Language was created spontaneously and needed no act of creation or sanction by the state – it is owned by each and every one of us. Money was also created this way, but today we have government ownership of the supply of money. This has been devastating for its purchasing power.
There are many stories in history of wicked monarchs who, to fund their various despotic regimes or lifestyles, would call in the coinage of the realm, extract a small percentage of gold – a “clip” – and then add an impurity before giving the coins back to the public; this is debasing of the monetary unit. This embezzlement was unlawful for the minter in the private sector and many people over the ages have been executed for stealing from money owners. Yet it is not unlawful for the state to do it.
Before World War I, money was gold. This was the commodity over time that freely consenting adults had chosen. This was the most marketable commodity that allowed us to move from barter to indirect exchange.
One ounce of gold today is £766. So if a pound sterling pre-WWI was just a name in the UK for 1/4 of an ounce of gold, it would imply that the pre-WWI purchasing price was 1/4 of £766 or £191.50. Compared with gold, the pound sterling has therefore lost 99.5% of its purchasing power in 100 years. One pound should buy something like a good week’s food shop for a family of four and not just one daily newspaper like it does now.
The government will raise an estimated £498bn and spend £666bn this year. In the last 20 years, the economy has grown at about 2% on average. Even with the 3% Treasury growth forecast, we will have a £1.5 trillion debt at best by 2014. On the whole, quantitative easing – i.e. creating money out of nothing or debasement of our purchasing power – has “paid for this”. With no political will to cut public spending, there is a serious danger we will be faced with further debasement and eventual currency collapse. This is the elephant in the room during this election campaign.
For more on these issues see Ludwig von Mises – A Primer.