027 – Transcript

Just Right Episode 027

Air Date: October 18, 2007

Host: Bob Metz

Station Disclaimer: The views expressed in this program are those of the participants and do not necessarily reflect the views of 94.9 CHRW.

Clip (Other People’s Money):
Lawrence Garfield: I love money. I love money more than I love the things it can buy. Is that surprising? Money. It don’t care whether I’m good or not. It don’t care whether I snore or not. It don’t care what I pray to. There are only three things in this world with that kind of unconditional acceptance. Dogs, donuts and money. Only money is better. You know why? Because it don’t make you fat and it don’t poop all over the living room floor. There’s only one thing I like better. Other people’s money.

Bob Metz: Good morning London. It is Thursday October 18th 2007. I’m Bob Metz and this is Just Right here on CHRW 94.9 FM. Where we will be with you from now until noon. No, no, not right wing. Just right.

Welcome to the show today. 519-6613600 is the number you can call if you want to join in on some of the thoughts and conversations today. Or if you have any other ideas or comments on the show you might want to email us too at justrightchrw.com. And of course if you didn’t guess by the opening of the show there our theme today is going to be about money. With the dollar at par now. Canadian dollars pretty well at par. Maybe even above going up and down a bit relative to the US dollar. People are talking a little bit more about money these days.

But generally just in the level of exchange rates how much does this cost versus how much does that cost. And most people really don’t give money much more of a thought even though their lives depend on it. They use it all the time. Why does somebody accept this piece of paper called a dollar or whatever form it might take in exchange for goods or services.

How many of us really think about that. The late Sophie Tucker once quoted as saying I’ve been rich and I’ve been poor and honey. Rich is better. And of course not many people would disagree with that. We’ve heard over the years too in politics especially from the NDP you know how they say that excess wealth quote end quote should not be allowed to exist and that wealth should be redistributed through a more equitable tax system and through social programs. And it’s funny that we have allowed our politics to even get that far because it’s such an obvious and totally wrong. It’s a contradiction in terms really statement to say that you can just redistribute people’s money. When that goes on unresponded to people get away with things if there was a private citizen saying the same thing instead of being saying it through politics I’m going to go and redistribute my neighbors wealth. Well we’d call that act by its true name we’d call it theft.

But when a politician does exactly the same thing we call it equity we call it a great wonderful positive virtue in society. And yet we know that stealing is bad in our personal lives why do we not look at it that way when we do it collectively through government and I think that’s one of the basic issues surrounding any discussion of money. If you think about it is really only three ways to acquire something in life you can either get it by gift somebody give you something you can earn it that’s through trade you exchange something for something else.

Or of course you can take it without another person’s consent and that’s what we call stealing and it generally takes two forms you either take it take something from them by force or you take it from them by fraud which is one of the reasons because both of those things deny a person’s right to consent to a transaction which gets into some interesting moral issues about the nature of money. You know people you hear people say things like just follow the money or money is always about commercialism and the consumer society and some people would give up their mother or sell their mother for money or something like that. I don’t think that’s really true I don’t think it’s the money so much even though at the beginning you heard in that was actually Danny DeVito at the beginning of the clip there he said some things he likes money more than the things that can buy and that’s from the movie of course other people’s money which is a great movie by the way if you ever it’s even a chick flick kind of thing you can go for a date with but it’s also very educational in terms of economic issues and it’s almost like I would almost say it’s a modern day fountain head which really illustrates how capitalism works and how it should work and how everyone ends up being a winner at the end.

I think it’s a great movie I think if you haven’t seen it check it out sometime it’ll surprise you. But in talking about money I’m not going to pretend to be an expert on money maybe I’ve had more experience than most back in the early 70s I took economics at Fanshawe College part of my business administration program and gotta be honest with you my first year there was a two year program I was unfortunate enough to have my economics class scheduled at about 3.30 in the afternoon so that meant I missed most of them if you know what I mean and had to carry it the next year but second year when I took it I aced it and economics is easy if you can stick with it. But before I continue we got a call there is that Ira?

Yes we have George online one. George. He has an opinion about money.

Oh that’s terrific what do you got to say George?

George: Okay I’d like to say money is a precious thing if you have to work hard for it in all of the world you have to work very hard for money. It’s an ill I think in our society that people are falling into positions where they think oh this job will make a lot of money all I have to do is sit around an office I sort of give my opinions about things or things like that sort of in a clinical sense if you know what I mean. And it’s like people become entrapped even by money that people’s opinions say oh I want to move away or say if I smoke a joint of marijuana once in a while and then the person that’s making the money giving the opinions is saying even once a month is too much. For one thing they’re not experts about this so what his opinion really shouldn’t mean much and the reason why so many people are in these positions of making literally five figure salaries for giving people their advice that’s one thing that we don’t need in our society anymore. It doesn’t make the society more productive more creative more imaginative and I think we’ve really got to question our values.

Bob Metz: Why do you think someone would pay why would I for example pay someone an exorbitant amount of money for their opinion.

