Monday, March 12, 2007

Do we Need the Government? (8) - Controlling the Money Supply

Many people believe that we need the someone to control the supply of money.

Governments used to believe that they could do this. Now they realise that they cannot control the supply of money, and the best that they can do is set interest rates. But even this is to much for them. The interest rate represents the price of that a society puts on the future. The chances of a politician getting the price of the future right are fairly slim, given that only God knows the future.

Governments will generally set the interest rate too high or to low.

For more on money see Money.

1 comment:

Steve Scott said...

Ah, Ron, but don't you know that a politician is God? I don't know how much off hand you've written about gold and silver as money, but the labor involved in mining and coining of precious metals is directly tied to the value of money; the churning of ink and paper isn't. People scoff at hard money because of the supposed inconvenience of it.