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Princely Finance and Taxation
December 30, 2002
One would have hoped that financial rip-offs committed by medieval princes
would have been permanently shelved when liberal enlightenment ended the
divine right of kings.
Recent imperious
announcements by Messrs. Greenspan and Bernanke to use the "printing
press" to inflate anything they can should be considered startling only in
the resort to honesty. Euphemisms for currency depreciations started with
the original promoters of the Fed and the tout was that a "flexible"
currency would prevent serious financial contractions.
Regrettably, since 1914
there have been many financial crises and the dollar has lost 90% of its
purchasing power. This is particularly ironical as the key regular ones
have not been prevented. These would be the 1920-1921 and 1990-1991
examples that ended a long period of vigorous economic expansion and the
post-1929 and post-2000 crises that ended, in such a costly fashion, a
perfectly managed new financial era.
Nineteenth Century liberals,
so rational and principled in their views, could not have imagined the
greedy craft developed by many modern governments in confiscating private
wealth earned by productively working citizens. Are we seeing medieval
financial tyranny replicated by today's proponents of the divine right of
bureaucrats? A look at history provides perspective.
Although outrageous when
imposed, the passage of time makes early examples of princely finance
somewhat amusing: the colourful Richard I (1189-1199) sold property to
finance his joining the crusade of Peter the Hermit. Upon returning, he
took it back on the pretense that originally he had no right to sell it.
The infamous King John
(prompted the Magna Carta in 1215) introduced the clever plan of
imprisoning and ransoming the mistresses of priests, confident that the
funds he could not obtain from their greed he would from their lust.
Edward I (1272-1307)
confiscated money and silver or gold plate from monasteries and churches,
faked a voyage to the Holy Land and, in keeping the money, refused to go.
Edward IV (1461-1483) was described as the handsomest tax-gatherer in the
country; and when he kissed a widow because she gave him more than he
expected, it is said she doubled the amount in hopes of another kiss.
The fiscally sound Henry VII
(1485-1509) approached wealthy families with two arguments. If the
household was not extravagant in expenditure, then he attacked what they
had saved by thrift; while if they lived extravagantly they were
considered opulent and could afford any exaction. Named after his minister
of finance, the ploy was called "Morton's Fork".
A broader form of wealth
confiscation capable of tapping even the poor was accomplished by currency
debasement and extreme examples in ripping off everyone provoked severe
social disorder. No matter what method employed, financial outrage
prompted the evolution of parliament as a necessary means of constraining
fiscal ambitions of the governing classes.
The struggle between
individual freedom and authoritarian state proceeded until the late 1600s
when growing commercial wealth and political power in London began to
become influential with its financial common sense. The specific event
that formalized the victory over the ancient status quo was the "Glorious
Revolution" of 1688, which maneuvered the pro-business and Protestant
William of Orange into the British Crown and displaced James II as the
last absolutist king. How refreshing this was is indicated by the
oppressive politics of his and his predecessor, Charles II. Starting with
the restoration of the monarchy with Charles in 1660, both kings were
bribed by France to change the culture of England - consistently in an
authoritarian direction. Scornful remarks by miffed establishment were
similar to those directed to the pro-business "religious right" today.
No matter how imaginative or
despotic princely financing was, it can't compare with the long- running
compulsion to spend other people's money by today's bureaucrats and
politicians, virtually unrestrained by the checks and balances of
constitution or mainstream media.
But before expanding this
point, consideration should be given to the other event that formally
ended the old world, which was the beginning of modern finance with the
incorporation of the Bank of England in 1694. As history shows, central
banking is fine when disciplined by a convertible currency and, when not,
it becomes a tool of state ambition to confiscate wealth though currency
depreciation. That the dollar has lost 90% of its value in only 50 years
exceeds most princely devaluations and, like those, has been no accident.
Indeed, recent Fed
announcements to "print money" could be an attempt to go for the final
10%. While many outside central banking would consider this as infinite
folly, it is uncertain as to how long this endeavour will maintain
credulity in even academic circles. Regrettably, modern financial agencies
such as the Treasury or Federal Reserve System have become as corruptible
as their medieval counterparts.
Fortunately, history
provides some antidotes to governmental abuse of the productive sector.
Short of rebellion, the most effective of course has been government and
its financial agencies accountable to the taxpayer. As for those who have
wrecked the currency (also a government responsibility), Dante, in his
Inferno, reserves a special place in hell for "false moneyers".
The Anglo-Saxon Chronicles
record something equivalent, albeit more temporal:
"1125 A.D. In
this year before Christmas King Henry sent from Normandy to England and
gave instructions that all moneyers ... be deprived of their members ...
Bishop Roger of Salisbury commanded them all to assemble at Winchester by
Christmas. When they came hither they were then taken one by one, and each
deprived of the right hand and the testicles below. All this was done in
twelve days between Christmas and Epiphany, and was entirely justified
because they had ruined the whole country by the magnitude of their fraud
which they paid for in full." - The Laud Chronicle (E)
Fortunately, history
indicates that the public will eventually figure out that no matter how
beguiling the claims about currency management and taxation are, the
gambit has been mainly to confiscate private savings. They will then
demand the return of sound money and accountable government.
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