In acknowledging his wife’s help and inspiration near the beginning of his wonderful new book, The Money Confusion, John Tamny writes: “You regularly tell me that the money stuff is ‘so obvious,’ and you’re right. The problem is that monetary experts don’t feel as you do. Hopefully, what’s common sense to you becomes common knowledge.”
Tamny’s noble purpose in his brief and fun-to-read book is perfectly expressed in these words to his wife—making common sense about money common knowledge.
Economists, pundits, and politicians misunderstand money and inflation to a frightening degree. That’s because they have abandoned common sense. Tamny: “What’s lacking among economists and those reporting on them is common sense.” All you need to free yourself from the experts’ confusion is your own common sense—and a little help from your friend and mine, John Tamny. He even makes it seem easy.
Think of Tamny as the Tom Paine of economics in our time. In Common Sense, Paine subjected the monolithic political beliefs of his time to the garden variety common sense of a sensible neighbor or friend, and set in motion a new political order which relegated kings, emperors, and czars to the dustbin of history. Tamny uses common sense to examine the monolithic beliefs of economists about money in order, like Paine, to show you simply and clearly those beliefs are nonsense.
According to George Orwell, some ideas are so foolish only an intellectual—or in this case, an economist—could believe them. Subjected to examination by common sense, belief in foolish ideas simply collapses. As you read Tamny’s book, economic falsehoods drummed into you by pundits in the media will fall away; you will find yourself being liberated from dogmas that have afflicted your understanding of the world in which we live.
Common sense has been called a superpower. By helping you bring your common sense to bear on this subject dominated by “experts” spouting nonsense, Tamny may convince you that you do, in fact, possess a superpower. In any case, he will show you how to understand economics better than the economists at the Federal Reserve.
Tamny’s theme is that it’s essential that money be trusted as a measure in the same way that the mile, the degree, and the tablespoon are trusted. He begins by quoting Adam Smith: “The sole use of money is to circulate consumable goods.” In short order, he quotes John Maynard Keynes: the market “presumes a stable measuring-rod of value, and cannot be efficient—perhaps cannot survive—without one.” Bang, that’s it. Everything in the book follows from this simple yet profoundly important commonsense understanding of money.
The experts at the Federal Reserve tragicomically believe, a 2 percent annual inflation rate is good for the economy(!). Imagine the folks at the federal Office of Weights and Measures advocating reducing the length of the foot or the weight of the pound at the rate of 2 percent a year, claiming that would stimulate the economy. It would certainly create an enormous amount of wasteful and unproductive activity.
Unlike the objects under scrutiny at the Office of Weights and Measures, governments do devalue money—with devastating consequences for ordinary people. Keynes again: “There is no subtler, surer means of overturning the existing basis of society than to debauch [devalue] the currency.” In 1933, FDR issued a presidential decree devaluing the dollar by an astonishing 59 percent. The dollar went from a fixed rate of $20.67 per ounce of gold to $35, robbing ordinary Americans by diminishing the value of their savings and the value of any money they were owed. True, that’s not on the level of Argentina or Zimbabwe but, together with other ruinous policies, it devastated the American economy.
Not to be outdone, in 1971, Nixon severed the dollar’s link to gold, transforming it into a fiat currency. By the time Gerald Ford entered the White House in 1974, the value of the dollar was in freefall. Today, an ounce of gold is valued at more than $1,650. Since gold is stable in value, that is an accurate measure of the dollar’s decline.
Americans no longer say as they once did, “sound as the dollar.” De-linking the dollar to gold created the need for the frenzied trading in the currency markets of today—now around $10 trillion a day, a sobering measure of the uncertainty people in the market are dealing with in a world of fiat currencies. All this would be unnecessary in a world of trusted money.
We need trusted money because it is a driver of progress and productivity, and, ending the book on a note of great optimism, Tamny argues we are going to have it again. Economic folly and fiat money have created the conditions for a money revolution. The solution is private money, stable and reliable money created by, for, and of the people, not by governments. Tamny write, “ . . . private money forms will inevitably replace government money . . . because we must have much more trustworthy money in order to achieve our human potential, and because we can.” (Bold print and italics in original.)
Tamny believes we are even now on the cusp of this revolution and the immense benefits it will bring us.
Because the book is rooted in common sense, like Tom Paine’s Common Sense it can accomplish a vast amount in a small number of pages. And because it only requires your common sense, it is readily accessible to any sensible person. If, however, you are deeply interested in economics, this book will be a gift to yourself that will keep on giving.
Tamny’s book, read by enough of us, really could succeed in making common sense about money common knowledge—and, like Tom Paine’s little book, change our world for the better.