Reason, faith, and tax-funding for education

February 23, 2006 by · Leave a Comment 



The non-sectarian presumption


The London Fog



Thursday, February 23, 2006

Freedom Party of Ontario leader Paul McKeever sends along this letter in response to the Izvestia editorial on that mythical beast, “non-sectarian” education:

I agree that it is a mistake for the government to use taxes to subsidize “faith-based” schools. However, it is self-defeating to base that opposition on the idea that a society that funds multiculturalism should protect funding for a “melting pot role” of public education.

Intentionally or unintentionally, all schools – public and private – have a major influence on a child’s beliefs about the nature of reality, about how it can be understood, and about morality. When a government funds or subsidizes a school with taxes, it eliminates any pretence of a separation of church and state. The state becomes a god of sorts. The schools it funds become its temples. The taxpayer becomes the state’s followers, compelled to pay for the temples and to accept, on faith, that the state is the origin of moral truth. All schools a government funds are “faith-based” in that sense.

In a day when tax-cutters are blamed for murders, our politicians – to avoid offending any voter – fund public schools in which moral relativism wages war against objective codes of right and wrong. At a time when the criminalization of blasphemy is considered seriously in some quarters, Mr. Tory would have the state fund mysticism in a war against the idea that man can understand the universe and use reason alone to distinguish right from wrong. The religious and the moral relativists must be free to teach their children their beliefs and philosophies, but not at the expense of those whose philosophy they seek to destroy. Instead of funding public or private schools with taxes, we must let every parent pay tuition directly to the school that their child attends, and only to that school. A separation of education and taxation is reason’s only hope.

Paul McKeever
Leader, Freedom Party of Ontario

Why the Money Supply Should not be Manipulated: a Response

February 5, 2006 by · 5 Comments 

(I recently received a copy of an e-mail written by a Mr. Wiseman, who was participating in a discussion among many others in a mailing list concerning monetary reform. The letter was cc’d to me, and I responded to the list as follows. )

Dear Mr. Wiseman / all on the cc list:

I regret that the work on my desk is both imposing and demanding of priority, so – as much as I enjoy debating the issue of monetary reform – my response here will be limited to addressing what I see as the more substantive questions or comments that have been directed to my inbox.

Mr. Wiseman writes:

“I have not heard a definition of inflation from the party nor in Healthy ….etc …Inflation refers to prices.”

The word “inflation”, today, means an increase in prices. However, that is not the original meaning given to the term by economists. In older texts (especially in those preceding Milton Friedman’s work on monetarism), the term “inflation” means “an increase in the supply/number of dollars”. The more recent definition was, in my view, introduced to mislead. By making “inflation” refer to prices instead of to the number of dollars comprising the money supply, the focus went from fixing the supply of dollars to fixing prices: i.e., it was introduced by those who were advocates of wage and price controls.

My booklet “Healthy, Wealth & Wise” does not use the term “inflation” because (a) it is directed at the layman, and (b) because I want to be understood unambiguously. Had I used the term “inflation”, most folks would wrongly have thought I was talking about run-away prices instead of a run-away supply of money. When your intellectual opponent manages to destroy the meaning of a word, deny him the fruits of the battle: cease to use it.

Mr. Wiseman writes:

“The money supply must expand…”

The only alleged purpose for expanding the money supply is to make sure that prices do not fall as productivity grows. There are a number of consequences – both positive and negative, depending upon ones circumstances – when prices fall. The principle effect of expanding the money supply is to prevent those consequences. In my view, however, the consequences of falling prices are actually the consequences of increased productivity: of better and/or more numerous goods and services entering the market and chasing the same supply of dollars. Those who want the money supply to expand (or to contract), in reality, are trying to prevent the consequences of increases (or decreases) in productivity.

For example, the employer who makes candles finds the value of his candles taking a dive as electricity and the lightbulb are introduced. With reduced revenues, he finds himself making no profit or losing money. In reality, the introduction of electricity and lightbulbs has decreased the value of candles and decreased the value of a candle-maker’s labour. The employer cannot afford to pay the wages that he has agreed to pay his workers because, in reality, their product is not as valuable as it once was. He has four choices, in reality. He can expect the workers to improve the value of their labour by learning to make lightbulbs. He can continue to make candles but try to get the workers to accept lower wages for their work. He can seek a ban on lightbulbs. Or, he can seek monetary laws that devalue the dollar itself so that the buying power of a dollar will decrease with the value of candles: that way, the price of his candles won’t change, and he’ll be able to make a profit without lowering anyone’s wages.

