Bricks

‘Hardy always cited common building bricks as perhaps the best available single monetary commodity’ – Milton Friedman

“Are economists the world over using an outdated tool to measure economic progress?”

That’s how Bernd Debusmann began his column about the use of gross domestic product (GDP) to measure development.

The question, long debated, is worth pondering again at a time when two economic giants, the United States and China, are sparring over trade, currency exchange rates and their roles in the global economy.

Another reason for Americans to worry if the dollar is outdated is monetary policy with Obama’s tacit recommendation for another round of quantitative easing (QE2), another try by Obama to change the economy by flooding it with dollars.

But better than another disappointing try by Obama is an idea presented by economist Milton Friedman for a commodity reserve currency. The idea is based on using bricks for money. At the time of Friedman’s writing, over three thousand counties in the United States had brickyards, manufacturing a product that requires few specialized skills.

Fighting high unemployment and with the threat of deflation, economic policy would be more likely to stimulate progress by the government buying bricks. Government demand for bricks would put Americans to work; workers with incomes would demand property; construction of single- and multi-unit properties would demand government bricks stored in locations like Ft. Knox.

Join me to recommend common-sense policy and thus build a stronger foundation for America’s new growth economy.

References

Milton Friedman, “Commodity-Reserve Currency,” The Journal of Political Economy, Vol. 59, No. 3 (June 1951).

N. Gregory Mankiw, Principles of Economics, Fifth Edition (Mason: Cernage Learning, 2009).

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3 thoughts on “Bricks

  1. Dr. Ron Paul, chair of the House Monetary Policy Subcommittee, has introduced two very important monetary reform bills that would move the USA (and thus the world) in the direction of Market Money and away from political fiat “dollars.”

    One discussion of this issue: http://teapartypatriots.ning.com/forum/topics/ron-paul-vs-the-fed-must

    HR 1098 which legalizes the setting of legal tender in private contracts; abolishes taxes on gold & silver coin trading.

    H.R.1098 — Free Competition in Currency Act of 2011

    To repeal the legal tender laws, to prohibit taxation on certain coins and bullion, and to repeal superfluous sections related to coinage.

    http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.1098:

    HR 1094 which abolishes the Fed Reserve board of governors and puts it in receivership preparatory to abolition.

    H.R.1094 — Federal Reserve Board Abolition Act

    To abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes.

    http://thomas.loc.gov/cgi-bin/query/z?c112:H.R.1094:

    The approach that Dr. Paul proposes is a continuation of his overall program to “Legalize Freedom…” as he says.

    • Dear Ralph Fucetola Jd,

      Thank you for writing!

      You’re right to raise issues about the Federal Reserve. It’s dual mandate makes it difficult to focus on price stability with single-minded effort (see ‘Phillips Curve’: http://t.co/CoIS6bN).

      Experts fear, however, that Rep. Paul’s plan to repeal the Federal Reserve Act of 1913 and abolish the central bank will result not only in the return of the same wildcat banking that led to America’s disastrous financial crisis of 1837, but also in preventing a lender of last resort from reducing the likelihood that a shortage of liquidity would cascade into greater instability during times of financial crisis.

      See ‘Lender of Last Resort’: http://t.co/dO9IKzG

      Sincerely,
      Ronald Grey

  2. FEATURE – Milton Friedman in 1951 on the relative benefit of a building-brick standard instead of gold or silver as money:

    “By contrast, the late Charles O. Hardy always cited common building bricks as perhaps the best available single monetary commodity. The absence of the homely virtues required for the physical use of bricks as a medium of circulation could be remedied by the use of warehouse certificates, which possess these virtues in high measure. Bricks possess the minor virtues required of a commodity to be used as a currency – they can be reasonably well defined and checked for quality, they can be stored, etc. And they have the major virtue of an exceedingly elastic supply. They can be made practically everywhere – Hardy claimed that bricks are made in each of the over three thousand counties in the United States – and require little capital investment or specialized skill. In consequence, the rate of output can be stepped up or down rapidly. There is a large stock – some, indeed, incorporated in buildings – that could be shifted readily from nonmonetary to monetary use and conversely. It follows that, under a brick standard, any decline in the prices of other goods that would tend to make it profitable to produce bricks for monetary use would have a rapid, widespread, and substantial effect on the rate of output and employment in the brick industry. This would provide a powerful offset to any decline in volume. Any tendency for prices to rise would similarly tend to be offset by a prompt decline in the rate of output and employment in the brick industry. There is real merit in Hardy’s contention that the chief defect of the brick standard is simply the impossibility of getting anyone to think seriously of bricks as money.”

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