Another WSJ hard-money editorial

What is it about that back page of the op-ed section of the Wall Street Journal that continues to have all sorts of interesting, far from the mainstream, opinions?

Here's another one in today's paper from Judy Shelton, economist (?) and the author of "Money Meltdown: Restoring Order to the Global Currency System":

Capitalism Needs a Sound-Money Foundation
Let's give the Fed some competition. Abolish legal tender laws and see whose money people trust.

Let's go back to the gold standard.

If the very idea seems at odds with what is currently happening in our country -- with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year's record budget gap -- it's because a gold standard stands in the way of runaway government spending.

Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold. Fiat money -- i.e., currency with no intrinsic worth that government has decreed legal tender -- loses its value when government creates more than can be absorbed by the productive real economy. Too much fiat money results in inflation -- which pools in certain sectors at first, such as housing or financial assets, but ultimately raises prices in general.

But wasn't all this "pooling" of money supposed to be the very foundation of an advanced, modern-day economy?

I mean, making asset prices go higher, much higher if possible, is the whole point of what we've been doing for the last 25 years, isn't it?

Apparently not.

Inflation is the enemy of capitalism, chiseling away at the foundation of free markets and the laws of supply and demand. It distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real consumption opportunities.

In short, inflation undermines capitalism by destroying the rationale for dedicating a portion of today's earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it's how an economy grows, how a society reaches higher levels of prosperity. But inflation makes suckers out of savers.

If capitalism is to be preserved, it can't be through the con game of diluting the value of money. People see through such tactics; they recognize the signs of impending inflation. When we see Congress getting ready to pay for 40% of 2009 federal budget expenditures with money created from thin air, there's no getting around it. Our money will lose its capacity to serve as an honest measure, a meaningful unit of account. Our paper currency cannot provide a reliable store of value.

There's much more - well worth a look.