In these times of crypto-currencies and digital money, a little bit of historical knowledge is worth a lot – it can save you time wasted on reading stuff like this. It’s a piece from the Financial Times of 1 July by one Jean-Pierre Landau, who – we are told – is “a former deputy governor at the Banque de France” and “a senior research fellow at Harvard Kennedy School”, just the kind of bien-pensant figure so loved by the paper.
Landau spends 663 words telling his readers that central banks should start issuing their own digital currencies, which as far as daft ideas go really takes first prize. He even comes up with a name for it, the “Central Bank Digital Currency” or “CBDC” for short. That’s the kind of zippy, catchy, instantly memorable name one expects from a former central banker.
Of course it won’t happen – at least, not just yet. The degree of cooperation required between central bankers of different national jurisdictions would be beyond the egos of just about all of them.
And in any case it’s a daft idea – it would not bring greater stability to the financial system, just increase its complexity a notch or three. The proposal is that the CBDC “should be as close as possible to cash.” In other words, it’s about protecting the control of the state over money and batting away the ever-encroaching threat of the private sector, which wants to take control over money into private hands.
This state versus private capitalism is not the battle that should worry us. It’s the fact that both the state and private capital are not really interested in protecting the value of our money.
For some sanity it’s worthwhile downloading (for free here) a copy of a now largely forgotten book titled Gold I$ Money (sic) edited by Hans F. Sennholz and published in 1975. It’s a collection of nine essays, all of them interesting, but the one by Henry Hazlitt – To Restore World Monetary Order – could almost be Glint’s strapline.
Hazlitt opens his second paragraph with a sentence that echoes through the ages: “Nobody seems quite sure what any currency will be worth tomorrow.” Late in his essay he turns to David Ricardo, the 19th century political economist, for a quote that’s as true today as ever: “Experience, however, shows that neither a State nor a Bank ever have had the unrestricted power of issuing paper money without abusing that power; in all States, therefore, the issue of paper money ought to be under some check and control.” As Hazlitt says: “It is not gold that carries some irrational mystique, but paper money. The mystique is the naive assumption that we can trust politicians or bureaucrats to issue paper money without their grossly abusing the power to do so.” It is because States and central bankers – governments – cannot be trusted with the money supply that we need to get our own, personal, gold standard.
In 1973, when the bulk of Sennholz’s book was being written, much of the industrialised world was going through stagflation. The world felt then like a very grim place, with monetary chaos matched by international sabre-rattling and outright war in Vietnam. Sennholz, in his epilogue, was pessimistic about the future and considered that “we seriously doubt that the American people will soon regain this right to gold as money.”
If only Sennholz could have been alive today – he died in 2007 age 85. He no doubt would have been delighted to see that people everywhere now have both the right and the opportunity to use gold as money. We think he would have been first in line to download and us the Glint app. Get rid of those value-of-money worries: download the Glint app, register today and find out how easy – and useful – it is.
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