founders have done differently?
The concept is called "privatized money," which involves allowing the people themselves to come up with, distribute, and regulate their own money supply based upon open competition. There would be several at a time, all vying for our usage based upon merit alone. No authoritative government would be handing us one single choice and forcing us to accept it as "legal tender," all the while affecting its value with its hands on the levers behind the curtain. Privatization would be like choosing amongst Visa, MasterCard, and American Express based upon who we thought had the most stable, reliable, well-known, and dependable money. Perhaps each would offer a backing and redemption in gold. It is not such a crazy idea. Deregulation and free markets have vastly improved such things as airlines, telephones, and even postal service (Federal Express, Airborne, and others have carved a nice niche in the space around the government's strange monopoly on mail). Privatized money has been done many times in spotty moments throughout history, at points where governments hadn't yet confiscated control. It worked. Usually it went from chaos to consolidation among a handful of worthy competitors, just like most industries.
We don't need to debate the details, however, because it's unlikely to ever happen. Those in charge of the game will never give it up. Instead, they've got to work to keep us playing along.
"Hey, you just passed 'GO', collect your $200 and pay your rent."