Master Class: Why We Should

DO NO HARM

Just as physicians take the Hippocratic Oath to "first, do no harm," monetary policymakers should adhere to a similar ethical standard. Society, like a living organism, requires a healthy circulatory system—its economy.

When central banks manipulate currency and interest rates, they risk inflicting harm on the societal body, causing inflation, economic instability, and wealth inequality.

These financial "treatments" often have unintended side effects that disproportionately impact the most vulnerable members of society. A truly ethical monetary policy would prioritize stability and long-term well-being over short-term gains, ensuring that financial decisions, like medical interventions, are made with the utmost care and consideration for all members of the societal body.

Monetary Policy Based on DO NO HARM

John Stuart Mill published "On Liberty" in 1859, introducing his Harm Principle during a period of rapid industrialization in Britain. He witnessed harsh working conditions, colonial exploitation, and economic disparities.

The Bank of England's dominance (having a monopoly on issuing currency like we see today with the Federal Reserve) became a wrecking ball devouring the quality of life for England. Mill's principle aimed to protect individual liberty while addressing the societal harms he observed in this tumultuous era

John Stuart Mill's Harm Principle, a cornerstone of liberal philosophy, posits that the only justification for interfering with an individual's liberty is to prevent harm to others.

This principle, which seeks to balance personal freedom with societal well-being, takes on new relevance in today's complex financial landscape. As we examine the current monetary system and its alternatives, Mill's emphasis on minimizing harm provides a compelling framework for analysis.

In our modern economy, central banks wield unprecedented power over the money supply, effectively controlling the financial destinies of millions. This centralized authority, while ostensibly designed to stabilize economies, has often led to currency debasement and inflation—a form of harm that disproportionately affects ordinary workers and savers. As the purchasing power of fiat currencies erodes, citizens find themselves working harder for less, a situation Mill might view as an infringement on individual liberty through economic means.

The financialization of the economy, characterized by complex derivatives and speculative instruments, has further exacerbated these harms. Asset bubbles, fueled by easy credit and monetary expansion, have rendered housing unaffordable for many, while boom-bust cycles leave economic devastation in their wake. The 2008 financial crisis starkly illustrated how the actions of a few in the financial sector can cause widespread harm, with taxpayers ultimately bearing the cost of bailouts—a clear violation of Mill's principle.

In contrast, gold and silver, as traditional forms of money, align more closely with Mill's vision of minimizing harm. These precious metals, with their intrinsic value and limited supply, offer a natural hedge against the inflationary pressures and currency manipulation that harm ordinary citizens. Unlike fiat currencies, which can be created at will by central authorities, gold and silver's scarcity provides a check on reckless monetary expansion.

Moreover, the simplicity and transparency of precious metals as a store of value stand in stark contrast to the opacity of modern financial instruments. While complex derivatives often benefit insiders at the expense of the general public, gold and silver are accessible and understandable to all. This democratization of wealth preservation would likely appeal to Mill's belief in individual autonomy and equal opportunity.

The current system's propensity for creating systemic risk—where the failure of interconnected financial institutions can trigger widespread economic collapse—is another area where Mill's Harm Principle comes into play.

Gold and silver, being physical assets without counterparty risk, do not contribute to this type of systemic fragility. Their use as a monetary base could help insulate economies from the cascading failures that have characterized recent financial crises.

In today’s context where we have seen Modern Monetary Theory ( aka Keynesians) stating that a return to gold and silver-based money would constrain economic growth and financial innovation.

However, viewed through the lens of Mill's philosophy, the question becomes whether the benefits of such growth and innovation outweigh the harms they potentially inflict on society. The widening wealth inequality, economic instability, and erosion of purchasing power associated with our current system suggest that the balance has tipped too far towards harm.

Stepping off the Path of Ruin

if John Stuart Mill were to examine our modern financial system, he would likely advocate for a return to traditional money (principles embodied by gold and silver. )

Such a system, by its nature, limits the ability of central authorities to manipulate currency at the expense of citizens.

It provides a stable foundation for economic activity that aligns with Mill's goal of maximizing liberty while minimizing harm.

As we grapple with the challenges of our financialized world, perhaps it's time to reconsider the wisdom of philosophers like Mill and the enduring value of gold and silver in creating a more just and stable economic order.