>>the well of funding has been poisoned, and the electrical system has a mishmash aggregate of incompatible sub-systems, juiced by the FED, with the charges building up in faulty capacitors, ready to go kaboom at some triggering perturbation(s).<<
After a couple of months of obsessing over 9/11 and the aftermath - I know more and care more about the events in Kunduz, for example, than anyone I know - I was finally able to pull myself away a tiny bit and started researching for the book again. I've been looking in Fairfax County land records, curious about interest rates. What I found surprised me - interest rates on mortgages were invariably 6%! I looked in the 1920's, the 1890's, the 1860's, and finally when I looked in the 1840's, I read something that helped me make sense of it.
Mortgages in the 1840's specified "interest at the legal rate." Well, the legal rate of interest was 6%. That was the maximum allowed by law under usery laws at the time.
I mentioned this to my husband, who remembered something his father had told him about bankers - they operate on the Rule of 6, 3 and 3 - charge 6%, pay 3%, and get to the golf course by 3 in the afternoon.
The oldest copy of the Virginia Code in the law library that isn't locked up is from 1860. In 1860, there was no Federal Reserve, there were no national banks, and the United States did not have greenbacks. Banks were controlled by the states. The 1860 Virginia banking code is about five pages long. Banks were allowed to issue banknotes, for no longer than six months, and no more than five times the bank's own specie in reserve. Further, they were required to exchange notes for specie on demand. They were not allowed to charge more than 6% interest. And that's about it. Other than that, they were left to their own devices.
In that simple, idyllic past, business cycles, as you say, came and went, powered, not by the Fed, not by interest rates, but by eternal events like the weather, and wars, and by technological advances.
In 1862, to finance the Civil War, the United States treasury started issuing paper money backed by nothing but full faith in the credit of the United States government, which turned out to be good. They promised to make the notes covertible to gold in 1879, and honored that promise. In 1933, for reasons we have discussed before, the United States went off the gold standard, and US greenbacks have been backed by the full faith and credit of the US government ever since.
Back in 1860, the only way to know if a banknote was good was to hold it up to the light to see how many spindle holes were in it. If there were a lot of spindle holes, and the note was dirty and well worn, the note had been accepted by the bank and put back into circulation a number of times, which meant it was probably good.
Very few people accepted bank notes at par. Other than bank notes, the most common form of money was pieces cut from old Spanish coins, which, though well worn, though sometimes shaved and sometimes clipped, circulated pretty much at par. Financial transactions are more interesting when you don't know whether the money is good. You probably know that better than any of us.
So if you think the monetary system is rickety now - well, it's never been more stable.
Using your analogy, the electrical system is ok, you need to worry about the things that are plugged into it. |
