skinny sideburns, large belt buckles, and live on armed compounds in Idaho. Money ought to be worth something , and gold seems as good as whatever. But the relationship between money and value is endlessly perplexing. The high value of gold is a social convention, a habit left over from the days when bright, unblemished things (people included) were rare. Gold may go out of fashion. I don’t think this is likely, but a generation may come along that regards gold as gross or immoral, the way millennials regard veal. And gold is a product. We may discover different methods to get huge new amounts of it. conquered the New World, they obtained tons of gold, melted it down, and sent it to the mint. It never occurred to them that they were just creating more money, not more things to spend it on. Between 1500 and 1600, prices in Spain went up 400%. Presented with the vast This happened to the Spanish. When they
notes backed by the value of France’s land holdings west of the Mississippi. Banque Royale issued too many notes, and the French government went broke. The largest Western experiment with fiduciary money took place right here in America. In 1775 the Second Continental Congress not only created paper money, but passed a law against refusing to accept it. The Continental Congress issued too many notes and... a pattern begins to emerge. All fiduciary money is backed by a commodity, even if the backers are lying about the amount of that commodity. Historically, the commodity most often chosen has been gold. By the 19th century, the major currencies of the world were based on gold, led by the most major currency among them, the British pound. This was a period of monetary stability and, not coincidentally, great economic growth. Some people think we should go back on the gold standard, and not all of them have
crazy things with money. Another reason that money violates common sense is that we don’t have to use real commodities as money. We can use pieces of paper promising to deliver those real commodities. This is “fiduciary money,” from the Latin word fiducia , meaning trust. In Europe, paper money was developed privately, in the 13th century, from bills of exchange traded among Italian merchants and from receipts given by goldsmiths to whom precious metals had been entrusted for safekeeping. Public fiduciary money was first printed in Sweden. Swedish commodity money came in the form of copper plates. Thus, in Sweden, a large fortune was a large fortune. In 1656, the Stockholms Banco began issuing more convenient paper notes. The bank issued too many notes, and the Swedish government went broke. In 1716, Scotsman John Law helped the French government establish the Banque Royale, issuing
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