What is money?

Because Boggs’ bills are both lovely and fun, he quite often
persuades merchants to accept his artistic creations in exchange for
goods and services. They’ve even been known to give change — in real
dollars. The more famous he becomes (the University of Chicago has just
published a book about him) the more his art is in demand.

But far from getting a grant from the National Endowment for the
Arts, he’s been subjected to three Secret Service raids. The agency
seized 1,300 bills from Boggs’ home, and despite the refusal of several
courts to convict him of counterfeiting, the government won’t return his
property.

There’s a popular bumper sticker that reads: “Don’t Steal. The
Government Hates Competition.” In light of Boggs’ experience, there
should also be one about printing money. The Fed, and the government
that created it in 1913, hate the competition.

Consider that the stock market soars and tanks on the merest
speculation of what Greenspan the Great will do next. He may raise
rates, causing markets to crash. Or he may raise rates less than
previously expected, making markets to take off. Predicting which will
occur is an art, not a science.

The only constant is the power of the Fed itself. In what does this
power consist? Two factors: 1) money is no longer gold but paper and
therefore can be created (or destroyed) on a whim, and 2) the Fed
controls the money supply. Congress and the Courts can only envy that
level of power.

It wasn’t always thus. Money originated in the market, not by decree
of a government or a central bank. Any valuable commodity can come to be
a means of facilitating exchange. Salt, shells, pelts, and even
cigarettes in prisoner-of-war camps have functioned as money. But
throughout most history and in most countries, the market has chosen
gold because it is scarce, portable, durable, and constant.

Before there was a central bank, there was no overarching manager of
the money supply. People used gold for money and banking operated like
any other business. The bankers performed the service of storing gold
and making loans based on their capital. They didn’t create money out of
thin
air, and they certainly didn’t raise and lower interest rates on their
own.

The glory of this system is that it operated outside the authority of
government. That is precisely the reason government did not like it.
Early in the century, a cabal of bankers and government officials got
together to change that, to reconfigure the monetary system so that it
served their collective interests. The result was the Fed, and the
subsequent loss of personal and economic freedom. Centralized control of
money was once just a plank in the “Communist Manifesto”; now it is
accepted as normal by virtually everyone.

Take a look at our money today. Coins that were once silver are now
tin or some other worthless metal. Their value has nothing to do with
the marketability of their metal, but only with their use in
transactions. Whereas paper dollars used to be exchangeable into gold
and silver, they are now nothing but paper with a value dependent on how
much the government and the Fed decide to print up.

What the government has monopolized and controlled it has always
destroyed, as Murray Rothbard argues in “What Has Government Done to Our
Money.” The turn-of-the-century dollar is worth a few pennies today. The
balance has funded the rise of the Welfare-Warfare State at the expense
of our savings.

With the Fed in control of the money supply, we will forever
experience booms when money is inflated followed by inevitable busts, as
well as relentless inflation that eats away at our living standards.
What the government cannot grab through taxation and borrowing it can
always create
with a call to its friends at the Fed.

Before the Fed, what was money? It was an easy question to answer:
gold and silver. But politicians and central bankers destroyed that
system. What is money today? The short answer is: what the government
says it is. And apart from the government’s promise to print quantities
of it, it would have no value whatsoever.

In some ways, the work of Mr. Boggs illustrates the point nicely.
“It’s all an act of faith,” he says in “Boggs: A Comedy of Values,” the
new book about him. “Nobody knows what a dollar is, what the word means,
what holds the thing up, what it stands for.” He has shown repeatedly
that his own drawings, valued as art, are worth far more than the
government’s currency. And yet he is constantly threatened with property
confiscation and even jail for doing what the government is doing.

Several years back, a separatist group in Montana called “The
Freemen” had the bright idea of printing up their own money. They
studied the operations of the Federal Reserve and discovered that its
money wasn’t backed by anything. Declaring themselves a sovereign
country, The Freemen figured they would also do what the Fed did. Of
course, the FBI quickly surrounded their land and hauled them off to
jail where they are rotting today.

Frederic Bastiat defined a free society as one in which the
government is not permitted to do to private citizens what they are
forbidden to do to each other. Following Bastiat, if private citizens
are not allowed to print up paper tickets and call them money, the
government shouldn’t be either. That we allow government to do so has
led to disastrous consequences.