Progressive Libertarianism

I assume that you know how the banking system developed and how the banks could improve the services rendered by gold, by transferring assets from one individual to another individual in the books of the banks. When you study the development of the history of money you will discover that there were countries in which there were systems in which all the payments were made by transactions in the books of a bank, or of several banks. The individuals acquired an account by paying gold into this bank. There is a limited quantity of gold, so the payments which are made are limited. And it was possible to transfer gold from the account of one man to the account of another.

But then the governments began something which I can only describe in general words. The governments began to issue paper, which they wanted to serve the role, perform the service, of money. When people bought something they expected to receive from their bank a certain quantity of gold to pay for it. But the government asked, What’s the difference whether the people really get gold or whether they get a title from the bank that gives them the right to ask for gold? It will be all the same to them.

So the government issued paper notes, or gave the bank the privilege to issue paper notes, which gave the receiver the right to ask for gold. This led to an increase in the number of paper banknotes that gave to the bearer the right to ask for gold.

Not too long ago, our government proclaimed a new method for making everybody prosperous: a method called “deficit financing.” Now that is a wonderful word. You know, technical terms have the bad habit of not being understood by people.

The government and the journalists who were writing for the government told us about this “deficit spending.” It was wonderful! It was considered something that would improve conditions in the whole country. But if you translate this into more common language, the language of the uneducated, then you would say “printed money.” The government says this is only due to your lack of education; if you had an education you wouldn’t say “printed money;” you would call it “deficit financing” or “deficit spending.”

Now what does this mean? Deficits! This means that the government spends more than it collects in taxes and in borrowing from the people; it means government spending for all those purposes for which the government wants to spend. This means inflation, pushing more money into the market; it doesn’t matter for what purpose. And that means reducing the purchasing power of each monetary unit. Instead of collecting the money that the government wanted to spend, the government fabricated the money. Printing money is the easiest thing. Every government is clever enough to do it.

Read more: “Deficit Financing” and Inflation - Ludwig von Mises - Mises Daily

Stephen Articles

President [Leonardo] Fração, it is a pleasure to be here, at this XXIII Forum da Liberdade, whose theme is based on Ludwig von Mises’s Economic Policy book [known in Brazil as The Six Lessons].

Mises was one of the greatest intellectuals of the 20th century, a resolute and uncompromising champion of freedom. Fifty years ago, Mises came to South America and delivered those six historic lectures, which are heralded and quoted just outside, at the Forum’s exhibit.

Today, there is a great international revival of Misesian ideas — including in Brazil — which show the benefits that consumers and workers derive when they are free to venture, to chart their course, and to fulfill their desires.

This week, in Porto Alegre, there is a great concentration of intellectual heirs of Ludwig von Mises. We, from Instituto Mises Brasil, have just concluded our first conference, which was a great success, and it could not have been otherwise! The energy emanating from you is contagious. We have here today many scholars and experts of the Austrian School of economics. Tom Woods, one of the speakers at our conference and the bestseller author of Meltdown, will address you tomorrow. The legendary founder and chairman of the Mises Institute — Lew Rockwell — is also among us tonight! Without Lew, there would be no Mises Institute, no revival of the Austrian School, no Instituto Mises Brasil. Thank you, Lew. And above all, thanks to you, President Fração, to IEE [The Institute for Entrepreneurial Studies], for your support to our conference and especially for your achievements in the fight for liberty. Results come first in this contest; the results of the work of IEE and of the Forum da Liberdade are both evident and quantifiable. Congratulations, IEE!

On other occasions, I customarily speak about finance and economics, about the measures that are likely to bring about a more prosperous society; in other words, as did Mises, I usually speak about what works and what does not.

Today, for the first time, I am addressing a different subject. I speak about what moves me. I speak about where my energy, as an individual, originates. Its source is here, in this advanced and progressive libertarian community, which looks forward to real changes; not merely illusory changes from campaign slogans. I feel at home. It is a great honor to receive the Libertas Award.

The history of ethics has been a history of exploitation. From time immemorial, individuals were set apart into two groups: those that must obey the rules, and those that need not. The people must observe ethics and morals, while rulers not.

Stephen Articles

The subprime crisis left many Americans wary of financial markets and capitalist financiers. In his recent speech President Obama blamed Wall Street, and to a lesser extent Main Street, for the 2008 crisis. According to this speech, Washington bears little or no responsibility for the 2008 crisis.

Obama is not alone in blaming Wall Street for the state of the economy. Chris Matthews recently vented his own anger toward financial tycoons and free enterprise. According to Matthews, our system gives the largest rewards to the least productive people: hedge-fund investors. The most successful hedge-fund investors made two to four billion dollars last year.

According to Matthews, these investors create nothing real, “not steel, not cars, not computers, not even movies”; they only make money for themselves. The gains of these investors supposedly come from the working poor and middle class who live paycheck to paycheck. Matthews has misled his audience in this matter.

Some of these hedge-fund investors lost money in 2008, so their long-term gains are not as high as they might seem. However, this fact does not negate Matthews’s basic argument about transfers. What does Matthews see as the solution to the alleged problem? He has high hopes for the new financial regulations that Congress will vote on this year.

Is Matthews correct? Should government increase regulation of all financial markets to get back at the most successful hedge-fund investors? Given the assumption that these investors make literally nothing, the correct measure would be to expropriate their unearned income. If Matthews had really thought things through, he would have joined Marx in condemning at least these capitalists. Of course, if Matthews had thought things through, he might have also realized that his assumption that hedge-fund investors produce nothing is never true.

Investors have two functions in modern economies. First, they defer consumption to invest in future production. The only reason that workers are able to produce steel, cars, or anything else is that someone saved and invested in real capital equipment in industry.

Most everybody saves some money in one way or another. However, a disproportionate amount of investment in capital comes from a relatively small number of wealthy persons who refrain from spending their fortunes. Without the capital accumulation achieved in modern capitalism, people would not be living from paycheck to paycheck as workers, but from harvest to harvest as peasants.

Stephen Articles