Milton Friedman and the Incomplete Inflation Argument
I was recently pointed to a Milton Friedman speech in which Milton Friedman claimed that trade unions do not create inflation, and that inflation is only caused by printing money. This is simply not true.
Does printing money cause inflation? Absolutely. But the primary purpose of trade unions is to create non-market pricing mechanisms, namely minimum or higher wages for the workers they represent, regardless of market conditions.
Trade Unions and Non-Market Pricing
Once a pricing floor is created, an artificial pricing mechanism exists. This is why on this blog we state clearly that we do not support or recommend a government gold standard currency.
Similar to our stance on Bitcoin, we are not against a private gold standard currency. However, you are delusional if you think a gold standard will force governments to spend less, especially under a democratic system where people can literally vote themselves benefits.
Why Governments Cannot Be Trusted With a Gold Standard
In the United States, the 32nd U.S. President, Franklin D. Roosevelt, made owning gold bullion a federal crime. He was one of the most popular presidents in American history. If you genuinely trust the voting public and government to respect a gold standard, you are fooling yourself.
Furthermore, people have the right to join trade unions and the right to lobby governments to create price controls that serve their interests. Once pricing floors and pricing ceilings, such as rent controls, exist, fiat money becomes the only system that can function.
Gold, Speculators, and Political Reality
For example, the price of gold is currently nearing $5,000. If currencies were tied to gold, governments around the world would immediately look for ways to dilute convertibility or claim that money speculators were threatening national stability.
If you are not wealthy, chances are you would not care what the government did. You would likely blame so-called money speculators for your problems and allow the government to act however it sees fit.
Tight Money Environments and Union Appeal
In a tight money environment, trade unions become even more appealing. Most people want to get rich quickly. Trade unions would sell voters on the idea that if the government simply mandated a higher livable wage, everything would improve. Voters would be spending their gold before they ever received it.
How Artificial Wages Distort Markets
In the real world, consumers look for the best deals they can find. That is why, even before price controls, businesses price goods to sell quickly. When wages rise artificially, goods can no longer be priced to sell.
If you are a business owner, one artificial wage hike signals that more are coming.
Rent Control and Pricing Into the Future
In rent-controlled environments, landlords price rent into the future. For example, if rent control caps increases at 2 percent annually, what would have been a $700 monthly rental can balloon to $4,000 per month.
Renters have rights, eviction is difficult, maintenance costs rise as government wages rise, material costs increase, and everything moves upward. Under government price controls, there are no mechanisms to force prices downward.
Price Controls, Entitlement, and Censorship
Once price controls exist in society, they become entitlements and expectations. People will violently oppose anyone who challenges minimum wage laws or rent controls.
This is the censorship most people ignore and that we frequently write about. Most people only notice censorship when it affects them personally.
A Spiritual Perspective on Censorship
Jesus Christ showed the world that censorship, the spiritual demon that destroys civilizations, exists everywhere.
Seek ye the Kingdom of God.
Consider making Jesus Christ your Lord and Savior today.
