How America’s Unsound Money Is Destroying Freedom Worldwide

[Editor’s note: This is a special preview—for Mises Wire readers—of Europe’s Century of Crises under Dollar Hegemony: A Dialogue on the Global Tyranny of Unsound Money, a dialogue book by Brendan Brown and Philippe Simonnot to be published October 8 by Palgrave Macmillan.]

Philippe Simonnot: If one believes the historian Suetonius, the Roman Emperor Caligula “threw to the people a considerable sum of money over several days from the top of the Basilica Julia.” Economists can see here a forerunner of Milton Friedman’s proposal for banknotes dropped by helicopter to stimulate economic recovery. Caligula was a tyrant but at least he threw coins which jingled and made a thud when they landed. The remedy as imagined by Friedman and today actually implemented in a more sophisticated form: Doesn’t this demonstrate both a growth in the tyranny of the princes who govern us and in the ineffectiveness of their so-called monetary policy?

Brendan Brown: Caligula’s disbursements of silver coins were pure and simple income redistribution. The emperor gifted a part of tax collections from the empire to those assembled below the Basilica. Only long after the time of Caligula did Roman emperors turn to the forerunner of modern money printing, coin debasement, to supplement their revenues (surreptitiously reducing the silver content of coinage). Today’s QE (quantitative easing) operations involve essentially both redistribution and debasement. The way in which the newly printed money is injected “into the system” plays a key role in the redistribution process and in determining the overall economic burden of the monetary inflation process.

In the case of present pandemic QE operations, the crowds below the Basilica have their counterparts in European bankers and their shareholders, identified eligible economic victims of the pandemic supply shock, private equity barons, and many other categories. The huge extent of this money distribution has only been possible because of money printing.

Yes, for every distribution made there is the taxpayer on the other side to the recipient. Tax bills, though, are not dispatched at the point of transfer, and much of the tax collection in any case is by stealth. Many of the taxed are not keenly sensitive from the start of the distribution to the fact that they might be selected at some point in the future, most likely as payer of monetary repression tax or inflation tax; many may even believe that the froth of capital gains during the immediate asset inflation represents a permanent addition to their wealth. That is the jingle and thud of money printing by today’s tyrants.

This base money creation has great potential to reinforce tyranny precisely because the payers can stay in a state of self-delusion for so long. For decades to come, masses of citizens will find out the extent to which they are to pay for the excesses of the “tyrant” which locked down large parts of the economy in response to covid-19, rather than allowing individuals whether as workers or consumers to respond to the pandemic supply shock as guided by free market price signaling within a clearly defined framework of law including defined rights of workers to absent themselves from now dangerous workplaces.

Today’s tyrants fundamentally distrust the invisible hands, especially their power to bring about economic recovery and guide society to prosperity. This distrust is especially acute and urgent when the asset and credit bubbles created by their great monetary inflation enter a phase of collapse. They are then in no mood to allow free market forces to efficiently liquidate masses of malinvestment accumulated during the inflation and generate new investment opportunity. That would all take considerable time. Instead they turn to the implantation of radical monetary policy—in effect vast government interventions financed by money printing with the intent to produce an economic spurt before election day.

Philippe Simonnot: The famous saying of Montesquieu, “Trade softens harshness of customs,” was a basis for hoping that the opening up of international trade would cause barbarism to retreat, notably in China. That country is subject to a ferocious dictatorship which has become stronger in step with economic development and deepens as a result of trade with the rest of the world. Perhaps it is our capitalism, damaged by unsound money, which has refuted the wisdom of Montesquieu, becoming responsible for a terrible disappointment, not only for 1.5 billion Chinese, which is already tragic, but also for our own societies, which are in a process of Sinicization? Is it not Lenin who correctly predicted “the capitalists will sell us the rope with which we will hang them?”

Brendan Brown: The trade which has flourished between China and the rest of the world has not been the freedom- and civilization-promoting form which Montesquieu would have imagined. Rather it has been the trade of the “cronies”; on the one side, the power and wealth of the Communist elites in China and on the other, the big business and finance cronies of government in the advanced economies, most of all in the US and Europe.

True free trade would have combated harsh communist tyranny. But alongside the free trade in goods and services there also should have been the opening up of free trade in capital—meaning the total scrapping of foreign exchange restrictions on the yuan, both with respect to residents and nonresidents of China.

With capital totally free to leave and enter China the power of the Communist Party to direct its economy and control its citizens would be critically reduced. Firms not in favor with the Communist bosses could access capital from foreign banks and citizens would be able to escape the repression of a banking system paying out meager returns due to gross misallocation of capital towards favored rather than economically profitable enterprises.

Far from encouraging this freedom, Washington has actually encouraged China to strengthen restrictions against resident capital outflows so as to counter depreciation of its currency (on the basis that this would shelter some China import competing sectors in the US). In fact a fully convertible yuan in the context of strong foreign capital inflows into a liberating China might well have been stronger than the partially inconvertible yuan.

Heads of state in the West, most notoriously Germany and France, went regularly on tours to China flanked by their crony heads of industry and finance, who secured deals from their opposite Communist Party echelons; the latter in effect bought the forbearance of Western governments for their repressive regime and anti–free market practices. In the case of the US, chief amongst the cronies of the administration in Washington who scored from this pattern of dealing in China was Big Finance—and in particular in recent years private equity (flourishing as a result of inflationary monetary policy led by the Federal Reserve).

In turn, Western investors (including financial institutions), in the income-famine conditions created by radical monetary policy, gambled on giving dollar credit to ailing Chinese financial and nonfinancial sectors (all in the quasi-state sector), helping thereby to shore up the Communist regime.

So yes, the Western big business, some having gained their power from monopoly capital rooted in monetary inflation (a big speculative narrative of asset inflation concerns present and future monopoly rents) sold the rope to the Communist leadership which was to kill any prospect of liberalization in China whilst bolstering Beijing’s aims to expand its Great Power status by any means. Alongside, the added power and wealth gained by these Western cronies from their China business undermined the institution of free market capitalism in the West, maybe even promoting a process of Sinicization in the sense that the Chinese economic model could claim considerable superficial economic success.


  • Philippe Simonnot is a French economist. He was professor of Law and Economics at the University of Paris Sorbonne and Paris Nanterre and has a doctorate in economics. He is the author of many books on history and economics, particularly in the monetary field. His latest book is Nouvelles leçons d’économie contemporaine (2018). He also publishes columns on economic affairs in the press, particularly Le Monde.

  • Brendan Brown is a founding partner of Macro Hedge Advisors ( and senior fellow at Hudson Institute. As an international monetary and financial economist, consultant, and author, his roles have included Head of Economic Research at Mitsubishi UFJ Financial Group. He is also a Senior Fellow of the Mises Institute. He is the author of Europe’s Century of Crises under Dollar Hegemony: A Dialogue on the Global Tyranny of Unsound Money with Philippe Simonnot. His other books include The Case Against 2 Per Cent Inflation (Palgrave, 2018) and he is publisher of “Monetary Scenarios,” Euro Crash: How Asset Price Inflation Destroys the Wealth of Nations and The Global Curse of the Federal Reserve: Manifesto for a Second Monetarist Revolution.

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