Customer Reviews

The Ethics of Money Production

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3 star:		(1)
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This book puts together in one place what it has taken me years to piece together (mostly) for myself reading various Austrian economists. Fabulous book and I am glad (and biased as a Catholic) that the author was not shy to quote Catholic thought on the subject where relevant. I have forwarded to as many people as I can and can only hope it acts as a counterforce to prevailing madness around us.

The Ethics of Money Production is a scholarly and relevant work. The author chooses his words well and is very engaging. Read it with a pencil in hand; it is often quotable.

As a professional money manger with a strong Austrian School background I have been revisiting the great works on money supply, old and new. Most recently I returned to my research regarding fiat money and inflation. Never in my 19 year career has macroeconomics had such an overwhelming impact on the financial markets. Herr Doktor Hulsmann's very original thoughts, and methodical development are very helpful in placing money production in a meaningful perspective, beyond the standard political arguments. I savored the typically inaccessable works of Nicholas Oresme and other thinkers of the Scholastic period.

I have purchased additional copies of his book for friendly distribution for like minded colleagues and clients and intend to keep up with his future work.

Kudos to Hulsmann! This is the most complete and insightful analysis of money production, its consequences and implications I have ever read. It is a total destruction of the arguments for fiat unbacked paper money. It is a complete analysis of the history of money, the roots of our current system, and the logical implications of the evils of fiat inflation. Every stone is overturned. No reader can be left with the impression that central banking and unchecked printing of money is ethical or practical.

One of the most interesting aspects of this book is how easily it disples the ideological myths that make Marxism, Socialism, Corporatism, Fascism, and Compassionate Conservatism so popular. None of these ideas are relevant at all, compared to the power of the printing press. It's as if intellectuals have spent the last 200 years blathering on about fanciful ideas while the bankers have robbed us all blind. I like to call it Morganism, after financier J.P. Morgan.

Thank you, Professor Hulsmann, for this work. Your efforts have enriched my life and sharpened my awareness of how the world really works. You should be commended and applauded. The Austrian School is lucky to count you as a member. I look forward to your next book.

David in Qatar

The most perfect little book on the science of economics since it gets to the heart of the subject. What is the heart of the subject of economics? Money and how it is produced and by whom? This seems like simple and trivial questions but they are at the heart of the economic science and they determine the prosperity and stagnation of commerce in society. Hulsmann perfectly sums up the crisis of the current money problem and he shows that it all stems from who produces the money, what is used as money and the rules that govern the game.

He divides money into two categories. Natural money and forced money, with natural money being the money that comes about from the voluntary association of buyers and sellers in the market place, whereas forced money is that legal tender that has been forced upon citizens by the state and given monopoly status From this basic point Hulsman logically explores and shows the consequences between usage of the two types of money. He does a historical overview that brings up from the first merchants in antiquity to the present. The consequences he reveals are astounding. He then even forecasts in passing the present economic crisis (he wrote the book in 2006 ) and shows that it will come directly as a result of the ethical disposition of those who are empowered to manufacture money (paper money).

The fluidity and simplicity of Hulsmann's writing elucidates the most complex of economic concepts thereby revealing the bluff of the establishment economists as nothing more that jargon. In other words economics is the science of every man since every man engages in commercial transactions. The same concepts that applies to the little man is the same concepts that apply to bankers, economic advisers and ministers of finance.This is a must read book in that it is a primer for those wanting to engage in further study of monetary policy. No high School student or college student should be without it. As a matter of fact no person in the current economic crisis should be without this book. Shut off the TV and read this book.

I just finished reading "The Ethics of Money Production" and I compliment the author for having written the best book I found so far about Austrian Economics, much as I read Rothbard, Hazlitt, Griffin, LoCascio, Judy Shelton, Nathan Lewis and even Niall Ferguson. I will recommend it to anyone willing to listen as he sold me completely on the Austrians, giving retorts to objections raised by all the Fisherians, Miltonians and others who come close, but not quite.

However, most current economists as well as all governments and central bankers are Keynesians today. Theefore hoping to see Austrian economics put in practice any time soon is, honestly speaking, pie-in-the-sky. One exception may be Mrs. Merkel and the Bundesbank portion of the ECB but it is hard to imagine how they could buck the rest of the global establishment. I am not too clear about the thinking in China where surprisingly lively debates are taking place on all kinds of economic and monetary subjects. But I never heard of Mr. Hu espousing Austrian concepts... Well, stranger things have happened.

Despite benign and sometimes vicious neglect (see Paul Krugman), Austrian principles exist and, at least as far as I can see, they do impact significantly the development of what happens in the world, whether anybody is aware of them or not; sort of like the laws of physics, much as I hate to apply physical phenomena parallels to human action.

Therefore, as a practitian in finance, what I missed in this book is a chapter evaluating what will, or at least is likely to really happen in the economy (and in the markets if that's not too much to ask), when Keynesianism is employed in an environment where Austrian rules apply.

