Sound Money vs. Inflation: Unmasking Government Deceit - A Conversation with Jonathan Newman, PhD

May 16th, 2024 Comments

From the Mises Institute in Auburn, Alabama, executive director of the Sound Money Defense League, Jp Cortez, sat down with Dr. Jonathan Newman, Henry Hazlitt Research Fellow at the Mises Institute, to discuss the origins of money, inflation as a policy choice, and the role of government intervention in a monetary system.

Main Topics Discussed

  1. Introduction and Background
  2. Definition and Origin of Money
  3. Problems with the Barter System
  4. Inflation as a Policy Choice
  5. Austrian Economics Perspective on Money
  6. Qualities of Good and Bad Money
  7. Fiat Currency and Government Control
  8. Sound Money and Economic Growth
  9. Technological Advancements in Money
  10. Government Intervention in Monetary Systems
  11. Historical and Conceptual Overview of Inflation
  12. Cantillon Effects and Economic Implications
  13. Misattributions and Public Perception of Inflation
  14. Central Bank Digital Currencies (CBDCs)
  15. Impact on Society and Individual Behavior
  16. Hope and State-Level Resistance


  1. Introduction and Background of Participants:

    • Jp Cortez, Executive Director of The Sound Money Defense League, and Jonathan Newman, a Henry Hazlitt Research Fellow at the Mises Institute discuss economics from the Austrian perspective. Cortez credits Newman with significantly influencing his interest in sound money.
  2. Definition and Origin of Money:

    • Newman explains that money is a widely accepted medium of exchange, emerging from barter economies. He attributes the concept to Carl Menger, an Austrian economist, who described how money evolves to overcome the limitations of barter by solving the double coincidence of wants problem.
  3. Problems with the Barter System:

    • The barter system is inefficient due to the lack of a common denominator for value, making economic calculation difficult. Money emerged as a solution to these inefficiencies, enabling more complex economic activities and enhancing the division of labor.
  4. Inflation as a Policy Choice:

    • Cortez and Newman discuss inflation, emphasizing that it is a deliberate policy choice rather than an unavoidable economic phenomenon. They criticize it as immoral and a form of theft from savers and wage earners.
  5. Austrian Economics Perspective on Money:

    • Austrian economists view money as a market product, not a state creation. Newman argues against the state theory of money, suggesting that government-imposed currencies lack the historical price memory needed for effective economic calculation.
  6. Qualities of Good and Bad Money:

    • Cortez highlights that different monies have varying qualities, which affect their effectiveness. He criticizes the U.S. dollar, noting that people use it not because it is the best money but because they are trapped by regulations and taxes on alternatives like gold, silver, and Bitcoin.
  7. Fiat Currency and Government Control:

    • The discussion covers how fiat currency, particularly the U.S. dollar, is a result of government intervention. This system allows for deficit spending and inflation, which Newman and Cortez argue is harmful and a form of theft.
  8. Sound Money and Economic Growth:

    • Sound money, such as a gold standard, imposes constraints on government spending and promotes savings and capital accumulation. This, in turn, leads to economic growth and improved living standards, contrasting sharply with the effects of fiat currency systems.
  9. Technological Advancements in Money:

    • Technological innovations are creating new forms of money, such as Bitcoin and gold-inlaid bills. These developments are seen as promising responses to the failures of fiat currency and government-controlled monetary systems.
  10. Government Intervention in Monetary Systems:

    • The conversation critiques the technocratic approach to monetary policy, where government officials believe they can manage the economy through mathematical models and interventions. This belief, according to Cortez and Newman, has led to numerous economic and social problems.

11.   Historical and Conceptual Overview of Inflation:

  • Terminological Shift: Historically, inflation was defined as an increase in the money supply, but over the years, particularly from the 1970s and 1980s, it came to be understood as a rise in prices due to increased money supply.
  • Economic Definitions: There are nuanced definitions, such as inflation being an increase in money supply beyond money demand. Rothbard’s definition emphasizes an increase in warehouse receipts over actual specie.

12.   Cantillon Effects and Economic Implications:

  • Cantillon Effects: The interview highlights the importance of Cantillon effects, which explain how new money enters the economy at specific points, benefiting some at the expense of others. This concept is critical in understanding why inflation is seen as a form of theft.
  • Government Co-option of Money: The discussion explains how the US government has historically co-opted money (e.g., 1913, 1933, 1971) to expropriate resources from the private sector without direct taxation.

13.   Misattributions and Public Perception of Inflation:

  • Blame Shifting: The interview criticizes how governments and media misattribute inflation to various factors (e.g., Putin, consumer behavior, corporate greed) instead of recognizing it as a result of monetary policy.
  • Public Awareness: There is a call to increase public awareness that higher prices are a consequence of government actions in debasing the currency, equating monetary inflation with a hidden tax.

14.   Central Bank Digital Currencies (CBDCs):

  • Risks of CBDCs: The interview expresses concern that CBDCs would grant governments unprecedented control over the financial system, leading to privacy invasion, the potential for negative interest rates, and further centralization of banking.
  • Historical Parallels: Comparisons are drawn with past government misdirections in inflationary periods, such as pre-hyperinflation Germany.

15.  Impact on Society and Individual Behavior:

  • Inflationary Pressures: The current inflationary environment forces people into a precarious situation where they must spend quickly, save and lose purchasing power, or engage in risky investments.
  • Economic Insecurity: This situation leads to increased food insecurity and homelessness, highlighting the severe social consequences of unsound monetary policies.

16.  Hope and State-Level Resistance:

  • State Legislation: Some US states are passing laws to exclude CBDCs from their definition of money, supporting gold and silver as legal tender, and establishing state depositories.
  • Growing Awareness: There is optimism in the increasing popularity of sound money principles and free market ideas, as seen in political movements and educational efforts globally.

Final Thoughts:

  • Advocacy for Sound Money: The interview underscores the importance of advocating for sound money and educating the public on the true causes of inflation.
  • Encouragement for Activism: Despite the challenges, there is a call to remain active and optimistic, as the movement for economic freedom and sound monetary policy gains traction at both state and global levels.