I recently saw a line in Human Action that I am very enthusiastic about. He defines a “monetary crank” as someone who “suggests a method for making everybody prosperous by monetary measures.” By crank, of course, he means lunatic. In the field of medicine, he would be called a quack.
In other words, anyone who suggests that we can solve economic problems by doing something or other with money, is a lunatic. He means things like taking money from A and giving it to B, printing more money, raising taxes to “sop up” excess money supply, passing laws making certain things forbidden to be used as money, setting an exchange rate between currencies.
And the reason is very simple. Money is not the same thing as what money can buy. We all work to make money, true. But if we knew that the money we got for our work could not be used to buy anything, we would not work for money. We would want to be paid in something that will give us, ultimately, things. We work to have food, to have gasoline for our car, and so forth.
The way to have everyone prosper is by increasing the amount of things money can buy. If manna rains down from heaven, giving us all free food, we all prosper. Even if all that manna falls in one persons back yard, we all prosper, because his increased supply of food, when brought to market, will lower food prices for all of us. J.B. Say put it very well. “A country is rich and plentiful, in proportion as the price of commodities is low.”
Here he is again, telling it like it is:
The encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we have seen that production alone, furnishes those means. Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption.
It should be clear by now that fiddling around with money will not create more things. It just shuffles purchasing power around. But that which is to be purchased, the things we want to get for our money, has not been influenced. There is exactly the same amount of food and gasoline as there was before.
Mises has saved us a lot of time. There are plenty of complicated schemes out there to make us all rich. We have Keynes and his many disciples, we have the Chicago School of Monetarists, we have MMT, and who knows what else. There is an easy way to tell if we should bother with them at all. If they propose to solve our problems by printing more or less money, or by taking money from A and giving it to B, then they are monetary cranks. They are like a fireman shooting water at the wrong house. Our problem is not money, it is production. Fiddling with money cannot increase production.
Yes, I’m looking at you, Ben Bernanke, you monetary crank.