George: It’s not paying someone for your opinion. I’m talking about like in an institutional sense like corporate corporate presidents and things like that for presidents not I’m talking more for like mental health professionals even a lot of doctors like I think the doctors the reason that people the doctors get involved is they do want to help people. It is a worthy noble position to be a doctor but I think it’s my own personal opinion about like sort of that there’s so many psychiatrists and there’s so many people living in the system of being helped out with money and then on the other end of the scale. I think in a huge economical sense like I guess your study goes towards that people making a lot of money just giving their opinions like sort of a psychiatrist to a patient type of thing. If you look at the parking lots at the regional mental health care London it’s absolutely filled with you know it’s a huge parking lots filled with nice cars and you think all these people are making huge amounts of money while this Joe over here works in a factory all his life to make $1,000 a month. He can’t feed his family. He can’t buy food he can’t pay that transportation I’ve got opinions about that too.

Bob Metz: You’re bringing up some interesting points. Okay thank you very much. Okay thanks George. Okay. A lot of the things George has brought up there have to do really with the law of supply and demand. Exactly. Largely. And the issue is that of course you’re talking about the medical field which is a whole issue in and of itself.

Exactly. Which has been artificially restricted in its supply to a great degree politically so and some degree. And of course the professions themselves like to restrict how many people enter the profession. These are all natural inclinations but we have to be careful of as a society is to keep that society open and free so that people can compete and that they can have options in ways of using their own money to buy the services that they want. It’s interesting you know we talk about helping other people with money. Again it comes back to the other people’s money doesn’t it. That’s what we do politically.

George: I can state one more thing. Sure. In a way I think we’ve got to thank like the rural type areas of Canada. You know I work sometimes in like small towns around Ontario and I saw someone that said if you ate today thank a farmer. And like in other countries they’ve got you know people have their lands. You know they get married the man and the woman go to work their fields every day and they have a very simple life but a very peaceful and very happy life. And I think we’re letting it get all away with materialism as you were saying. And like people just wanting an exorbitant amount of money thinking that that’s the key to happiness when they find that it isn’t.

You know in a big way they make other people pay for it. So I’d like to thank you very much for having me on the air and I really respect what you’re doing. Thank you so much. Well thanks George. Okay thank you. Bye.

Bob Metz: Take care. Again an interesting point talking about the materialism and how money doesn’t buy happiness. But then again you hear people always saying well it’s better to be rich and unhappy than it is to be poor and unhappy.

And of course there’s some truth to that. But the issue is whose money is it, whose services is it, who’s getting paid for it. And again it does come down to redistributing wealth. What is fair? What makes things fair? How do we make certain that what a person’s earning in a society is a just remuneration?

Remuneration. And that is one of the reasons we should have free economies because it’s always a law of supply and demand. You cannot just say, but I understand what George is saying when he says you have to work hard to make money. That’s true but working hard is often confused with what I would more emphasize is productivity. Sometimes you can be very productive and not have to work as hard.

If you can figure out a way to do something faster, quicker, and a smarter way, or you invent a tool that does the job quicker for you, you are being more productive. And that in turn is it is production that raises the wealth of any nation, of any jurisdiction. And the more you produce, in fact production is profit.

Production is wealth. They’re not just merely synonyms. They are the actual very same thing. Again, if anybody tells you they’re an expert on money and understanding money, it just is not so. As I read from one economist, he says, anybody tells you they understand the whole nature of money is lying to you because it has so many dimensions. It’s a little bit like in physics studying the properties of light. Sometimes if you do certain experiments, it will reveal that light is a particle. Other times it will reveal that light is a wave and the two things don’t seem to mesh.

It’s been one of those debates in physics circles. Same with money. Money takes so many forms.

It can be a commodity, an instrument of exchange, a savings vehicle, and therefore when people talk about it, they often are talking about a different aspect of money. Now, you know, I used to work in banking back in the 1970s. He used to work for a company called Canada Permanent Trust Company. They later called it the Permanent, located on the corner of Richmond and King there for several years. And I used to handle a lot of cash. And I used to carry it out to Richmond Street and walk next door and around the corner to the Toronto Dominion Bank that used to be there on the corner.

Neither of these institutions are there now. And go in and make these deposits. And this wouldn’t be at a regular teller’s wicket, but at one in the back with bulletproof glass separating the employees from the customers with the big cash deposits.

And I’d be carrying, oh, at least $15,000 to $50,000 down the street going next door and making this deposit in cash. And a very interesting experience having been in the banking industry and trust company industry for about 10 years or so. You know, I actually got to sign a check, not like one that you or I would write, but one used to call them official requisitions. And they sort of have a status more like a certified check. And the largest check I ever signed that cleared the bank was a million bucks, believe it or not. It wasn’t my money, of course, but how many of us can say that we signed a million dollar check that actually cleared the bank?

It’s really funny. While I was at the permanent as a branch accountant, I actually had the authority to sign up to $3 million per day without having to get anyone’s authorization from higher up. And I used to sign so many checks on behalf of the corporation. I had to learn to abbreviate my signature to the awful scribble that it still is today. But even though I handled a lot of money during those years, I really didn’t understand the nature of money until much later in life. And it’s the kind of thing that you realize in retrospect, that could have cost me my job in some cases, because sometimes you make errors that you’re not aware of or overlook things, that you’re not aware might present a problem.

