[Note from Matthew Gaylor: J. Bradley Jansen is the Deputy Director for the Center of Technology Policy at the Free Congress Foundation. Prior to this position he served as Rep. Ron Paul's monetary affairs legislative aide.]
From: Notable News Now <[EMAIL PROTECTED]> Subject: fcfnnn010902 Inside: J. Bradley Jansen's Commentary: Why Do Governments Hate Money? Date: Tue, 8 Jan 2002 18:12:40 -0500 Free Congress Foundation's Notable News Now January 9, 2002 The Free Congress Commentary Why Do Governments Hate Money? By J. Bradley Jansen Why do governments hate money? What people want from their money is a good store of value, medium of exchange, unit of measurement and universal acceptance-without it tracking their movements for Big Brother. Private markets used to provide good commodity money before governments got in the act. People traded goods for higher use goods that better possessed the qualities of good money: easily identifiable, easily divisible, durable, etc. Carl Menger, founder of the "Austrian" school of economics, explained this development well in his Principles of Economics. Unfortunately, governments seem unable to resist the idea of using money to track their citizens. Our anti-money laundering laws for the past quarter century under the misnamed Bank Secrecy Act have required banks and other financial institutions to monitor our transactions and report large cash or other suspicious activities to the government. Congress passed quickly and with inadequate debate in the anti-terrorism fervor new proposals to combat money laundering. What is rarely reported is that the continuation of the current approach will fail to prevent any terrorism. Our approach is not designed to prevent anything-it only aims to make investigations easier after the fact. We are no safer from terrorism by the financial provisions of the USA PATRIOT Act. Unfortunately, the Europeans show even less respect for financial privacy. Many European nations have decided to give up their national monies in place of a single Euro with the promise of easier comparison shopping and lower transaction costs for traders and travelers. Bureaucrats have now seized on the opportunity to use the new currency notes as people tracking devices. Reportedly, the European Central Bank is developing a project to add radio frequency identification tags into the fibers of the bank notes that will be introduced in the next few years. Promising to thwart counterfeiters, the new tracking RFID chips would be used to follow the money-and their owners. It wasn't daring enough that euro is the first money in the world to begin as fiat money not backed by anything of intrinsic value-now the bureaucrats want to use money against their own people. Why do governments hate money so? The technology would enable the carry tax on cash idea proposed most recently by Marvin Goodfriend, a senior vice president of the Federal Reserve Bank of Richmond. Happily, U.S. Representative Ron Paul spoke out clearly and early. By shining a light on this idea in its infancy, it retreated back under its rock. The carry tax would have tracked our currency holdings and taxed the Federal Reserve Notes depending on how long we held the cash. As they say in the capital markets, money goes where it's welcome and stays where it's well treated. Argentina seems a good case in point. When the government there proposed a currency board-like system that promised to hold U.S. dollar reserves for each Argentine peso about ten years ago, money flowed into the system. One strength of an orthodox currency board is that is stops politicians from disguising the failure of their irresponsible fiscal policies through monetary inflation. However, the International Monetary Fund helped the local, corrupt politicians subvert the otherwise honorable system. Now that the government has been forced to admit it has broken its promises, money is fleeing the country. The multilateral organization born and allegedly designed to help the functioning of the global capital markets is the International Monetary Fund. In fact, the IMF's activities have been to reward irresponsibility and corruption by national government officials. This marginal disincentive to act fiscally responsible has actually exacerbated the crisis: Argentina would be in a better position now to deal with its problems if it had been forced to act sooner and before the IMF added to its debt burden. All the IMF's lending to Argentina may have produced is to pass a greater burden on to the next administration. It is no secret that former Treasury Secretary Larry Summers was deeply involved in dictating IMF decision making. Mr. Summers should stand up now and take responsibility for his actions. Before the new excuse of fighting terrorism, official corruption was the poster boy of the financial privacy haters. In reality, government officials often say one thing and do another. Here is one more example. In a capitalist economy, there are always alternatives. Even with our legal tender laws giving the government default monopoly status, competitors have emerged. Some of these have harked back to the atavistic desire for honest money and blended it with new technologies. E-gold is the most successful of these so far, but their decision to adopt Know Your Customer policies may give the upstart GoldMoney.com room to maneuver. If governments refuse to study history's lessons of irresponsible monetary policies bringing down civilizations, perhaps it is time for us to follow the advice of Nobel laureate F.A. Hayek and denationalize money. Let people chose what money they want best through the marketplace. Let the best money win! J. Bradley Jansen is the Deputy Director for the Center of Technology Policy at the Free Congress Foundation. 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