If he tries to get the workers to improve their skills, he will be met with the Candle-makers’ union’s refusal or with its demands that he pay the education bill for the workers: he cannot continue to operate with the former and does not want (or might not be able) to afford the latter. If he tries to decrease wages, he will be faced with employment/labour laws that punish him for doing so, or will be prevented from hiring workers by a state-backed closed-shop union that decides to strike. If he seeks a ban on lightbulbs then his society (including his business, himself and his employees) will be denied the fruits of technological advancement that other individuals and companies in other societies will use to speed their further advancement. But, if he simply gets his local MP to cause the government to make a law that facilitates an increase of the money supply, he can devalue the dollar and not have to go through any of the grief. Guess which option appeals to him most?

These days, it appeals to misguided banks and to unions too. The private bank’s economists line up to tell the public, on TV/radio/newspapers, that the only “feasible” answer is to increase the money supply as productivity increases so that the price of candles doesn’t change. The unions sing the same tune, and claim they are fighting for the wages of their members.

The banks – and the government – know that whoever creates additional dollars owns them. If the dollars are created in the form of bank of Canada notes (i.e., currency), then the state-owned government will increase the percentage of the total dollar supply that it owns. If, instead, dollars are created in the form of bank credit, then an increased percentage of the total dollar supply will be owned by the credit-creating banks. Whether created in the form of paper currency or in the form of bank credit, more dollars are created: “dollar” is a term that applies equally to currency and to bank credit. In other words, more “money” is created: both currency and bank-credit are “money” and, together, currency and bank-credit make up the total “money supply“.

In practice, those who have been permitted to increase the money supply want to collect interest on the use of the dollars they have created and now own. If 98% of the supply of Canadian dollars is in the form of bank credit issued by Canada’s chartered banks, then the banks are collecting interest on as much as 98% of Canada’s money supply. If the government creates the extra dollars (e.g., in the form of Bank of Canada notes), then the government will be able to collect interest on the use of that money. And, throughout history, governments have done just that: expanded the money supply either (a) to spend the money into the economy, or (b) to make money off of the interest paid by those who borrow the government’s money.

Now, consider the candlemaker in all of this. Assume that the candle-maker employee is being paid $20 per hour by the employer. Assume – for the sake of simplicity – that the price of a candle is $2 before the light-bulb is introduced and that it drops to $1 after the light-bulb is introduced. Assume that a light-bulb costs $2 after it is introduced. The employer wants his candles to continue selling for $2, so he wants the money supply expanded enough that the buying power of a dollar will be cut in half: he wants the price of his candles to go back up from $1 to $2. Of course, the relative value of a candle and a light-bulb cannot be changed: the market, in this example, considers the light-bulb to be twice as valuable as a candle. So, if the employer is successful in his bid to devalue the dollar, light-bulbs will increase in price from $2 to $4. Assume that the employer is successful in having the money supply increased. What has happened to the candle-maker’s standard of living? Well, after the introduction of the lightbulb – but before the supply of dollars was inflated – he was able to buy twice as many candles with his income: with his $20 hourly wage, he went from being able to buy 10 candles to being able to buy 20 candles or 10 lightbulbs. However, after the employer manages to have the dollar devalued, the candlemaker’s $20 buys him only 10 candles (at $2 a piece) or 5 lightbulbs (at $4 a piece). Ask yourself: did the candlemaker benefit from an increase of the money supply?

Take it a step further. Before the employer had the money supply devalued, the employee had $200 tucked under his pillow. With that $200, he could have bought 100 lightbulbs at $2 a piece. However, after the employer had the money supply devalued, the employee’s savings now will buy only 50 lightbulbs at $4 a piece.

Now, ask yourself: what happened to the buying power that would have bought the other 50 lightbulbs? Answer: when the bank created additional dollars, those dollars were sufficient in number to buy the 50 lighbulbs that the employee can no longer afford. In other words: half of the value of the employee’s saved dollars (i.e., half of his “buying power” or “wealth“) has been transferred to the newly-created dollars that are owned by the banks that issued them. Wealth has been transferred from the employee to the bank.