I’ll give you an example of something that happened to me one time without knowing it and realizing it. I had left on my desk in my basket about $250,000 worth of unsigned Thomas Cook travelers checks for about three or four days. And there were all kinds of people walking by them and going around them and no one ever touched them. And yet if people had known that that was as good as cash because they were unsigned, someone might have picked it up.

And it wasn’t until a teller came by, I was really early in my banking days then, who explained to me, yeah, this stuff’s negotiable, maybe we should put it in the safe, and so we did, and no one was any the wiser. But it’s that kind of thing that people talk about generally when they talk about money is what they can get for it. And often poverty, usually in the media, everybody talks about poverty. Very few people talk about money and wealth. And of course there is the whole issue of the morality of money and its necessity. You know, Ayn Rand in her incredible novel Atlas Shrugged, which is still getting attention, there’s even an article about it in the National Post just last week or the week before. I think through the character John Galt she wrote the following about money.

She said, money is the barometer of a society’s virtue. When you see that trading is done not by consent, but by compulsion. When you see that in order to produce you need to obtain permission from men who produce nothing. When you see that money is flowing to those who deal not in goods, but in favors. When you see that men get richer by graft and by pull rather than by work, and your laws don’t protect you against them, but protect them against you, when you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed.

And those were the cryptic words, I believe, of John Galt in the novel Atlas Shrugged. It’s funny, you know, the thing about money, when you talk about win and lose, people always think that when they give money up for something that they’re somehow suffering a loss. When that’s only true in one circumstance, and this is why volunteerism is moral and involuntary is immoral.

Let’s be frank, that’s basically the dividing line. You see, if you have a voluntary transaction, you have a win-win situation. If you’ve got something you want to sell me and I want to buy it, we both have to agree before that transaction takes place.

And neither of us, now understand this, it’s where people confuse money with value. Neither of us would go ahead with that transaction if we didn’t think it left us better off than before. So we both gain. So if I buy a newspaper from somebody for a dollar, and they give me the newspaper, to them the newspaper is worth less than a dollar, to me the newspaper is worth a little more than a dollar, or I wouldn’t have given it up. It’s not an equal exchange in that sense.

We both benefit, and in a sense wealth is increased. And that dollar can change hands many, many times back and forth. So if you look at the other side of the equation, if one side is forced, let’s say somebody forces you to buy a newspaper that you don’t want. The person who gets the money who’s putting out the newspaper is the winner in that, but you’re the loser. Because you do not value that newspaper, and therefore you have lost wealth. Even though it can be measured in a dollar or whatever, your loss is actually greater than that. So interestingly enough, the value of money is directly affected by free will. And money is depreciated in value when it’s forced to be spent by some way.

So you can already see what happens with all government spending, which is all forced spending. The money itself is already depreciated, and that’s why we don’t get value for our money. Now of course not all values can be measured in dollars and cents. We value our friendships, we value our relationships, we value our principles or beliefs. And we often forego economic opportunities or rewards.

But remember this, those foregone opportunities can be measured in dollars and cents, even if the values you choose in their stead might not be easily measurable. I remember when I was a kid I used to frequent all the used comic book stores, because I used to collect a lot of comics, a lot of marble collections, and searching for rare collectors items or those special issues that would complete your collection. I remember getting a quick lesson in economics one day when I observed a young mother come into one of these stores in search of some cheap comic books that she could give to her kids, just to occupy them while they went about shopping. So she just haphazardly grabbed a few titles and placed them on the store counter, only to surprisingly discover that while most of the comic books selected cost only 10 to 25 cents, two of the items were in the $30 range. In looking quite shocked she questioned the inequitable pricing of the comic books. After all, she reasoned this 10-cent Bugs Bunny comic book had 32 pages printed in color on newsprint, just like the $30 Fantastic Four comic book title did. So what made one of them only worth 10 cents while the other was an expensive collector’s item, she asked. And replied the clerk, collectors, that’s all it makes it valuable, someone had to want it. And that was one of my first lessons in economics, that value is entirely subjective. But prices are objective. That’s the point at which each party in the transaction mutually benefits. So we’ll carry on with the subject right after this break and you’ll hear that very point illustrated once again.

Clip (Star Trek: Deep Space Nine S05E25 “In the Cards”):
Quark: The items up for sale were all aboard an old derelict freighter that the Bajorans found adrift about a light year from here. The cargo hold was crammed with valuable items of every description. Antiques, paintings, vehicles. It’s all a bunch of junk.

Nog: Listen to some of this stuff. A mid-24th century ceramic Romulan water basin, slightly cracked. A pair of Tellerite shoes, date unknown. A mid-20th century Human baseball card, a Foley and Penn store.

Jake Sisko: A baseball card.

Nog: A mint condition 1951 Willie Mays rookie card.

Jake Sisko: No, this is it. What do you mean? It’s perfect. This is how I can cheer up my dad. You know how much he loves baseball? Uncle Quark, when he sees this.

Quark: Tell him to be here at 1200 hours and he can bid, along with everyone else.

Jake Sisko: No, I’m going to bid on this. He’s always doing things for me. I want to do something for him for a change. And this is it. All I have to do is get him this card. How hard can that be? Come on, Nog.

