Why “Monetary Policy” Will Always Distort the Free Market

By Richard M. Ebeling – Re-Blogged From Savvy Street

Money is not a creation of the State. A widely used and generally accepted medium of exchange emerges spontaneously.

Carl Menger (1840-1921), the founder of the Austrian School in the 1870s, explained in his Principles of Economics (1871) and his monograph on “Money” (1892), that money is not a creation of the State.

A widely used and generally accepted medium of exchange emerges “spontaneously”—that is, without intentional government plan or design—out of the interactions of multitudes of people over a long period of time, as they attempt to successfully consummate potentially mutually advantageous exchanges. For example, Sam has product “A” and Bob has product “B”. Sam would be happy to trade some amount of his product “A” for some quantity of Bob’s product “B”. But Bob, on the other hand, does not want any of Sam’s “A”, due to either having no use for it or already having enough of “A” for his own purposes.

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Who Knows the Right Interest Rate

By Keith Weiner -Re-Blogged From Gold Eagle

On January 6, we wrote the Surest Way to Overthrow Capitalism. We said:

“In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.”

Today’s article is part I that promised article.

Let’s consider how to know the right rate, first. It should not be controversial to say that if the government sets a price cap, say on a loaf of bread, that this harms bakers. So the bakers will seek every possible way out of it. First, they may try shrinking the loaf. But, gotcha! The government regulator anticipated that, and there is a heap of rules dictating the minimum size of a loaf, weight, length, width, depth, density, etc. Next, the bakery industry changes the name. They don’t sell loaves of bread any more, they call them bread cakes. And so on.

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What if Education Was Left to the Free Market?

By Stephen Hicks – Re-Blogged From Savvy Street

Nothing can come into our minds as knowledge and nothing can become a skill except that we choose to make it so. So the real cost of education is the effort each individual has to put into it.

Higher education can be a path to a successful life. Yet many successful people did not graduate from college and many unsuccessful people have impressive degrees.

So who should go to college? And who should pay for it?

Let’s start by imagining an average student who wants to go to college but has no money and compare that student’s options in socialized and free-market education systems.

In a socialized system, the government pays for it. The student eventually graduates, goes to work, and starts to pay taxes.

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A Trade Deficit Is Never A Problem

[Fiat Money(paper money) can allow Trade Deficits to continue indefinitely, while under a Gold Standard, the imbalance is corrected automatically. In either case, Trade is good, while restrictions are bad. – Bob]

By Steve Saville – Re-Blogged From http://www.Silver-Phoenix500.com

It’s not just Donald Trump. Many political leaders around the world operate under the misconception that a trade deficit is a problem to be reckoned with. This misconception has been the root of countless bad policies over the centuries.

Trade, by definition, is not an adversarial situation resulting in a winner and a loser. Rather, both parties believe that they are benefiting, otherwise the trade would not take place. Most of the time, both parties do benefit. In general, one side wants a particular product more than a certain quantity of money and the other side wants the quantity of money more than the product. When the exchange takes place, both sides get the thing to which they assign the higher value at the time.

All the hand-wringing about international trade deficits is based on the ridiculous notion that the side receiving the money is the winner and the side receiving the product is the loser, but how could this be? If the side receiving the product was losing-out then it wouldn’t enter into the trade. Furthermore, given that today’s money is created out of nothing, if a trade were to be viewed as a win-lose situation then surely it’s the side receiving the product that should be viewed as the winner.

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