I don't think it's any accident that the people who think the most about alternative backings to money other than gold are the people who live where there isn't much gold, e.g, Adam Smith and John Law grew up in Scotland.
The decision to have one national currency ignores the fact that regions have their own economies, especially true when transportation was very difficult and time consuming. What seems self evident, and natural in eastern urban areas like New York or Washington doesn't apply so well to farming communities in the Great Plains.
There it is plain as day that land is wealth and so is grain. Mortgage backed money and commodity money make perfect sense there. The banker doesn't need to understand much to know whether his customer is a good risk. A good farm can be seen with the eyes. In a big city, except for a few famous people, and your personal contacts, everyone is anonymous and their business mysterious.
Farmers make money in the fall, and need to put it away. They need to spend money in the spring to plant, and then have something to live off until the fall again. If they have a bad year, that's to be expected once in a while, so they may have to borrow money to plant, otherwise they'll go out of business. Seasonal businesses are very different than factories and shops that go year round, and need to borrow for capital equipment, otherwise just use the bank to hold money for transactions.
I suppose it's odd to think of banking as serving a social good but I probably watched "It's a Wonderful Life" too many times when I was young. -g- |