Nog: No, why not? It’s my money, Jake. If you want to bid at the auction, use your own money.

Jake Sisko: I’m human. I don’t have any money.

Nog: It’s not my fault. Your species decided to abandon currency-based economics in favor of some philosophy of self-enhancement.

Jake Sisko: Hey, watch it. There’s nothing wrong with our philosophy. We work to better ourselves and the rest of humanity. What does that mean exactly? It means it means we don’t need money.

Nog: Well, if you don’t need money, then you certainly don’t need mine. How much Latinum do you have? I don’t know. How much? Five bars. Five bars! Look, it’s taken me a lifetime to save up that much money, and I’m not just going to throw it away for some baseball card.

Bob Metz: And yet some people would throw a lot of money away on a baseball card, which tells you exactly how people value things very subjectively, and something that you might think is not worth a nickel someone else might prize at a very great price. Welcome back. This is just right.

I’m Bob Metz, and this is CHRW 94.9 FM, where you can call it 5196613600. It’s really funny, you know? Just listening to that clip, you hear this sentiment expressed over and over again how any concern with money is somehow evil while doing good and improving oneself is a good thing, and you can do one without the other somehow. It’s like this magical mind-body dichotomy. You can just split the two things, and they don’t have to go together.

It just doesn’t work that way. Invariably, the people who say they’re doing good and watch them, they’re always talking about money, about getting other people’s money, somehow getting someone else to fund their good cause. And, you know, if there’s, of all the stupid Star Trek premises, it’s that whole concept that they don’t have money, which even in the show itself, as you just heard, the contradiction is just glaring that you can’t even buy a baseball card if you don’t have any money. So what do you plan into exchange it back to a barter system? Did a ship like the Enterprise get built out of goodwill and people doing good things, or do they actually have to put food on their table and eat and have families and pay the rent and have a home and all that stuff?

It just is outrageous. And, of course, if you watch the series, you’ll notice through time that indeed they do use currency and they call them credits, which is very interesting because we’ll be talking about that. And even when they use, you know, the replicators and things like that, that comes out of their pocket, they don’t get that stuff for free when they replicate something, their account, I think, somehow gets automatically debited.

That came up in one of their, indirectly, of course, in one of their episodes. So it just didn’t, there is a cost to everything. And yes, they do have money, although it might be a different type of currency. Now, most people go through their entire lives using money, working for money, planning their lives around how much money they may or may not have, and yet they never really question what money is and how it works. And it’s funny because sometimes people think, well, abstract concepts aren’t real, they’re just things that you talk about on an academic level and don’t really take any real seat in reality or in day-to-day life, and yet money is a completely abstract concept.

There is nothing really that you can touch that’s called money. There’s things that are valued in terms of dollars, but nothing that’s really a dollar in and of itself. You can have a coin that says it’s a dollar, you can have a coin that represents $10 or $100 or $1,000, or a gold bar that represents so many dollars. But the dollar itself is an abstract concept. And, of course, it takes its physical form by way of representation, and that’s what we’re talking about when we refer to precious metals, paper currency, or property. For example, dollars are a measurement of value, which is, again, a completely abstract and subjective concept, which we just discussed, whereas the form that dollars may take could be cash, securities, IOU property, credit, all sorts of things. My trusty encyclopedia defines money as a medium of exchange based upon a standard unit of value. And, of course, the medium of exchange is the form, whether it’s in paper currency, debenture, it could take any kind of form.

It could be coins, it could be silver, gold, and based upon a standard unit of value, which would be the dollar. Money also performs the functions of providing a standard of deferred payments and a store of value, which we generally use the word savings to describe. You can save literally the energy that you created that you needed to earn that money. You’re saving it, like almost in a storage battery, but it’s all very abstract and it’s representative, and that’s what money basically is. Money can be a commodity, such as gold or silver, or it may be a symbol, as with paper money or token coins, copper, nickel, and lesser silver coins. And in times of rare shortages, it’s interesting, but other things have been money in the past, too. After World War II, cigarettes were very usable as money.

Stockings were, and fuel was, petrol and gasoline, and anything that was shortage or in great demand. Generally, money has to be a luxury item in order to be considered money. Other symbols that have been used to represent money in the years have been porcelain coins, fur pelt, wampum, and cattle even. Believe it or not, the source of our word pecuniary comes from the Latin pecus, P-E-C-U-S, which was the Latin word for cattle, which were once used as money. Now, of course, to be generally satisfactory, the money must be reasonably durable and easily exchangeable. You don’t want to be carrying around your house or your car to have to trade them.

That could make things difficult. Money is not just made up out of the spot. You can’t make anything be money just because you think you can and because you think people will accept it.

I run into people that think this all the time. It’s interesting, Isabel Paterson in her book, The God of the Machine, has a chapter in there called Why Real Money is Indispensable. She talks about some of the nature of money and what makes something valuable. She says that the material used for money should be durable, divisible, incorruptible, portable, not easily imitated and found in nature in sufficient but limited quantity.

Nothing but the precious metals generally answer these intrinsic requirements, and that’s what we’ve been using for now. The quantity of gold available was always limited to some degree, even though it goes up and down and is affected by the law of supply and demand. Gold is not and was not given value by Fiat, which means you just didn’t give gold value by passing a law. It had a value before. There was any law saying that it had a value.

