Perhaps a better title would be "Mercantilism's fundamental flaw". Rand makes few assumptions regarding the inherent integrity of "leaders"; in fact, she assumes no such integrity, and argues for liberty.
While we trip over ourselves (as a society) to give up our freedoms and grant ever more sweeping power to "leaders" to save us, we will reap what we deserve -- ever greater examples of waste, bungling, abuse, malinvestment and looting, on scales simply unimaginable just a few years ago.
We gave up our ability to directly monetize wealth 2 or 3 generations ago -- what features of our present financial system makes you believe that it is "Capitalism"? Government giveth, and government taketh away. Sounds like good, old-time kingly Mercantilism to me...
I hate to bring this to a general discussion of capitalism/Rand etc., but I have a question:
How is Rand's "liberty" supposed to be provided?
It seems to me we already live in a universe where people have as much free will as we ever will. Some people use this free will to restrict the free will of others. Sometimes this is a government, sometimes it's a corporation, or sometimes it's a kidnapper.
But what hypothetical external agent could ever ensure that no one's free will will be restricted? To have such a system would necessitate restricting people's free will so that they couldn't restrict each other's free will; it would be a self-defeating situation.
This is analogous to the set of all sets in mathematics, or other paradoxes that arise by having "all powerful" objects. Humans are so free, that we are free to kill ourselves (for instance), and remove our freedom. Likewise, we are free to disable our own free will.
How could Rand change things so that this is not the case?
In my view, governments are the result of the utter freedom we have as humans. It is simply absurd to think of getting rid of the systems that restrict freedom; if we did, the freedoms granted would simply create new systems, like corporations, or another government, that would replace all the functions of the system we got rid of.
Let me put it another way: It seems we already have maximal liberty. How are things ever going to be better in that respect?
I think this whole argument implies an interesting normative method for evaluating government policy. Your implication seems to be that restricting some freedoms for some people ends up producing an overall increase in freedom relative to no restriction. The obvious crimes come to mind first but the framework could be applied elsewhere. Take copyright for example, do I have the freedom the control my own creative work however I like, or does the freedom not to have to constantly worry about the source of media outweigh the freedom to control my creations. More succinctly, in a world without copyright are we more or less free? It's not obvious to me.
Singapore is a case in point, freedom not to be caned for minor infractions vs. freedom to walk around relatively safely in a high density metropolis. Again who is more free is not clear.
I think you are wise to suggest there might be "maximal" achievable liberty. Does the culture of society affect the attainable liberty opportunity set? It seems like it must.
I was going to submit this a few days ago, but I don't like Rand-only discussions. However, I'd like to contribute to the thread with this recent Slate article, which abruptly reversed almost all my remaining positive feelings about Rand:
Not only was she a hypocrite who ignored her own teachings when things got personal, she worshipped a serial killer who raped and dismembered a 12-year-old girl, because she saw him as a hero defying society.
The Branden quotes weren't taken out of context. It was the Branden affair that first led me to doubt her words, and that's pretty much as it happened.
According to Rand scholar Chris Matthew Sciabarra, she deliberately modeled Renahan - intended to be her first sketch of her ideal man - after this same William Edward Hickman. Renahan, she enthuses in another journal entry, "is born with a wonderful, free, light consciousness -- [resulting from] the absolute lack of social instinct or herd feeling. He does not understand, because he has no organ for understanding, the necessity, meaning, or importance of other people ... Other people do not exist for him and he does not understand why they should."
So she modeled her initial Randian Hero after the psychopath.
In the original version of her first novel We the Living: "What are your masses [of humanity] but mud to be ground underfoot, fuel to be burned for those who deserve it?"
Sounds Jokereqsue, no?
Of The Fountainhead's hero, Howard Roark: He "has learned long ago, with his first consciousness, two things which dominate his entire attitude toward life: his own superiority and the utter worthlessness of the world."
And:
The editor also provides the briefest and most detail-free synopsis of Hickman's crime possible: "He was accused of kidnapping and murdering a young girl. He was found guilty and sentenced to death in February of 1928; he was hanged on October 20, 1928."
As far as I can tell, this is the one and only reference to Hickman's victim to be found anywhere in the book. Ayn Rand never mentions the victim at all in any of her journal entries. The closest she comes is a sneering reference to another girl, "who wrote a letter to Hickman [in jail], asking him 'to get religion so that little girls everywhere would stop being afraid of him.'"
I'll say we haven't reached maximal liberty, all one has to do is look at the drug war, education, and medicine. You'll quickly see limitation on your liberty.
The way things are better is when people are free to choose what they want through voluntary interaction without force. If I want certain standards for a school or a doctor, I seek those out -- If I want to go to witch doctor that's ok too.
I'd highly recommend Nozick's Anarchy, State, and Utopia if you're interested in this question.
Central bank money, created and debased at will, vs. Wealth-backed money, intrinsically valued by the wealth that backs it. Freedom to choose money that doesn't inflate allows multigenerational wealth transfer, etc.
I guess I'm curious what "wealth-backed money" is. All money is only a medium of exchange, and is only worth what people collectively agree it is worth.
I'm going to take a guess and assume you mean gold, but if that isn't the case, I'm really curious to know.
The fact that people collectively agreed that gold was a good form of money has nothing to do with any intrinsic (or god given) value of gold. It had everything to do with certain properties of gold that made it a good medium of exchange. Namely, it's durable, portable, hard to counterfeit, malleable, etc.
Eventually, gold's cause was assisted by tradition. People have been using it to represent money for so long they mistakenly believe it has intrinsic value. (Granted, gold isn't a bad choice, if you are betting on the fact that others will irrationally value it.)