Did Mr. Hulsmann address this question in some other publication? Is it impossible to divine any reasonable answer since the human psyche can go in any and all directions in a random manner? Are we heading for some large catastrophic event, just as WW II followed a similar situation after the Big Depression? Something else, similar or comparable to a war may be?

I have been thinking for a while of an impending complete paradigm change, but will develop that idea only if anyone expressed any interest in reading about it.

Many thanks for a wonderfully written book.

This book provides an excellent explanation of the consequences of money production, fractional-reserve banking, inflation, etc. It also provides a concise history of those topics and gives sources for interested readers. As with all books that come out of an Austrian perspective, this one should come with a warning: this book may be hazardous to your mental health. The reason is because it makes so much sense and explains things in a clear way that you will go crazy realizing that our politicians, including fed chairmen, are doing the exact opposite of what they should be doing if they really were acting on behalf of the people they claim to be serving. It's when you read books like this that you start to suspect that our elected leaders, who are too intelligent not to understand the principles put forth in this book, are in fact not acting for the benefit of society in general but for their own benefit.

For me, though, a big turn-off of the book was the way it attempted to mix economics with theology. The author spent a fair amount of time discussing the Catholic Church's stance on a particular monetary issue. But I don't see the need for this in a book of this nature. I fear non-Catholics will be turned off from that and not read the book to the end, which would be unfortunate because when the book focuses solely on economics, which is most of the time, it is truly excellent.

One particular passage prompted me to write this review and give it three stars: "Unlike fiat money..., [counterfeiting] cannot be abolished through political measures...because it springs from the internal human condition of original sin" (p. 97). Now why bring up the controversial topic of original sin in a book about money production? One can discuss ethics without reference to one particular set of religious beliefs. Such a statement might cause some people to close the book in disgust. Original sin is not a universally accepted belief, even among religious or spiritual people, so why bring it up? If you want to score browny points with your religious leaders, find a different way of doing it, but in a book like this, it has no place, in my opinion. Thankfully I don't know the religious beliefs of most scholars because they don't tell me what they are in their works. That's how it should be. But for some reason Hulsmann found it necessary to inject his personal religious beliefs into his otherwise excellent book. Too bad.

For years after the 2008 recession I struggled to explain to family and friends what's wrong with the present monetary system; now I just buy them a copy of this book. It's admirably free of the economic jargon that tends to make other books on the subject unnecessarily hard to understand and rebarbative to read, without losing anything in the way of intellectual depth or coverage. As well as analysing different monetary systems on a economic level - ranging from a free market to our current model where a central bank and its licensed banks have a monopoly on essentially unlimited and cost free money production - Hulsmann, crucially, looks at the morality of the various systems, both in terms of their consequences and more deontologically. He finishes up by providing a neat historical account of how our monetary system evolved from one based on precious metals, a process driven by banks looking for illicit profits and, most importantly, chronically overspending governments looking to emancipate themselves from the laws of accounting that govern the rest of us.

I can personally attest that this book has been of enormous benefit to many people without any formal background in economics. Hulsmann's intellectual ambition is admirable (he even ticks off where appropriate Murray Rothbard and Ludwig von Mises, two giants of "Austrian" monetary theory), but there is nothing in the book that an educated and intelligent layman, so to speak, can't understand. Indeed, once you read this book you will be much closer to being able to withstand the barrage of (essentially meaningless) statistics and deliberately obfuscatory terms Keynesians and Monetarists adduce in favour of our barmy and profoundly anti-capitalist monetary system, using the old fashioned weapons of closely reasoned, logical argument.

The only quibble I have with this book are Hulsmann's sometimes rather strained attempts to demonstrate that his analysis is in accordance with authorised Roman Cathoic social teaching. He makes cogent points even here, demonstrating that many papal Bulls that appear anti-capitalist apply more to a system of government-sponsored pseudo capitalism than the real thing, but he fails to adequately disguise the extent to which they positively endorsed even worse statist and corporatist forms of economic organisation. Since I'm not a Roman Catholic, or any type of Christian, and am perfectly comfortable with saying that some of what the RC church teaches about economics is simply wrong, I'd prefer the book to leave out these bits and make a more general moral and (where applicable) Christian case for a free market in money.

This may be the first modern in-depth look at the ethics of making money. Not the business of earning money, but of producing it (although, as Hülsmann points out, the very first such treatment was written 700 years ago by a French Bishop).

Money production has been monopolized by the state for so long that it is difficult for us to even conceive of it is a business. Yet a business it is, and like any business, even a state monopoly, it ought to be viewable from the perspective of business ethics (while the author's own religiously based ethical system shows through at times, this aspect could be "translated" as a practical matter into the frameworks of other ethical systems).