People knew gold had a value because they accepted it and they traded it. You can’t give something value just by passing a law. Any more you can make cheese or cotton or leather valuable by passing a law and making them dollars.

It has a value because it serves a vital need. She points out, Isabel Paterson, that if a gold coin of the Roman Republic were dug up now, it would have, still, its original value even though the Roman Republic perished 2,000 years ago. So would a Russian gold ruble minted under the Czars or a gold coin of Germany or France before 1914?

But the paper currency of Russia, Germany or France before 1914 is now all waste paper. It’s garbage. I’ve got some of it, by the way. I’ve got some old bills that really look fancy, but they’re not worth.

The paper they’re printed on, as they say. So, you know, Paterson says, If it is said that anything will do for money so long as people accept it, let it be asked, why will people not accept anything? Offer the man who says anything will do for money, a handful of pebbles in payment of a debt and see what happens. And of course, one of the reasons we need money, this is something she points out, is so that we can make the necessary application of arithmetic to goods and labor. Because you couldn’t make it without having some kind of common unit of measurement to compare them to, you know, and in applied mathematics you have to describe your unit. And so, you can’t be always going around saying three hours of labor are worth two chocolate bars are worth this or worth that and have a whole scale of things. You have one standard of value and we call that the dollar or the yen or the mark or whatever it might happen to be. And of course, when governments print more money in terms of paper, they’re depreciating the value of the paper.

It’s something I’ll be getting into shortly. And the difference has to come out from somewhere and that generally comes out of wages. When the government prints more money or expands the credit supply or the credit supply is expanded in indirect ways, it all comes out of the working man’s wages because that’s where the wealth is and there’s no other possible source in the long run.

The depreciation and currency comes out of wages immediately because whatever anybody gets in his pay envelope will buy him that much less in goods. And on the other hand, if you have increased production, it will raise wages even though the sum of money is the same, says Paterson, and it’ll buy more. And this is one of the things that you see so much in labor movements. They have these anti-productive mentalities that they want more money.

They’re being fooled by the dollars and cents by the numbers and not taking account of the value, which can be derived when you’re not even dealing with the numbers. But credit and depressions have always been two things associated with, well, with depressions. You have always, real money never is and cannot be the cause of a credit collapse, as Paterson points out. The financial system is unsound.

It is only because of an overextension of credit and paper currency. And that is again emphasized by a fellow named Clarence B. Carson in an essay called Free Enterprise, Key to Prosperity from a book published by The Freeman, The Freedom Philosophy. And he points out, quote, there is much evidence to show that it is government activity, not free enterprise, which is responsible for the so-called business cycle. The cyclical change from prosperity to depression recession, and then back to prosperity, can be correlated with increases and decreases in the supply of money.

And the cycles result from credit expansions and contractions. The villain of the piece is government manipulation of the money supply. The cure lies not in government intervention to hamper enterprise, but a sound money policy that cannot be manipulated, he suggests. And with that, we’ll come back and discuss what such a sound money policy might be right after this.

Clip (Stand-up Comedy):
Speaker 1: I don’t know why when I buy groceries they thank me for shopping there. I don’t do it for them. I need groceries. If I don’t eat, I die. I don’t understand investing either, people making all that money. I just don’t get it. The other day this broker comes up to me, he says, what do you want to buy? I said stocks that go up. He says, you know, some stocks go down. I said, yeah, don’t get those.

Wouldn’t it be simple if it was just like that? Wouldn’t life be easy if it was just that simple, I mean to say?

Bob Metz: Welcome back. This is Just Right. I’m Bob Metz, and you’re listening to CHRW 94.9 FM, where we will be with you, still from now until noon. It was interesting. I was reading in the, actually this is out of the National Post, Not Good News for Investors, Bernstein, a financial publisher says, be wary of rising wealth inequality. And he makes a point. It’s an article written by Jacqueline Thorpe, National Post, October 6th, actually. It is traumas and not achievements that drive economic policies, says Peter L. Bernstein, publisher and editor of a number of financial investment newsletters and journals. He says, the new trauma on the scene could be rising inequality.

He says, no need to emphasize the numbers, but the main point is that most people have shared only modestly or even not at all in the great, quote, prosperity of the last 15 years. And now we face the possibility that many of them will lose their homes in mortgage foreclosures, he said. And as fear of unemployment dominated U.S. economic policy for 35 years after the Great Depression, the memories of steepening economic inequality will remain embedded for some time to come, says Mr. Bernstein. Populist policies, higher taxes, more regulation, protectionism, suspicion of Wall Street and the wealthy, I think is something we are going to have to learn to live with, he said. And the backlash could include the market crimping measures above, trade protectionism, new rules and regulations and higher taxes.

Well, goody-goody, isn’t that good news for us coming up? And these are some of the reactions that people actually have when the money supply is not kept in check. Interesting, here’s another one. Dollars fall, a boon for Bush, according to an analysis printed by the National Post July 23rd, 2007.

