Friday, October 24, 2008

Veto the Smoking Ban

Talifaitasi Satele

I ask Governor Togiola to please veto the Fono’s bill that will dictate to private businesses on how to address the risks posed by second-hand smoke should it become law. The risks of smoking, like that of bungee jumping or eating a high cholesterol cheeseburger, are well within the control of every individual who may engage in such a risky activity.

The owner can choose not to have smoking on his property or designate a smoking area outside; the employee can choose to work where smoking is prohibited; and, the consumer can choose to socialize where the owner of the property doesn’t allow smoking. The important word here is “choose”, and in the case of smoking on private property, it is clear everyone has a choice.

This doesn’t warrant government intervention, and it is a clear violation of our private property rights. Should the ASG succeed in dictating to businesses on how to control smoking on their own property, then we shouldn’t complain when the Fono finds it necessary to intrude into our very homes on such a matter.

And what of other behaviors where we take risks on daily basis? Sex, eating fatty foods, swimming, climbing coconut trees, playing sports, etc.? Do they fall within the purview of the Fono as well? Is this the proper role of government?

The answer is no, and the governor should lead the Fono in addressing the dangers of smoking without having to violate our individual rights.

Sunday, October 19, 2008

Fractional Reserves, Fiat Money and the Federal Reserve

Talifaitasi Satele

I’m not sure what part of our monetary system Majac LeTautai has a gripe with, the fractional reserve banking, fiat money or the Federal Reserve itself. Perhaps an explanation of all three will help both of us determine what exactly we’re arguing about.

Fractional reserve banking is a process where banks keep only a fraction of their depositors’ money in the vault while lending out the rest in hope of making a profit by gaining interest on such loans. Your bank, however, does promise to pay you your balance should you ever wish to take it all back at once.

As “Modern Money Mechanics” explains, banks can easily predict the level of cash withdrawals, but the Federal Reserves dictates such parameters to its member banks.

The amount of money we would have in the economy would normally come from the credit created from fractional reserve banking and actual deposits. “Deposits” meant gold deposits during most of our banking history. A dollar in cash meant that you could redeem a dollar’s worth of gold, back when we were on the gold standard.

Today, however, we have a fiat money supply, where paper dollars are not tied to gold deposits but instead to our government’s order for us to accept the dollar as payment. Fiat actually means “order: or “decree”.

You can read on any dollar bill the statement, “This note is legal tender for all debts, public and private”.

The switch to a fiat money supply, which was only possible with the creation of the Federal Reserve, came about in what Mr. Greenspan explains was an attempt “to use banking system as a means of unlimited expansion of credit”.

The Federal Reserve is not a private firm but a supposedly independent government entity authorized by the Federal Reserve Act of 1913. Its Board of Governors are appointed by the President and confirmed by the Senate. The Federal Reserve’s actions in bailing out Wall Street over the past month is not a good indication of its independence.

Banking is better left to the free market, which is not what we’ve had since 1913.

Tuesday, October 14, 2008

Money: More Than a Piece of Paper

Talifaitasi W. Satele

The origin and role of money in the economy is one of the most important lessons we need to learn. A lack of proper understanding often leads to public policies that have disastrous consequences such as hyperinflation or just inflation period.

Money, as Adam Smith put it, is a "medium of exchange". Economists Thomas Sowell and Alan Greenspan both pointed out that even sea shells were used as a form of money. Mr. Sowell explains in his book, Basic Economics, how cigarettes from Red Cross packages were used as money among prisoners in P.O.W camps during World War II. He notes that the least popular brand of cigarettes circulated as money, while the most popular were smoked.

But what makes money, money? First, people with whom you want to trade with have to want to accept it. "Want" being the key word here. If there is ever a mass consensus that the US dollar, for example, is useless, there is little government can do to force people to accept it. That will be especially true on the international market and with foreign governments who hold the Dollar as reserves.

Any form of money has to be tied to what people consider valuable. For Europeans, it was gold; for Samoans, it was the ie toga. Gold, as Mr. Greenspan puts it, has both artistic and functional uses. The ie toga represents honor, history and pride to the Samoan.

The other aspect of money is that it is limited. If there is more gold coins or paper bills or ie togas floating around than there are goods and services in the economy, prices will go up.

The point I want to make is money is whatever most people find valuable and will accept as payment for their property; is limited in supply and ideally represents the amount of products and services being demanded and supplied in an economy.

When we ignore the nature, origin and role of money in an economy is when we start getting into some serious trouble.