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To: Ilaine who wrote (11616)	12/1/2001 5:38:53 AM
From: Ilaine	Respond to of 74559

Just finished reading a biography of Andrew Jackson, seventh president of the US. He is known for getting rid of the Second Bank of the United States by withdrawing all US government funds from it by executive order, in 1833. He ordered all the US funds to be distributed to some 80 state banks. This caused a short, sharp fall in prices, which corrected by 1834. I was intrigued by the following: in 1837, Congress ordered that $37 million held by those banks be distributed to the states, the public debt having all been paid off. The banks had come to regard that money as being almost a permanent loan, and had inflated credit on the basis of it. In order to meet Congress' drafts, loans were called. Cotton prices declined. The financial, industrial and commercial system collapsed and remained prostrated for six or seven years. That was the Panic of 1837.

To: Ilaine who wrote (11616)	12/1/2001 9:41:39 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 74559

CB - ...do Austrians have a theoretical explanation for scrip? That's one of the things that fascinates me. It's clear that, in olden days, at least, from time to time there would be a problem because there was not enough physical money around to effectuate transactions, so people would invent something to act as a marker. ... Money is what people accept as money, and it being local or regional is no problem for those areas. For a small town, a store can issue credit, and thus reduce the need for money. Austrian theory states that money evolves from existing commodities, with the most marketable goods acquiring additional value as money, increasing the demand for it in a regenerative positive feedback loop. In the case of cigarettes, they initially have a value in use for smokers, but as they are increasingly used as money, their value as money increases and they become too expensive to be smoked. It is entirely realistic to expect that they could become entirely money under certain circumstances. At that point, you could even conceivably remove the tobacco without reducing their value as money. This is the path the US dollar may have taken, at least in theory. It was first 100% convertible to gold, and then covered only by fractional reserves, and then non-convertible. What's important is that there is a continuous money value from one day to the next. This is true for acceptance, but it doesn't retain the property of gold that it is, at most times, expensive to produce. Regards, Don