Money Mad Europe

Oscar B. Johannsen

[Reprinted from The Gargoyle, August-September 1972]

Since America emerged as the most powerful nation in the world, Europe and other continents have tended to follow in its footsteps, often to their sorrow. Many Americans visiting other countries are struck by the numerous American customs which these countries are adopting, and report that, unfortunately, more often than not they seem to be substituting some of our more garish and vulgar habits for some of their customs, which while they may be more quaint are possibly more sensitive and culturally on a higher level.

According to The Wall Street Journal this follow-the-leader pattern seems to be only too true in the economic field for Europe now appears to be on her way to outstrip the United States in the production of money. Inasmuch as today money in all nations essentially consists of the circulating non-interest bearing debts of those countries or their central banks, this means that the European printing presses are operating at higher rates of speed than they are even here in the U.S.

The British, in particular, seem to be trying to outdo even the Latin American countries in printing paper money. These nations have long been viewed with suspicion and concern, and quite properly so, for their loose practices in printing money. Yet recently, in a five week period, Britain's money supply jumped to an annual rate of 42%. This is even higher than Brazil's rate of 39%, Argentina's of 36%, Costa Rica's of 28%. Only communistic-ruled Chile's rate of 88% is greater.

While one may not be especially surprised at the loose monetary policies of the British, since Britain has hardly been a bastion of monetary restraint since WW II, it does come as a surprise to note that even in countries as West Germany and France, which at least have been attempting to follow some economically sane policies, the increase in the money stock in the past 12 months was 13% in West Germany and 12% in France. And most surprising of all is that in Switzerland, whose paper money is the soundest of all, the rate has been 20%. By comparison the annual rate in the U.S. is now about 7%.

Of course, some of the increase in the money stocks of these European countries is due to what is known as "imported inflation". By this is meant that these countries import the inflation of the money supply going on in the U.S. due to the fact that they have agreed to fixed exchange rates with the American dollar. As countries are forced to print more of their paper currencies to buy the paper dollars which flow abroad" in' order to keep the exchange rates at the fixed parities.

But it is claimed that such is not the main reason for their money expansion. In England, domestic politics is blamed. Even West Germany argues that its production of money is due more to a great increase in lending money than to dollars flowing into the country.

The result of all this is that prices are rising abroad much more rapidly than in the U.S. If this process should continue, it could be that a time will come when the American dollar will appear strong compared to the European currencies. The domestic politics of the countries will be the determinant. As all nations are dominated by the Keynesian economics of fiscal deficits and monetary expansion as the means of reducing unemployment and keeping the economy limping along, the question of which currency will be strong depends on which country uses greater restraint in creating deficits and increasing their money supply.

Switzerland, with its strong tradition for economic common sense is the nation most likely to "cool" its money expansion, which is why so much money is finding asylum there. Of course, the only true shelter is money, itself which is gold. It is interesting to note that there are rumors that some Arabian countries are beginning to demand gold in payment for their oil rather than any of the world's currencies. If this is true, apparently they don't even trust the Swiss franc.

Why should Georgists who recognize the fundamental importance of land be overly concerned with the present monetary shenanigans of the nations of the world? Because, everything points to the constant inflation of the money supplies of the various countries as being the proximate cause not only of serious internal disorders but external disputes which can lead to war. To cope with these problems, the danger is great that the nations will suppress that fragile and vital element -- freedom. Without freedom to teach, the people will never understand the land problem.

Already we see the growing encroachment on freedom in the U.S. With the imposition of price and wage controls last year, all Americans have had their freedom to buy and sell their goods and their labor at whatever price they wished curtailed. Since price controls won't work, unless they are removed, rationing will be instituted, which is a further restriction. Under rationing the government will see to it that newspapers whose policies it does not like do not receive sufficient newsprint, so a subtle censorship of the press ensues, which later night become an overt one, to "prevent loose talk which is upsetting the economy".

And we see already how the inflation of the money supplies has caused the imposition of controls on money entering and leaving countries. This increases the isolation of countries from one another bringing on trade wars which may erupt into actual war.

It thus behooves Georgists as they attack the land problem, that they also attack the money problem, which means the governmental control of money and banking.

A society predicated on the principles of justice requires free land. It also requires free banking, that is, banking and money under the aegis of private enterprise and not the government.