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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: gpowell who wrote (53703)2/13/2006 12:49:22 PM
From: Elroy Jetson  Read Replies (1) of 110194
 
A "free market" system for money only exists when there are multiple currencies in use competing against each other.

A "free market" monopoly with a "free market Fed like clearing-house" is in no way related to free markets.

This situation existed, pre-Fed, in early American history, with competing banks each offering their own currency. The value of each currency fluctuated constantly, and due to the lack of fast electronic communication the value of each currency declined as the distance from the bank of issue increased.

This situation turns "Gresham's law" on its head where good money drive out bad. Gresham's so called law only applies where there are legal tender laws requiring fixed exchange rates.

In that era, precious metal money was alway preferred as its value was more stable and it would appreciate in value, in tandem with increases in societal wealth, without the need to deposit it in a bank to "earn interest".

Why did this situation change? The business community argued, just as Inflationists like Grace Zaccardi do today, that prosperity depends upon voluminous credit and money creation. Its classic addict thinking - more crack cocaine is always better than less crack cocaine. Non-addicts understand that more crack cocaine only hastens death - it does not bring prosperity.
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