Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

756 Money, Bank Credit, and Economic Cycleshere, permits the discontinuation of state intervention in thefield of money and finance. Mises sums up this argumentquite well:The reason for using a commodity money is precisely to preventpolitical influence from affecting directly the value of the monetaryunit. Gold is the standard money . . . primarily because anincrease or decrease in the available quantity is independentof the orders issued by political authorities. The distinctivefeature of the gold standard is that it makes changes in thequantity of money dependent on the profitability of goldproduction. 57Therefore we see that the institution of a pure gold standardwith a 100-percent reserve requirement has emergedfrom the choices made by millions and millions of economicagents in the market throughout a prolonged evolutionaryprocess, and it provides the vital opportunity to check the tendencyof all governments to meddle in and manipulate themonetary and credit system. 587. The Proposed System Is the Most Compatible with Democracy.One of the key principles of democracy is that thefinancing of public activities must be the object of discussionand explicit decision-making on the part of political representatives.The current monopoly on the issuance of money,which is held by a public agency and a banking industry that57 Mises, On the Manipulation of Money and Credit, p. 22; italics added.58 Mises, The Theory of Money and Credit, p. 455. There we read:Thus the sound-money principle has two aspects. It is affirmativein approving the market’s choice of a commonly usedmedium of exchange. It is negative in obstructing the government’spropensity to meddle with the currency system.Hence we consider our proposal vastly superior to that of the School ofMonetary Constitutionalism, the adherents of which attempt to solvecurrent issues via the establishment of constitutional rules on monetarygrowth and banking and financial markets. Monetary constitutionalismis not necessary in the context of a pure gold standard and a 100-percentreserve requirement, nor would it curb politicians’ temptation to manipulatecredit and money.