Bo Nielsen is the author of that. And apparently they’re saying that the falling American dollar is boosting the economy and the Republicans’ chances in an election in the United States. Everyone from Nobel Prize laureates to the world’s biggest bond investor says the Bush administration has reason to cheer that the U.S. dollars slide to historic lows. A weakening dollar is helping the economy and may bolster voters’ confidence in the Republican Party as the U.S. heads into a presidential election year. Rather than causing foreigners to flee U.S. securities, the depreciating currency is making American goods less expensive abroad and helping offset the worst housing recession in 16 years.

So there you go. They’re redistributing the wealth again. Of course, when the United States went to war, it was inevitable that their dollar would go down in value. That’s how they are paying for it. That’s the hidden cost, one of the many. And that comes in basically its inflation, really. Prices are going up for Americans relative to their dollar and the goods that they were used to buying before. It’s funny how so many governments think that inflation is good for the economy and can be used to make things better, etc. Henry Hazlitt in a book wrote a book called Economics in One Lesson. He had a chapter in there called The Mirage of Inflation, in which he points out that the most obvious and yet the oldest and most stubborn error on which the appeal of inflation rests is that of confusing money with wealth. That wealth consists in money, or in gold and silver, wrote Adam Smith more than two centuries ago as a popular notion which naturally arises from the double function of money, as an instrument of commerce and as a measure of value. To grow riches to get money and wealth and money in short are in common language considered as in every respect synonymous, said Adam Smith. Real wealth, of course, consists in what is produced and what is consumed, the food we eat, the clothes we wear, the houses we live in. It is railways and roads, motorcars, ships, planes, factories, schools, churches and theaters, pianos, paintings, books, anything that’s a physical thing that someone values. Yet so powerful is the verbal ambiguity that confuses money with wealth that even those who at times recognize the confusion will slide back into it in the course of their reasoning while they’re talking about it.

And I do that myself. Each person sees that if he personally had more money, he could buy more things from others. If he had twice as much money, he could buy twice as many things. And to many, the conclusion seems obvious that if the government just issued more money and distributed it to everyone, we’d all be a lot richer. And of course, that’s a complete illusion because if you have one million dollars chasing a million dollars worth of goods and then suddenly you have ten million dollars chasing a million dollars worth of goods, that money is worth one tenth of it. And a million would buy only a tenth of what a million bought you before. So you might have a big number, a big value of something there.

It looks like a big number, but in literal value, it is not big. And the problem with inflation is that it does not and cannot affect everyone evenly. Some people suffer more than others. The poor are usually most heavily taxed by inflation and percentage terms in the rich because they don’t have the same means of protecting themselves, either through speculative purchases or in real equities. They can’t tie up their money in property where it may be safer from currency inflation. Inflation is a kind of tax that’s out of control of the tax authorities.

It strikes wantonly in all directions. The rate of tax imposed by inflation is not a fixed one. It cannot be determined in advance. We know what it is today. We do not know what it will be tomorrow.

And tomorrow we will not know what it will be the day after. So, like every other tax, inflation acts to determine basically, what was I going to say? Oh yeah, like it acts to determine the individual and business policies that everyone is forced to follow.

So if you know the prices are going up, you’re going to have policies that go accordingly. It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. And it often makes it more profitable to speculate than to produce. It tears apart the whole fabric of stable economic relationships. It’s inexcusable injustices drive men towards desperate remedies. It plants the seeds of communism and of fascism.

It leads men to demand totalitarian controls and ends invariably in bitter disillusion and collapse. That’s Henry Hazlitt out of his book, Economics in One Lesson. And now if you want to hear a little bit more about inflation, I will now turn you over to someone who I’ve played on the show a number of times before. For the next few minutes you’ll be hearing from Dr. Walter Williams, a bit of American perspective on inflation. And I think you might find this interesting.

Clip (Dr. Walter Williams on Inflation):
Dr. Walter Williams: I believe for the first time in our entire history that we have all of the conditions for a runaway inflation. What I mean by that, we have all of the conditions to go to bed one night with inflation clipping along at 2 or 3 percent and waking up the next morning and finding at 30 percent. And of course there’s runaway government. Excuse me, I refer to these as symptoms of our problems rather than causes. And for right now I’ll summarize the cause of our problem as being a significant departure from the principles of liberty that made us a rich nation in the first place. And these principles of freedom were embodied in our nation through the combined institutions of private ownership of property and free enterprise.

Now through numerous successful attacks, private property and free enterprise are mere skeletons of their past. And Thomas Jefferson anticipated this when he said the natural progress of things is for government to gain ground and for liberty to yield. And we can look at how government, or one of the best ways to look at how government is gaining ground and liberty yielding, is to look at what is happening to taxes and spending. There’s only one way to look at taxes. Taxes represent government claims on private property.

And indeed if government were to tax private property at 100 percent, it would confiscate private property and taxes are going up. And even better measure of what government does is to look at spending. And to put spending in a historical perspective, we can look at what was spending in 1902 at the turn of the century. In 1902 expenditures at all levels of government, federal, state and local levels of government, totaled $1.7 billion.

In that year the average taxpayer paid $60 in federal, state and local taxes. Today federal expenditures alone are over one and a half trillion dollars. And that’s if you ignore the underground federal government, the so-called off-budget expenditures. State and local governments spend over a trillion.

