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Pastimes : Book Nook -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (87)	3/28/2001 1:12:47 AM
From: JF Quinnelly	Read Replies (1) \| Respond to of 443

. Mortgage backed money and commodity money make perfect sense there. Sounds like John Law Lives Again. There's a flaw inherent in land-backed money, as Law's investors discovered. 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. This isn't actually so. America was remarkably poor in specie at the time of the Revolution; what coins there were were hoarded or spirited out of the country. The Continental Dollars weren't worth, well, a Continental Dollar. But fortunately America was blessed with a rare genius in the form of Alexander Hamilton, who knew something about a "funded public debt" and how it could turn a nation's debts into an asset. Hamilton announced that America would accept, for payment of taxes and tariffs, either gold or Continental Dollars; and announced that America would make payment on all of its debts in gold. What happened is that immediately America's bonds and its Continental Dollars were bid up to be equal to gold. Even though there was little specie in the land, the monetary base of the country grew dramatically overnight. All it took was convertability, and the guarantee that debts would be paid in gold upon demand.