Is the monopolization of money production by the state really necessary, wise, or ethical, or is it simply a practice of long standing that needs to be called into serious question? Hülsmann takes on just this challenge from both ethical and economic perspectives.

For me, this book came at the end of a concentrated series of readings on money and banking issues. My readings included The Case Against the Fed, The Mystery of Banking, Money, Bank Credit, and Economic Cycles and a series of back-and-forth academic articles on the fractional reserve vs. 100% reserve debate. Hülsmann's volume had a number of unique and important perspectives and insights to offer.

The book addresses the issues from both ethical and utilitarian angles while clearly distinguishing them. It gives priority to the ethical. If something is just plain wrong, there is no basis for excusing it on some set of utilitarian grounds. Nevertheless, the author is also in thorough command of all the utilitarian arguments made in favor of what he identifies as unethical money production, and he examines them all, finding each to also be flawed or self-contradictory on purely economic grounds.

He finds that there has been no real attempt to defend conventional monetary practices on ethical grounds at all, and indeed, he can uncover no non-utilitarian ethical grounds in support of such practices to even address. Moreover, he finds substantial grounds for condemning these practices as fraudulent and socially destructive on many levels, from both ethical and purely economic standpoints. The continuous loss of value of everyone's money discourages saving, responsibility, and long-term planning and thereby even assists in the break-down of family bonds and other institutions of civil society. The sole beneficiary is the state itself and its closest friends, the banks that help finance its activities beyond what the citizens would be willing to pay in visible taxes, followed by all the usual "special interests."

Inflationary financing is essential to state power. Control of money is a central, if not the central, strategic issue in the strength of the state, providing it with a nearly limitless means of financing itself at the expense of its subjects in a way that is hidden from, and quite mysterious to, most of them.

Hülsmann goes further than his predecessors in imagining the conditions of free market money production. In considering such details of the monetary unit, it is important first to address the view that various electronic moneys could simply be made up in a competitive system. In any conceivable legitimate and sustainable money economy, electronic conveniences could only be built on top of some kind of commodity money. But how should a commodity money function and be defined? This is a complex topic with various historical influences.

One weakness in previous formulations of metallic monetary units was a working assumption that only one type of metal would form a circulating monetary unit. However, it is quite possible that more than one could function in parallel for different purposes, and this has happened repeatedly historically. There is no need to have an arbitrary, state-imposed "bimetallist" exchange rate between metals, which has historically always driven one or another metal out of circulation whenever the market rate for it exceeded the official rate.

Multiple, freely floating monetary metal currencies are also defensive for the monetary order as a whole. If one metal begins to become corrupted or weakened, it is easy for consumers to switch at the margin. This helps preserve monetary stability, tending to mitigate and rebalance speculative value shifts, and preserves for consumers the ability to quickly and dynamically shift away from potential problem areas. This is exactly the same consumer power that the state has always sought to take away in order to protect its sad parade of monopolistic funny-money schemes. The essential point is to have total monetary freedom, which means that people are never forced to accept money they do not wish to, and are free to use any money they do.

The book also pointed out a subtle error in previous monetary standard formulations. Saying that "an ounce" of a certain grade of a metal is the monetary unit is not clear enough. Rather, it may be better for the unit to be a specified type of coin that contains this amount of metal. Hülsmann points out that it is costly to mint coins. Yet if the monetary unit is not specified as a coin, a debt of 100 ounces could be paid, for example, with 100-oz. bar instead of 100 coins. However, the bar is quite likely to be less valuable than the coins because of liquidity differences and minting costs. The market solution would likely be to make a specified type of coin itself function as the contractual monetary unit. If someone wanted to pay in bullion, it would have to be discounted so that the value of the 100-oz. bar, for example, would be lower than the value of 100 of the minted coin units, and a balance would be due in addition to the bar.

Understanding this means taking yet another step toward the consistent application of the subjective theory of value in monetary theory. In this scenario, the bar, even though of the same metal, is not the money; it is just another commodity. This is because "money" is an economic rather than a physical concept. The coin, in this example, would be the "money," but not the bar.

As Hülsmann shows, all such problems, such as confusion as to the actual monetary unit, ultimately arise from the state arrogating to itself the right to set arbitrary "standards," which inevitably have some flaw in them that leads to problems that people operating in free markets could easily have solved and would not have generated.

But the state does this, and its pet "economists" spread the kind of monetary misinformation this book dissects, for a reason: it profits handsomely at multiple levels. That it profits at the expense of its subject population should be the first point taught in any exposition of monetary theory. In state-run educational institutions, however, how much prominence is this point likely to be given?

The author shines light on it for all to see and shows a way forward that is at the same time more ethical, economically sounder, and truer.

This book appears to be brand new, and my husband loves it! It's only been on the 'potty' rack for 2 weeks, and he's almost read the whole thing. Hopefully, when he's done I'll get my bathroom back. :}