Today the average taxpayer pays over $8,000 a year in federal, state and local taxes. Now what does this mean? It means that as time goes by, you and I own less and less of our most valuable property, namely ourselves and the fruits of our labor.

Clip (Cabaret – Money):
Song: The government is the only government in the world that has ever been in the world. The government is the only government in the world that has ever been in the world.

The government is the only government in the world that has ever been in the world. If you happen to be rich, shouldn’t you feel like a nice entertainment? You can pay for gifts, cafes, if you happen to be rich, shouldn’t you be alone? And you need a companion, you can ring, sing and ring, pause and meet. If you happen to be rich, shouldn’t you find you a left-by-your-lover? And you’re mown and you’re grown by the lot.

You can take it on the tin, corner cap and begin to recover on your 14 car ready odds. What? Money makes a world go round, a world go round, a world go round. Money makes a world go round, a world that people are sure.

Clip (Louis C.K. Stand-up – Being Broke):
Louis C.K.: You gotta turn it into a game, being broke is pretty exciting. People with jobs don’t know what you’re missing, man. Oh, every day is an adventure. What’s gonna happen today? Am I gonna eat? It’s exciting. It’s a little too exciting when I’m using my bank card to buy stuff. You know that feeling when you don’t know, really? Did the check come out yet?

I don’t know. She swipes it through and all of a sudden it’s like you’re defusing a bomb. You know, oh God, it’s taken too long. You’re sweating. Processing, that doesn’t sound good. Approved? Yeah! Yes! All right. I’m gonna enjoy this Snickers.

Bob Metz: Welcome back. This is Just Right with Bob Metz, and you’re listening to CHRW Radio 94.9 FM, where we’ll be with you for a few minutes more until noon. Now that was Walter Williams earlier, just at the early part of that clip, talking about the increasing danger of runaway inflation, but no one can ever call the time on that. It could be tomorrow. It could be 10 years from now.

But certainly all the pieces are in place. A number of people are, you know, you get the feeling, especially of late, how people feel like they’re working harder and harder and not getting ahead in life, even though they should be getting further ahead and feeling that they’re making some progress. Which, by the way, is a very different feeling from what it was like in the 50s and 60s. People didn’t feel that way then, even if they were poor.

They still felt that there was, you know, you could work hard and actually believe that you could get a payoff at the end. And what has changed between now and then? In many ways, we’re more wealthy, which is an illusion for people in the sense of the money issue, because we do have technology that’s been saving our butt for so long, you know, because you can live cheaper and take the average DVD player at a cost. You can get one as cheap as $19, $20, a machine like that 10 years ago.

It would have cost you several hundred bucks and would have been out of the reach of many people. But what is, you know, what can we, what’s part of the problem? It’s not just the fact of people being, you know, the rich getting richer and the poor getting poorer and things of that nature, because it’s not true that there’s, quote, only so much wealth to go around.

Wealth is always being increased. But one of the solutions to the problem, as being proposed by a compatriot of mine, friend of mine, and someone who’s been on this show before, freedom party leader Paul McKeever, he sees the problem with money not as being about the gold standard, per se, and not having money on the gold standard, because that’s not really an issue. Whether a government officially decides to go on a gold standard or a silver standard or otherwise is not important, because gold is still a value and silver is a value.

That standard exists independent of the government law or whether it’s there as a fiat. But what Paul seems to, what Paul advocates is that we should have a fixed number of dollars in our economy, and thus only the value of each dollar changes. If you have a much more productive economy, everyone’s got a stake in it, everyone will benefit from it, because their dollars will buy more. In other words, you could get a pay increase without having to actually see the dollar value of your pay go up.

Suddenly, things would be cheaper. And of course, the issue is the big problem is credit expansion. About two, three years ago, Paul wrote a piece called Healthy, Wealthy, and Wise about the monetary system and the money supply in Canada. It had a lot to do with also dealing with Canada’s debt, which gets too complicated to get into in the last few minutes that I’ve got here.

But here’s some interesting facts and issues that you might find a little fascinating. Here in Canada, basically, dollars take two essential forms, okay? Cash and credit. And there are about $700 billion in use in Canada. That means that’s roughly, give or take, how many dollars are in circulation in Canada. Now that’s money, that’s not the wealth of the nation, that’s the currency we’re talking about. What we would call money. About $35 billion of those $700 billion are in the form of cash, and the correct legal term for that is called currency. So $35 billion in cash, which would be notes printed by the Bank of Canada.

It would include pennies, nickels, dimes, all that sort of stuff. But the rest of Canada’s dollars, $665 billion approximately, are created by private banks. And that would be banks like the Royal Bank, TD Bank, Bank of Nova Scotia, Bank of Montreal, etc. And they basically create money by something that they call creating a credit. So every time you purchase anything with a debit card or a credit card or a check, you’re paying someone, not with cash really, but with bank-made credit.

The bank doesn’t even have to have the cash on hand. Like cash, credit gets passed from person to person. And if you’re like most Canadians, you’re paid in credit, not in cash on your average payday.

They don’t give you cash through a window wicket. They deposit some money into your account or give you a check, which again is a form of credit drawn on a bank. And where do you find credit?

