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Morpheus Reloaded
by Jim Davidson
planetaryjim@yahoo.com

Special to The Libertarian Enterprise

Recently, a correspondent sent me a message about my essay "The Morpheus Proposal" which you can find on various sites using Google.

One place to find it is here.

My correspondent wrote in to mention that Beardsley Ruml had proposed that the purpose for taxes is to redistribute money from those who produce it to those who can't or won't. After all, he wrote, rather more honestly than the average government stooge, since the government can print money, it doesn't actually need to impose taxes.

Since it can print all the money it would ever need, why bother to set up a tax structure to take money from those who are able to produce it? And that seems like a good reason to revisit the essay.

A government can print money but it isn't at all clear that it can print as much as it would ever need. Consider the experiences of Zimbabwe from 2000 to 2007, say, or Yugoslavia in 1993-95. In both cases, they printed as much as they wanted, but it was not as much as they needed. In both cases they ruined their currency and in the case of Yugoslavia, toppled their government.

This inflation problem and currency collapse happens over and over again. (I can cite with some familiarity examples such as the John Law money, the South Sea bubble, the assignats and mandats of Revolutionary France, the Continental of Revolutionary America, the paper pound of the Napoleonic war era, the Confederate currency, the greenback, the Weimar mark of post WWI Germany, the Austrian krone, the Republic of China's hyperinflation, the South Vietnamese piastre, etc.)

"None are more certainly enslaved than those who falsely believe themselves to be free," wrote Goethe. So, indeed, part of the process is to convince the productive not only to produce, but also to produce for the benefit of the state—for all those things the state is supposed to do "for" people.

The classical liberalism fallacy is that "governments are instituted among men" to protect rights such as life, liberty, and property. Hans Hermann Hoppe demolished that argument in 1999. I believe my essay "The Morpheus Proposal" is on a similar theme. Governments, to the extent that they exist at all (all collectives being essentially fictional) are created for the benefit of those who run the government.

So, governments are, as EC Riegel wrote in "A New Approach to Freedom" uniquely unqualified to issue currency. Why is that? We would expect any individual who issues currency to accept that currency for what he produces—the goods or services he provides. In other words, anyone might issue currency that he could later redeem for the things of value that he produces. But a government cannot do so because it produces nothing of value.

Governments can destroy value, and they can tax value, but they are unable and unwilling to produce wealth. They aren't productive, but parasitic.

I think those who run the government, especially the bureau-rats, are exceptionally unwilling to produce wealth. They see it as their opportunity in life to force other people to do that dirty business of making wealth. Many bureau-rats are intellectuals, and see it as their role in life to tell other people what to do, because, you know, the intellectuals are so smart, so well-educated, so much better than anyone else.

Of course, Ludwig von Mises and others have noted the fallacies involved in all central planning schemes. No matter how clever the social "scientist" he cannot discover a market clear price without a free market. And free markets turn out to be the most important protection against all manner of tyranny.

So one must conclude, as my correspondent wrote, that the true purpose of government is to redistribute wealth to those who run the government. The excesses of Halliburton and other military contractors (better called death merchants) are obvious examples of this point.

In theory governments can print as much money as they would ever need. But as a practical matter, they cannot. Someone still has to produce wealth. It is best for those in government if those who produce wealth are willingly harnessed to the state. But if necessary, the scum are quite willing to use brutality and deception to get what they want.

While it seems like it ought to work in theory, it is messy in practice. It's that market clearing price thing. There is a market clearing price for money, you know.

The math and the economics work. There is no doubt that those who run governments would love to inflate endlessly and without consequences, but many countries have destroyed their middle class doing so, and have wrecked the engines of prosperity.

Gold has, in recent days, been setting new records. One must suppose that there is at least some danger of the dollar being wrecked as a currency, with excruciating pain for those who are holding their wealth in dollars, or in dollar-denominated securities.

I note with chagrin that the Obama administration, after passing out hundreds of billions of dollars to the banking gangsters and after buying out General Motors, announced a few weeks back that there would be no "cost of living adjustment" for Social Security recipients. Those on fixed incomes will have to suffer whatever massive price inflation results from the dollar printing of the Feral Reserve, it seems. Only the politically connected cronies can get the Obama government to bail them out.

So, how do you protect yourself? Don't try to store wealth as dollars right now. Buy something else. Gold, silver, copper, things you think people will need such as canned food or copper pipe, things which can generate income independently such as stocks in companies you think are well-managed. It seems clear that much of the recent rise in the stock market is not based on earnings—check out the price per share against the earnings per share to find the price to earnings ratio. It isn't based on the dividend yield, either. Stock prices are rising because dollars have been printed in huge numbers.

You might consider other currencies. Australia, for example, has gone to a strong Australian dollar policy, even though that makes imports more expensive and exports less competitive. They mostly export raw materials, and they are very close to major markets for raw materials.

But, in the end, any national currency depends on the policies of those who run its central banking scheme. My buddy Clyde Harrison once said, "Fiat currencies don't float, they sink at different rates."

Modern portfolio theory suggests that you diversify your risks. Choose different types of securities, different geographic regions, different currencies, different commodities, and don't put all your eggs in one basket, nor in one currency.

The nude economy, as I mentioned some weeks back in my essay of the same name (found here) is not based on producing new wealth. It is a broken thing, and a great many enterprises and individuals are going broke right now. Blowing a bigger bubble and basing the nude economy on fiat money inflation won't work this time, any more than it worked in any of the previous attempts.

The market will find a market clearing price, and the intrinsic value of a piece of paper with some printing on it is going to show through.

Jim Davidson is an anti-war activist involved in the divestment project detailed at divestfromdeath.wordpress.com. He is also an author and entrepreneur. His latest book comes out this Autumn at 623 pages plus notes. Two of his current projects involve financing films, one a documentary about destination resorts in orbit. See www.11at40.com for details. Visit cadre.ag for more ideas.

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