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The Treasury Department currently offers a number of financial products, including Treasury bills, notes, bonds, and inflation-protected debt instruments, making the federal government a major participant in money markets and capital markets. Could a government conduct itself this way within a hypothetical Objectivist society or no?

asked Dec 07 '10 at 16:24

Michael%20Labeit's gravatar image

Michael Labeit
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edited Dec 07 '10 at 20:07

Greg%20Perkins's gravatar image

Greg Perkins ♦♦
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The Treasury Department is a legitimate part of a government (note that a Treasury is a separate institution from the Central Bank of the same nation), and as such there is nothing intrinsically wrong with its issue and settlement of its own bills and bonds. The question of whether and how much a government should borrow is a technical one, where the normative aspect of this is that goverments shouldn't be spending so much as to need the sheer volumes of bills, notes, bonds, etc that Treasury departments typically handle today.

What a Treasury should not be doing, however, is being anything other than a regular market participant, and certainly should NOT be involved in directing others' trade in either its own financial instruments or in any other financial instruments. A Treasury shouldn't even trade at all in anyone else's instruments, either, restricting its participation strictly to issuance and settlement of its own instruments. Nor, similarly, should it be involved in the maintenance of the physical money supply itself - that is, there should be no Government Mints.

So long as there is not the massive volumes as exist today, and that there is no attempt whatever at regulating trade in any financial instruments, the Treasury departments of governments should be liberty to conduct their operations and use whatever array of instruments as they judge most efficient at meeting the legitimate funding needs of those respective governments. If governments restricted themselves to their proper functions these Treasury operations would be be only a tiny part of financial markets.

JJM

answered Dec 09 '10 at 00:55

JJMcVey's gravatar image

JJMcVey ♦
630211

To answer this question in the affirmative would be to imply that there should be central banking, but it shouldn't offer financial products. Objectivism, however, opposes central banking (government banking) as such. It is not a proper function of government to control the money supply or the medium that is used for money in a free, laissez-faire economy. At most, government involvement in a free society would be to adjudicate cases of fraud or breach of contract. This is not abstract fiction; there is historical precedent for it. (How we get there from today's system is a different question.)

answered Dec 08 '10 at 16:39

Ideas%20for%20Life's gravatar image

Ideas for Life ♦
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Asked: Dec 07 '10 at 16:24

Seen: 1,246 times

Last updated: Dec 09 '10 at 00:55