A free market in money…well…not so great… January 19, 2013
Posted by WorldbyStorm in Irish History, Uncategorized.trackback
The NPR Planet Money Podcast is, I find, a great podcast, not one I listen to religiously, but instead let them build up and listen to a glut of them at one go. And they’ve done some great one’s over the Christmas and New Year period. The Birth of the Dollar Bill in particular is great stuff, compressed into 10 minutes or so, including an insight into a supposedly ‘free market’ in currencies where in the US before the introduction of the US dollar bill there were up to 8000 different currencies, and the processes of exchange for those travelling across the US was painful beyond belief (and perhaps worse again for shopkeepers who had to decide whether they could accept notes, and had to consult regularly published books detailing legitimate currencies). And it was a field day for counterfeiters.
But it wasn’t because the state decided the situation was crazed, which it clearly was, that the there was a change. Oh no. It was because in the wake of the US Civil War the costs of funding it demanded that the US printed money ‘greenbacks’. They were intended to be temporary, but as noted on the podcast ‘consumers kind of liked them’ because they were universally recognised. And then national banks, regulated by the Federal government appeared at the same time (and for similar reasons) and they further supported the dollar as a unitary and de facto national currency.
Of course in Ireland even subsequent to Independence and prior to the Currency Commission the introduction of the Saorstát pound in 1928 six individual banks issued bank notes albeit they were convertible at the same rate as the pound sterling (as still occurs in Scotland and England today). You’ll find some of the background to that here. And you’ll find more background and images of the notes themselves here.
The Cedar Lounge Revolution 
and perhaps worse again for shopkeepers who had to decide whether they could accept notes, and had to consult regularly published books detailing legitimate currencies
Indeed. There’s a great Hayek pamphlet I once read in which he advocates, if I recall correctly, the legalisation and production of competing privately-issued currencies, which would prove their value only if they maintained the confidence of the market, and so on and so on. All great stuff because Hayek, if he had nothing else, had an interesting mind.
However, he never to my knowledge worked on a market stall. And, being someone who does precisely that, I can tell you that what I do not want to be dealing with, during the periods of manic activity which occur on such a stall, is competing currencies. Just one will be sufficient, thank you very much.
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I believe Ron Paul and his followers advocate something similar to Hayek’s idea. They see fiat currencies (and inflation) as the ultimate evil. It seems as though the ECB holds the same view, except when it comes to using its fiat currency to backstop financial institutions across Europe.
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Hadn’t thought of it that way Ciaran before.
ejh, there one has it. There’s an amazing disconnection between a lot of libertarian right thinking and the actuality of sales and purchase. In a way that’s what makes it doubly interesting, because it’s so abstracted. There was another Planet Money podcast where they went to a right libertarian summer camp where people bought and sold using gold (in order to avoid dollars). The sheer complexity and inefficiency of it, the time consuming haggling and so on, seemed akin to performance art and the sort of thing that would push one straight back to the dollar, quick smart.
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the processes of exchange for those travelling across the US was painful beyond belief
“It was on one fine March morning when I bid New Orleans adieu
I took the road to Jackson town my fortunes to renew
I cursed all foreign money, no credit could I gain
Which filled my heart with longing for the lakes of Pontchartrain”
also
“I said, ‘My pretty creole girl, my money here’s no good,
And if it weren’t for the alligators I’d sleep out in the wood'”
– “The lakes of Pontchartrain”, anon, 1890s
What the guy was doing in NO with nothing but ‘foreign money’ is unclear. (Jackson is probably Jackson, Louisiana – 100 miles NW of New OrleansIn contemporary folklore (or folkie lore) it’s supposed to be an Irish song – so the narrator could have been an exile travelling around for work – but there’s really no evidence for that.
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Appropriately enough, this was the song reportedly sung by Brian Cowen at the Fianna Fail drink-in on the night before the interview that led to his downfall.
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The lure of gold continues. Its difficult what to make of the Bundesbank’s move to repatriate some of its gold reserves.
‘Many analysts say the world is moving towards a de facto gold standard again as China, Russia and other reserve powers boost their holdings to diversify out of dollars and euros.’
http://www.telegraph.co.uk/finance/personalfinance/investing/gold/9804444/Bundesbank-to-pull-gold-from-New-York-and-Paris-in-watershed-moment.html
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I couldn’t resist posting this, despite the fact that a number of my posts go missing. I honestly don’t know if this is policy or technical malfunction.
Anyhow once more into the breach:
Firstly, CLR beware getting sucked into discussions of alternative currencies. The field is littered with ‘true believers’ who have the cure to all our ills.
Second, and more interestingly and relevantly, I only recently read with a certain degree of delight about the role of private banks in the great inflation of 1923 which still haunts the German collective unconcious.
From and IMF Paper by Benes and Kumhof entitled The Chicago Plan Revisited:
The relevance to the current crisis, where finance-captital has for over 40 years been politically enabled and encouraged to print virtual money as ever more involved forms of debt, insurance and straight gambling instruments, should be obvious.
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Except that in the current crisis the threat is deflationary rather than inflationary.
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Correct CL. But the parallels lie in the purposeful surrender by states of the monopoly on money creation to private financial institutions.
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Schacht went on to serve Hitler by creating money to finance rearmament and thereby reflating the German economy.
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I was going to expand further on my earlier point re the ECB, but I thought instead I’d divert your attention to this particular episode of Vinny Browne:
http://neweconomicperspectives.org/2011/09/marshall-auerback-on-irelands-vincent.html
From there, you can link to a visiting economist confusing the hell out of Lucinda Creighton, and sending Dan O’Brien into near apoplexy, when explaining what the ECB does and can do. If you have the time to watch it, it will be very educational, albeit very dis-spiriting when you realise that no-one in mainstream Irish political or media life was listening too hard, and resumed the ‘nation = corner shop’ narrative.
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The Bundesbank are moving all of Germany’s gold back to Frankfurt from the Fed and crucially Paris. In what used to look like prelude to war is probably just efforts to accentuate all that is prudent in an election year. Not sure what such a public display says for the confidence fairy though.
374 tonnes in 54,000 bars and it still wouldn’t cover the cost of Anglo Irish Bank
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