Wealth & Poverty Review Looking Ahead to the Digital Imperatives
Originally published at washingtontimesThe following is a review of Discovery Institute Fellow Richard Rahn’s book, “The End of Money: And the Struggle for Financial Privacy”, written by William H. Peterson and published in The Washington Times.
In 1976 economist Richard Rahn was struck by a radical idea in a new book by F.A. Hayek, the Nobel laureate in economics.
The book was, “The Denationalization of Money.” In it, Hayek held that government monopolization of money was neither necessary nor desirable, that politicians had thus the means to press central banks to cheapen money and cut interest rates, especially before national elections.
The aim: Create a boom that would sweep incumbent politicians back into power. The catch: Booms lead to recessions, or an inflationary boom-bust cycle that pretty much parallels the history of money going back to antiquity. So inflation has ever been a government coin-clipping, press-printing or credit-expansion phenomenon — too much money chasing too few goods.
The cure (per Hayek): Switch to private competitive currencies based on a market basket of commodities such as wheat and gold. Presciently, Hayek pleaded for removal of legal obstacles to money privatization so as to make way “for an evolution which is bound to throw up beneficial results we cannot now foresee.”
The author, an international financial consultant, sees what Hayek could not foresee in 1976 — technologies that allow a welcome denationalization of money. These new technologies include the semi-conductor chip, the Internet with its revolutionary e-mail communications system, encryption devices that appear to make breaches of privacy government-proof, and the rise of debit cards, credit cards, and smart cards which provide an easy and confidential means of storing, dispensing, and collecting e- or digital money.
So privacy, or what Justice Louis Brandeis hailed as “the most comprehensive of rights and the right most valued by civilized man,” looms big in Mr. Rahn’s view, as he worries over a rash of banking laws nominally designed to detect money laundering from drug trafficking or other “hot money” schemes. Under such laws as the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986 and the Anti-Drug Abuse Act of 1988, the U.S. government requires bankers to report any unusual activity in their depositors’ accounts. That reporting accelerates.
Power corrupts, abuse ensues and the Fourth Amendment right to be free of “unreasonable searches” is undermined. Selective prosecution follows, particularly against those who have lost favor with the political establishment. The author names names.
In any event, Mr. Rahn says today’s digital money revolution is well under way, a revolution that lays bare the incongruence of many of our tough tax, trade and financial laws. Laws that serve special interests (including Uncle Sam), that clash with society as government money passes out of circulation, as paper currency and metal coins fade in an increasingly cashless, plastic-money, globalized society.
The trend draws fire from officials. Congress, Mr. Rahn recommends, needs to be alerted and put on the job of expediting the digital and privacy revolution. Specifically, he asks that the Financial Crimes Enforcement Network agency of the U.S. Treasury be abolished, that anti-money-laundering laws be erased, that laws allowing the forfeiture of assets without a criminal conviction be repealed, that taxes on capital be eliminated, that high marginal income tax rates be cut, and so on.
This is a hard-hitting, forward-looking, clearly-written book, one that merits the dust-jacket blurb of supply-sider Jack Kemp who stresses its tax implications: “Richard Rahn persuasively argues how the coming digital money revolution will make lower tax rates and radical tax simplification inevitable.”
William H. Peterson is an adjunct scholar with the Heritage Foundation and Distinguished Lundy Emeritus Professor of Business Philosophy at Campbell University in North Carolina.