So yes, it's harder for governments to manipulate a gold-backed currency... but it's not that hard. The US effectively did it twice, most recently after WWI with the Gold Reserve Act. Also, your money supply is now open to manipulation by private entities and even individuals. Gold mining companies, for instance, would have powerful sway over the amount and price of gold.
"Hard to counterfeit" is the key point there. The difference between gold and dollars is that dollars are very, very easy to counterfeit. Just get Congress to order more from the Treasury!
Expansion of the money supply is not "counterfeit" money, although there are circumstances where it is a bad idea. Counterfeiting is when a private citizen decides to, as it were, expand the money supply with his or her own printing press.
Why should we treat the action of the government differently from the same actions of citizens? Wouldn't it be wrong for a government to murder people with no provocation? Wouldn't it be wrong for a government to kidnap people and hold them captive in a secret location? Why then is it fine for the government to debase the currency, and therefore destroy the value of any accounts held in that currency?
This is the current global strategy to the debt crisis: inflate it away. If we (we being the government and central banks as a colluding entity) inflate the dollar 100:1, then the "toxic" debts are only 1% as bad as they were before. And we get to keep the houses we evicted everyone from, and sell it back for the new, inflated valuation.
Why then is it fine for the government to debase the currency, and therefore destroy the value of any accounts held in that currency?
The value of the currency depends on what I can exchange it for. If the US dollar's value relative to the things I buy and sell remains relatively stable over the next few years, and if my risk of losing my job remains low so that I can feel confident in my ability to keep earning those dollars, then as far as I'm concerned, the Fed is doing its job.
If the US dollar's value relative to gold goes down, I couldn't care less. I can't eat gold.
I'm not trying to defend the current setup of the Federal Reserve as it stands... I think there is a lot of room to make it more transparent and to erect barriers such that Goldman executives (or any other bank) can't make a career of moving back and forth between the company, the Federal Reserve, and the White House.
As you put it, the government has the ability to debase a currency (I'm not arguing it's fine to do so, but I agree that it has the ability). Would you prefer to give this ability to private entities (corporations and individuals) as well? That is what commodity-based money gives you. Whoever produces or purchases that commodity has an effect on the money supply.
As an alternative way to think about it, would you want a money supply based on oil? It is also non-renewable, malleable (yay liquids), portable, and hard to counterfeit. How about money based on copper?
I'm sure the folks in the middle east and Chile (respectively) would love to be able to affect our money supply. Also, the cost of driving a car or building a house would go up needlessly, just like the cost of gold for electronics and medical uses is needlessly high because of gold's status as a speculative commodity.
So yeah, if there was a way to have a perfect money supply not subject to manipulation, I'd be all for it... but a commodity-backed system is just as bad (or worse) than a fiat one.
"That is what commodity-based money gives you. Whoever produces or purchases that commodity has an effect on the money supply."
But in that sense, nothing has changed for fiat currency. Fiat currencies are still produced and purchased just like commodities, with the exception that governments can produce all they want to get a leg up on that game. That's what they use monetary inflation for, to cheat at currency trading and bonds games.
My point is that nobody should be "in charge" of a currency. Currencies came about through consensus in the market, not through government mandate. Nobody has the right to be the final arbiter of all "dollars" any more than anyone has the right to be the final arbiter of "time" (the only truly important resource) or "air and water" (the first truly vital resources). Monopolies are not good, especially monopolies that come about through force, which is as governments are. In a society that is claims to be free and equitable, having a super-citizen government is not equitable.
A single, mandated currency is a borderline oppressive idea. There are laws against "undermining the ubiquity and stability of the dollar". They're used against people who want to mint their own coins of their own design and use them in transactions with people willing to accept them. If people want to use something other than dollars for transactions, then more power to them. Hell, publicly traded corporations already do it, often using their own stock holdings as a medium of trade for merger deals and such. When you look at the plethora of trading (I mean this in the generic sense, not the Wall Street sense) options available to anyone with enough wealth, I think it starts to become clear that financial and monetary laws and regulations are really only meant for the working classes.
There is no reason it's illegal to make and circulate your own currency... my town even has it's own local currency.
To quote the section to which I think you are referring (Section 31 U.S.C. 5103):
"United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues."
Also Article 1, Section 8 of the Constitution:
"The Congress shall have Power...To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"
Notice it doesn't say exclusive right.
The 'legal currency' just means that if you sell/loan someone something, and they offer to pay/repay in dollars, you either accept them or give up your claim to that debt. Also, the government will only accept dollars for taxes/fees. So you could legally refuse dollars if you wanted to, but if you did so, the other person could just say "I tried to pay but he wouldn't let me" and walk away. But if the other person wants to pay you in some other way... with Blah Bucks... and you accept them, nothing illegal happened. It would just be considered bartering.
I'm not sure I'd want a currency backed by my local bank. At least I know the US government and by extension the Federal Reserve can't go bankrupt, rendering my money worthless (although it's true they could hyperinflate, by choice). Imagine all the people that would have had Bear Stearns dollars and what a catastrophe that would have been.
While we trip over ourselves (as a society) to give up our freedoms and grant ever more sweeping power to "leaders" to save us, we will reap what we deserve -- ever greater examples of waste, bungling, abuse, malinvestment and looting, on scales simply unimaginable just a few years ago.
We gave up our ability to directly monetize wealth 2 or 3 generations ago -- what features of our present financial system makes you believe that it is "Capitalism"? Government giveth, and government taketh away. Sounds like good, old-time kingly Mercantilism to me...