Monopoly Money

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The guy on top is always a target; it comes with the territory. So government, committed to the program of helping the "little guy," or at least making him think that it is, wars against monopoly. No group should dominate, especially in business, because the power of such a group will be used for selfish purposes, and against the common good. This is a dogma of the state, and although it’s only superficially plausible, that’s good enough for government propagandists.

Some monopolies are good, though, and the most sacrosanct of all monopolies is the money monopoly. The same government that wrings its hands in distress at the size and power of Microsoft defends to the utmost its licensed money-creator, the Federal Reserve and its banking system. At times it becomes ludicrous, as in the recent cases of $200 bills.

Salesperson Kathryn Miller, who sells clothing at a women’s shop in Greensburg, Pennsylvania, cheerfully accepted as payment (the phrase "as payment" means "in lieu of payment!") a $200 bill, returning $101 in change to the buyer of $99 in clothing. And she is not alone in her acceptance of $200 bills.

The cops in Kentucky are looking for a customer who bought $2 worth of food at a fast-food place, and "paid" for it with a $200 bill, receiving $198 in change. It’s an epidemic!

Authorities in Kentucky remarked that the $198 given in change was "real money." And a spokesman for the Pennsylvania police said of hapless clerk Miller "Anyone with a bit of knowledge should have recognized that it wasn’t the real thing, " referring to the $200 bill.

It’s true, beyond doubt, that the creators of the $200 bills had nothing on deposit anywhere with which to redeem the bills — just like the creators of "real" money. Nor did the holders of the $200 bills have a claim upon any property of their creators — exactly as is the case with "real" money. Nor had the $200 bills been declared a "legal tender" by Congress.

On the other hand, they worked! As a medium of exchange, they proved themselves in the marketplace. Isn’t that what counts? The Federal Reserve itself, in the booklet Modern Money Mechanics, tells us that what makes modern money effective is that people have confidence in it. Their exact words are: "What, then, makes these instruments — checks, paper money, and coins — acceptable at face value in payment of all debts, and for other monetary uses? Mainly, it is the confidence people have that they will be able to exchange such money for real goods and services whenever they choose to do so." Those who spent the $200 bills had that confidence, and it was not misplaced. They were able to "exchange such money for real goods — "It is interesting that the Fed distinguishes between "such money" and "real goods." If you are as old as I am, you can recall when money itself was "real goods!"

Why, then, the outrage by the authorities at the use of these $200 bills? Was anyone hurt? Well, it can be said that the sellers of goods were hurt, because they could not pass the bills that they had accepted. But that is merely a legal formality, and the legislature could change that overnight. Moreover, all "real" money comes into existence as a loan, bearing interest. The DIY stuff is debt free. Score one for the amateurs! The recipients of "real" money have no more claim upon anything whatsoever than the recipients of the $200 notes. Why, therefore, should the creators of "real" money be given favored status over those who could create money with exactly as much "value" in their garages or basements? Whatever happened to equal protection of the law?

Maybe it has to do with the bankers, who, in addition to issuing "real" money, use the credit that they create to buy government bonds, and, quite simply, make the continuing operation of government possible by ceaseless lending, with no expectation of repayment. (But why would they want repayment, when they can collect interest forever, and use the government’s IOUs as assets to justify still more lending?) The do-it-yourself money-creator can’t compete with the monopoly money monopolists. He has no bank, no loan department, no lobbyists, and no national and international finance connections. He’s the proverbial little guy, and the government, far from stepping in to protect him, steps on him.

There are monopolies and monopolies. Some are bad — like Microsoft — but others are a positive Godsend — like the Fed. Don’t fret over it; the government will sort it out. Trust them!

Dr. Hein [send him mail] is a retired ophthalmologist in St. Louis, and the author of All Work & No Pay.

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