It’s in your bank account, of course. When you open your bank book and see a $10 balance, that means the bank owes you $10 of Canadian cash. But what you hold is $10 of credit. In other words, credit is nothing but an IOU of the bank in lieu of cash. And your account balance is a record that tells you in the bank how much cash the bank owes you. But you may never need that cash, as long as you’re doing your transactions by check and never actually taking cash out of the bank, you can carry on with credit as being your main means of money.

So there’s two ways you can pay someone in Canada. You can pass cash from your hand to their hand, or you can move credit from your bank account to the other person’s bank account using a check or a debit card. But the critical thing to notice is that because we’re all willing to accept credit in exchange for goods and services, credit is money, just like cash. And that’s probably how the whole credit system got started on Star Trek, where they think that they don’t need money anymore, because maybe nobody actually sees the cash. But every time a bank teller creates a dollar of new credit and lends it to someone, if somebody comes in for a loan, it adds a dollar to the total supply of the Canadian dollars that are out there.

Of course, the reverse is also true. Every time a borrower repays a dollar of his bank loan, the bank destroys a dollar of credit. And that way, one dollar is removed from the supply of Canadian dollars. But over the long term, banks have tended to create and lend out much more credit than they destroy. And banks have tended to cause a total supply of Canadian dollars to increase over time. Now, you might want to blame the banks for all of this, but it’s not really them that got us into debt. It’s really politicians in the government that did that, because they’re the ones doing most of the borrowing.

And, but just because of that fact, that doesn’t mean that we shouldn’t fix our banking laws, which is something that Paul McKeever suggested in his brief. Because this is our banking laws actually allow banks to increase the supply of dollars by creating credit, essentially out of thin air, which in effect transfers wealth from the pockets of Canadians to the pockets of banks, just like counterfeiting. Just as if you went out and printed some fake $10 bills or some $20 bills and used them for a while, you’d be actually stealing money from someone, even if you burned those bills later and put the money supply right later on.

But among the considered repairs to this system is to have a 100% reserve requirement and prevent governments and banks from increasing the total supply of Canadian dollars. Now, that’s dollars we’re talking about, not money per se. You know, we now see the value of our pennies getting so low that they’re almost useless, when in fact they could be going the other way. They could have been getting more valuable, and we’d have to be considering what the British once had, like a half penny and things of that nature. You can expand the money supply in terms of its tokens and its representations, but there has been a lot of talk about keeping that fixed dollar of volumes, and we’re talking about government dollars here, of course. And this has been considered back in 1933 and 35, the U.S. government had a banking crisis, and a group of people, including Irving Fisher and Henry Simon, drafted a proposal to President Roosevelt at the time called the Chicago Plan, which was supposed to get them out of the crisis that they had.

And by the way, I believe Irving Fisher is the guy who came up with the term, you know, the basket of goods that people use to measure consumer goods and the gross national product and things of that nature. But among all of their recommendations, the one thing that was not followed and not kept to was a 100% reserve requirement. It wasn’t adopted because the Wall Street banks lobbied very hard to keep their power to create and rent out money, and they won. And if you think this is just a pie in the sky kind of idea, it was supported by many highly respected economists, including Irving Fisher, who dealt with the issue in his book called 100% Money, Milton Friedman, in his book A Program for Monetary Stability, and Murray Rothbard in his book What Has Government Done to Our Money, which apparently are all available online somewhere if you want to get a hold of them.

But just to mention a few of them, that they all believe that there should be 100% reserve requirement for money, and of course banks don’t want it. So in other words, in short, they would be recommending that we have a fixed volume of dollars and that only the value of the dollar changes. So if we had say $700 billion of Canadian dollars today, that’s how it should stay. We’d always had $700 billion in circulation. Doesn’t mean you’d run out of money, as people think, because what would happen is we wouldn’t have a credit expansion or an expansion of the value of money.

We’d actually have money get more valuable, and then people would actually feel that they were getting ahead in life, or had there been always falling behind. But that’s just one of the many ways that governments can redistribute our wealth is through inflation. I think inflation is much higher than what they’re telling us. We hear about it all the time in the news and stuff, oh, it’s only running at 2%. It might be in the general, in a lot of the commodities that they’re measuring, but you can certainly see the bubble bursting in certain areas, particularly in the outlandish prices of houses nowadays.

That’s where you can see that it just doesn’t seem to match. I can buy something very cheap on a consumer level, in terms of electronics and stuff, with a dollar that wouldn’t have bought much more 20, 30 years ago. And today that’s just not the case. Anyways, we’re out of time. We’ve got to go. I’m getting the signals from the room next door, so I’m not going to get a chance to talk about what we should do about all those pennies we have.

We’ll get to that one next time around in the future. So that’s it for this week, folks. So until next week, take care, be right, stay right, do right, act right, and think right, and we’ll see you again then. Take care.

Clip (Stand-up Comedy):
Speaker 1: They accused me of killing the Queen Mother. I can’t think of a way into that joke, but they did. They accused me of killing the Queen Mother when she died. It was very sad, but I got the blame. I’ll never forget coming home on that fateful day, hitting the button on the remote control, and the man on the news said, if you’ve just turned your televisions on, the Queen Mother is dead.