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Why Freedom, Private Property & Money Matter

Personal freedom is a relatively simple concept to understand. It is a little harder to define. However, most people would agree that freedom constitutes the ability to carry out one's personal wishes without encumbrance.

The most apparent barrier that prevents people from doing what they want is a lack of money. Others might argue that they don't have enough time to be free. (However, if they had sufficient money, then they wouldn't need to be so busy in the first place.)

In fact, time and money are intimately intertwined. "Time is money" is a well-known adage. The more dollars (or euros, or yen) you have to your name, the more free time you are likely to have to do what you want. Unless of course, you allow your money to control you, not the other way around.

Money should always be used to maximize freedom, not constrain it - to make purchases or commitments without that primary commandment will always result in future problems. The materialistic millionaire with his mansion, vacation property, fleet of cars, helicopter or personal jet, flock of servants and so on, isn't really a free man. He's exchanged his money for sizable ownership obligations, which might not necessarily be in his best interests. Unless he's an astute manager who can efficiently arrange his affairs, he's allowed his need for approval by a consumer-mad society to steal his potential freedom away from him.

This is not to say that having "things" and enjoying the good life are bad - far from it. It's just that many individuals who are otherwise quite intelligent insist on trapping themselves in an encroaching fishnet of obligations when their hard-earned money should be used to achieve just the opposite.

By this time, you should be thoroughly convinced that money is the primary tool of freedom. But what is it? Money is really nothing more than a medium of exchange used to determine the "value" of goods and services, without the need for a barter system.

But what is the value of money itself? There are two basic kinds of "money" available for use in the world: sound money (or "hard" money) and fiat currency.

Sound money is backed by a commodity asset, a "hard" item that exists in the real world in finite and discrete quantities. Gold has almost always been used for the role of providing sound money. It is essentially imperishable, its purity can be easily tested, it is malleable and ductile, it is easily divisible, and it is difficult to "create".

This last property is important because it serves as a disciplinary limit to the growth rate of the money supply, otherwise known as inflation. Contrary to popular belief, inflation is not the rate of price increases in consumer goods. Inflation is the growth in the money supply, which subsequently leads to price increases in consumer goods (or assets such as stocks and real estate). Price increases are a symptom -- not a cause -- of inflation.

To state that inflation is an increase in the CPI or PPI is analogous to saying that a cold causes a runny nose and a cough. A cold is caused by a virus that infects the nasal and throat tissues; the body's reaction to this infection often includes such symptoms as a runny nose and a cough. Similarly, inflation is an increase in the money supply; its symptoms often include consumer and producer price increases and asset price increases.

Inflation is always an epidemic when fiat currency is used. Unlike sound asset-backed money, fiat currency by any kind of real-world asset. Fiat currency is nothing more a pretty piece of paper whose "value" lies in the credibility and financial means of the issuer. A fiat currency is merely a promise to pay by the issuer.

To pay what? A good question, because unless you are already a student of the economics of sound money, you will be rather shocked to learn that there is nothing behind the promise to pay except hot air, government assurances, and an equal amount exactly the same kind of money. There is no intrinsic worth to paper money other than what the government claims it to be worth.

Governments that are large and powerful, with the means and attitude to extract large sums of tax dollars from their captive tax-serfs, have stronger currencies than weaker, less tax-intrusive entities. This is why the US dollar is more highly regarded than, say, the Colombian peso. But it is all a confidence game in the end.

When your "money" represents a debt liability to another entity (in the US case the Federal Reserve Bank of the USA), you really don't own it. You are, after all, operating on the assumption that the entity issuing the debt is in fact willing to honor its obligations to you.

As you might expect, the other party to a debt transaction does not necessarily have your best interests at heart. In fact, if that other party is much more powerful than you (either by perception or by fact) then you can count on the rules regarding "money" to be changed in that other party's favour.

The most common way this is done is by inflation. When the money supply is increased (purely at the issuer's discretion), more paper dollars flood the market to purchase essentially the same, fixed-amount supply of goods and services. In any free market, the value of the item in increased supply will drop relative to the other item if the second item's supply is constant. In this case, the value of the currency will fall, as it will take more of it to purchase the same goods and services than it used to.

And so the first of two primary differences between sound money and fiat currency is that inflation (and subsequently, purchasing power) is asset-based in the case of sound money, and political in the case of fiat currency.

Without the discipline of a gold standard, there is no guarantee that the money supply will not stray from a free-market system of supply and demand. In fact, politicians and their partners-in-crime (the central banks) are pretty much guaranteed to erode the purchasing power of their currency whenever it is to their advantage.

The second of the two primary differences is that a private citizen cannot truly own money under a fiat currency system, but can do so under a sound money system. In a fiat currency regime, no ownership is possible since the "money" is nothing more than a promissory note issued by politicians and their cronies. In a sound money system, gold (or notes which are directly convertible to a fixed amount of gold) can be held and stored with 100% rights of ownership.

And what does all this have to do with personal freedom? Since we have already established that money is the primary tool of freedom, having ownership of your own money is a very crucial factor. Fiat currency is presently the only "money" in use - and it's a tool of the state - so we're now left with the result that there is in the end only one true freedom: freedom from the state.

Freedom from the "authorities" is based on the principle of private property. Starting with sound money, it extends to your own physical body and to the possessions you've ethically earned from your own personal labours. (The word "ethically" is used in place of "lawfully" because the state can arbitrarily change the laws to suit its own designs, at will. Ethics are in general rather immutable, but that is a topic for another essay).

There can be no true freedom without private property, no matter which form that property may take: money, real estate, patents, worldly possessions, and so forth. Property is not truly private unless the owner of that property has a complete and unencumbered claim to it. Taxation and other forms of state-sponsored confiscation do not allow for truly private property, as they give the state the "authority" to seize the property if the required sums are not paid on time.

Therefore the state must not hold any mandatory powers of confiscation over the property of its citizens. This means that any law contrary to the protection of private property must be struck from the books. Moreover, the new and reduced code of laws must be closely monitored by all private citizens to ensure their freedom is not stolen from them.

How important is this in the grand scheme of life? You need only look at the history of areas where the concept of private property is not respected or protected. Russia and most of Africa are notorious for their lack of private property principles - corruption and property theft have reigned supreme for centuries in these places. Much of Latin America would fall into the same category.

It goes without saying that these areas of the world have hardly been world leaders in technology, innovation, or quality of life.

Historically, the countries that have always prospered the most have been the ones which (at that point in time) had the soundest money, the strongest protections of individual private property, and (as a result) the least amount of government in their economic and legal affairs. The Netherlands, England, and America have all at one point demonstrated such a combination of qualities, although of course these principles have now been severely eroded in today's world.

What allowed these nations to out-compete their less free rivals was the fact that their economic progress was unretarded by bureaucracy and that individuals had every motivation to be as productive as possible, since they were entitled to the full fruits of their labours.

Thus a high level of personal freedom is good not only for individuals, but also for nations. We are left with the inescapable conclusion that personal freedom is not only desirable, but also a necessity for the advancement of the human race. And it all starts with the concept of private property, which itself is derived from sound, asset-backed money unhindered by the manipulations of the state.
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