Who creates the dollars does not make a difference: the non-consensual transfer of wealth (i.e., the theft) occurs no matter who is the person creating the dollars. So, if the government prints up the extra dollars instead of a private bank, the government thereby takes half of the employee’s savings: wealth is transferred from the employee to the government. With no effort, the government gains the value needed to buy 50 lightbulbs, and the employee loses the value needed to buy those 50 lightbulbs. Some will argue that, if the wealth taken from the employee goes to the government, that makes things acceptable because the government represents the employee. Consider, however, that one could say the same about taxes. And, if that argument holds any moral water, it is an argument in favour of communism and against property rights: there is no difference, in principle, between inflation by government and taxation by government, and there is no difference in the morality of inflation vs. taxation.

And notice one thing: the chief difference – in principle – between more dollars being created by (a) the Bank of Canada or a chartered private bank, and (b) a counterfeiter, is that the counterfeiter doesn’t have a government-issued bank charter. He is, in principle, banking without a licence if he creates look-alike dollars and lends them to people in exchange for interest. In short, we lock up counterfeiters in this country because, unlike the government and our chartered banks, they do not have a state-issued licence to steal from that candle-making employee.

You will forgive me if, on moral grounds, I disagree with the conclusion that “the money supply must expand”. Although I am reasonably confident that Mr. Wiseman is not knowingly advocating theft, I assert that expansion of the money supply is – in reality – (a) theft, hence wrong, and (b) not to anyones advantage except the person creating the extra dollars.

I do not have the time, here, to go into it – it will be noted that the problems associated with falling prices are, first and foremost, the result of laws that some erroneously believe “protect” wages, jobs, etc.. Monetary expansion makes the union look strong while it allows banks to empty its members’ bank accounts. Incidentally, that is why some bankers see socialism as a convenient ally.


Let nobody confuse me with a bank-basher. I am pro-capitalist: I believe the state should use defensive physical force to ensure that an individual or corporation (e.g., a bank) has exclusive, uncoerced control over (a) the use of its property (by which term I include dollars), and (b) the amounts and terms, if any, that he/it chooses to demand in exchange for the use of that property. I view capitalism as the only moral social system ever known to man. I believe that expanding the supply of dollars involves the non-consensual transfer of control over the use of a person’s wages and savings: I believe that expanding the supply of dollars is vicious, not virtuous, and that the practice is anti-thetical to the moral foundations of capitalism. Monetary expansion is not an aspect of capitalism (those who think otherwise hold an erroneous understanding of the definition of capitalism). When it is done by the state, it is an instance of socialism/fascism. When it is done by a private individual/corporation, it is an instance of what should be a criminal offence. Either way, it is an instance of vicious conduct.

I believe firmly in the propriety of lending ones money for interest and view it as equivalent to lending a lawnmower for rent: I view that as true both for individuals and for corporations such as banks. I believe firmly in the practice by which a bank borrows from its depositors and lends that money to borrowers as intermediary, and I believe that that function has a value that is rightly rewarded with interest revenues and/or other charges.

I have no objections to lending, borrowing, charging interest, making a profit, and becoming incredibly wealthy and influential in the process: that is true whether I am speaking of an individual or a banking corporation.

My objection is not with banks, but with inflation of the supply of dollars. I do not believe that inflating the supply of dollars is rightly an aspect of banking: it is an instance of what – like robbing, raping, and arson – falls more appropriately into the category of anti-social, rightly-prohibited behaviour (that should be prevented by imposing a 100% reserve requirement). Moreover, my firm belief is that controlling prices with monetary manipulations is not in the interests of banks over the long term, any more than it is in the interest of the candle-making employee. Again, I have little time to expound on this, but consider that monetary expansion erodes the value of both interest and principal. Inflation – by which I mean an increase in the supply of dollars in the form of central bank notes or private bank credit – is the rust of the monetary world, and is anti-thetical to capitalism. It is as harmful to a bank as it is to the employee and his savings.


Paul McKeever, B.Sc.(Hons), M.A., LL.B.
Leader, Freedom Party