Alasdair Macleod: The impossibility of economic calculation in a fiat world
3:23p ET Sunday, February 10, 2013
Dear Friend of GATA and Gold:
Fiat money, at least as it long has been managed in most countries, has made accurate economic calculations impossible, GoldMoney research director Alasdair Macleod writes today, elaborating on a point made by another British economist, Peter Warburton, in his incisive 2001 essay, "The Debasement of World Currency: It Is Inflation But Not as We Know It":
Warburton argued that depriving the economy of a "stable numeraire" had become pretty much the purpose of Western central banking.
"Governments in countries like the United Kingdom have destroyed much of their manufacturing industry through currency depreciation, while Germany contrasts with a history of engineering excellence and a firm currency. The German business owner in the post-war years had relative certainty of economic calculation, allowing him to build up his productive wealth; while the British business lobby resorted to encouraging successive governments to keep costs down by devaluing the pound, rather than investing their own resources in more efficient production.
"Reducing costs by managing the currency is, to put it less politely, all about robbing the workforce of the purchasing power of its wages. But the workforce is, in economic terms, made up of individual entrepreneurs selling their skills and labour to employers. They are the unconscious victims of devaluation as indeed are small businesses, but at least in the short term the central planners manipulating fiat money congratulate themselves that jobs have been saved."
Macleod's commentary is headlined "The Impossibility of Economic Calculation in a Fiat World" and it's posted at GoldMoney's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
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