". The inference being that, since gold has not achieved perfection in a monetary sense, it is no better than any other alternative, despite the vast historical record to the contrary
And which historical record might that be??
Gold/Silver has not been perfect, especially given the continuous fluctuations of inflation/deflation during the times it was the primary currency or backing for currency.
Allow me to relate something from Grieder's book (that he gleaned from other historians.). Again, it deals with what happened during the Great Deflation after the Civil War (a justifiable war, I think most would concur), Pg. 250:
"Across the cotton states, small farmers existed in a state of virtual peonage, their everyday lives held in bondage by the crop-lien system, an American version of the medieval usuer. In every hamlet, the "furnishng merchant" provided farm families with staples and supplies and took a lien on the farmer's cotton crop as security.
If a farmer bought something for cash, he paid one price, but if he purchased on credit, he would pay 25 to 50 percent more. At the end of the season, when his crops were sold and his account settled, the "furnishing man" would add another 33 percent or so for interest.
The real interest rate, thus, approached or exceeded 100 percent. There was nowhere else to turn; other merchants or banks would not extend credit to someone who was already indebted. With falling cotton prices, it was impossible for farmers to "pay out," and so the merchants took notes against the farmers' land.
As the debts mounted and forfeiture was inescapable, tens of thousands of farmers--eventually millions of people--- "descended into the world of landless tenantry," as Lawrence Goodwyn wrote.
They became hired hands, sharecropping on the farms they had once owned, or displaced immigrants who streamed to the cities. This wholesale liquidation was entwined in the South's bitter memory of Reconstruction, the legacy that led Populist legislators, once they had gained power in places like Arkansas, to write stringent prohibitions of usury in their state laws and constitutions.
Usurious lending also afflicted farmers of the Middle West, though less dramatically, as they struggled to stay ahead of falling prices. The age of mechanization was opening and famers were advised that the only way to maintain their income levels was to increase their efficiency-- to produce greater yields from the same land and labor. The new machines they purchased on credit typically carried annual interest rates of 18 to 36%-- chattel mortgages that they would have to pay off in steadily appreciating dollars.
When the farmers went to ship their grain, the railroads squeezed them further with arbitrary freight rates. "The farmer of the west." Goodwyn wrote, "felt there was something wrong with a system that made them pay a bushel of corn in freight costs for every bushel he shipped."
But the credit problem was larger than the personal anxieties of farmers sinking deeper into debt. The Tight-money conditions imposed by restoration of the gold standard guaranteed permanently high interest rates, and the higher profits naturally flowed to the lenders, the banking system and the owners of wealth. But the money-and-credit system also creaked with rigidity and periodically broke down. When the demand for money supply could not quickly or easily expand to provide additional credit, given the rules of the gold standard. Money creation was based on the quantity of gold in reserve, and, thus, more money could not be produced by the banking system until it acquired more gold reserves, usually borrowing them from Europe. It took fifteen days for a shipment of gold to cross the Atlantic. In the meantime, the banking system was on its own.
The result, again and again when credit became scarce, was a rolling wave of illiquidity that rippled through the financial system, starving commerce for short-term credit and ruining hundreds of banks.
The squeeze typically started in the South and West-- farmers bringing crops to market, merchants and traders needing short-term loans to finance the swollen transactions of local trade. When rural banks exhausted their resources, they turned to larger city banks for temporary loans. When the larger banks ran out of reserve funds, they turned to the money centers of the United States, the oldest and largest banks of New York, or Chicago or St. Louis, which were great storehouses for America's accumulated fortunes...."
And the rest of this goes into the formation of the populist party by the Farmer's alliance, and their calls for a centralized banking system based upon Fiat money that was more responsive and flexible than the previous gold standard.
This entire event was caused by the necessity of the US gov't to finance the Civil War, easily the most expensive war of that era, beyond the limits of the gold standard of that day. The "discipline" that was applied to restore "hard money" after the war lasted thirty years and vast societal and demographic changes as people lost everything and had to restart their lives (something they could do when credit records were extremely shoddy, unlike today where we've all got a credit dossier affecting almost everything we do).
And Investor-ex... I may be amazing in refuting an accumulated history. But your even more amazing in that you created that history.
It certainly wasn't as financially rosy and glowing as you make it out to be.
But I'm used to alternative histories.... like the day I met "Zera" from the Planet of the Apes while grabbing a late lunch in a DC eatery. The most amazing thing is Zera was masquerading as a human being, with a somewhat eccentricity about her that would make someone question her sanity.
But not me... not after my experience with practictioners of alternative history who wish to shape it and mold it to meet their narrow and selfish goals.
And btw, Zera was an amazing person.. uh.. errrr... Ape. She could relate the entire history (to be) of the planet as so accurately portrayed in the movies and TV series of the '70's. Uncanny how we, as humans, were able to so accurately foretelling tomorrows yet to come.
Regards,
Ron |
