Time the Taskmaster
“Today’s money,” says economist George Gilder, “tries to cheat time. And you can’t do that.” It may not cheat time, but it cheats far easier marks – consumers, investors, and entrepreneurs.
Tempus fugit – every action humans undertake has to take time into account. In the economy, interest rates serve as the signal and regulator of the inter-temporal structure of capital. In an unhampered free market economy, they tell entrepreneurs how large the pool of available savings is, and whether consumers have become more or less future-oriented. The issuance of additional money from thin air can neither alter the size of the pool of real savings, nor can it alter actual consumer time preferences. But it can and does temporarily suppress interest rates and distort relative prices. This falsifies economic calculation and promotes the malinvestment of capital – which in turn sets the boom-bust cycle into motion.
It took us a moment to understand what Gilder meant. Then we realized he’s right. Time is the ultimate limitation… the ultimate truth… the ultimate fact.
You’ll recall. There are facts and there are myths. The facts are true no matter what you think. Everything else is opinion, conjecture, or claptrap.
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