I love this succinct and euphonic explanation of fiat currency’s superiority to the gold standard, by commenter ras at Samizdata:
“Which is better for building confidence in a currency or a monetary system, gold bars in a vault or a carrier battle groups at sea?”
GOLD is for the mistress—silver for the maid—
Copper for the craftsman cunning at his trade.â€
“Good!†said the Baron, sitting in his hall,
“But Iron—Cold Iron—is master of them all.â€
{ 8 comments }
I am always puzzled by anarcho-capitalist arguments for the gold standard using the “fiat currency” idea, as if Gold had some inherent value.
I’m all for carrier battle groups, but they don’t have much to do with the stability of a currency. How large is the Swiss Navy, anyhow?
10 military patrol boats.
I’m all for carrier battle groups, but they don’t have much to do with the stability of a currency. How large is the Swiss Navy, anyhow?
How much would Swiss currency be worth if the Russians or Germans seized Switzerland?
Believe it or not, Switzerland is actually one of the few countries that has mandatory military service. Their neutrality was always built on the fact they could retreat to the nigh- impregnable Alps.
http://en.wikipedia.org/wiki/Switzerland_during_the_World_Wars
Switzerland was able to remain independent through a combination of economic concessions to Germany, military deterrence
Gold seems to be popular among the anarcho-libertarian set because supposedly governments cannot jigger the price of gold very effectively. Of course they can, if not as easily as they can with fiat currency. But gold is also vulnerable in lots of other ways; it’s easy to steal, vaults where it’s kept become big targets for attack by governments, sudden discoveries of rich veins of gold will cause inflation, and etc.
Dean Esmay’s last blog post..the return of Romo Lampkin
By the way, that’s a Kipling poem. No surprise; while modern poetry fans tend to look down on Kipling as too simplistic, I always find him enjoyable. “Simple” verse is where the real power of poetry lies if you ask me, and that’s probably a big part of why so many people these days don’t give a damn about poetry: most poets aren’t writing anything that the average person can relate to.
Anyway, rant aside, that particular stanza is interesting, although surprisingly enough it’s actually a Christian poem. You can read the whole thing right here.
Dave…the value of a nation’s currency, along with many other things, is of course dependent on its ability to defend itself (or have someone else defend it)….but although a necessary condition, that isn’t a sufficient one. It’s possible for a country to have tremendous military power and still screw up its currency.
Interesting poem, Dean. Orwell once published a piece on Kipling, referring to him as a “good bad poet” and suggesting that he deserved more credit than the intellectuals of the time tended to give him.
It’s possible for a country to have tremendous military power and still screw up its currency.
Sure, just as you can have a gold standard and screw it up by printing money even though you don’t have the gold to back it. But you need gold to have a gold standard, and a credible use of force to protect/gather funds to have fiat currency.
http://en.wikipedia.org/wiki/Fiat_currency
In economics, fiat currency or fiat money is money that has value primarily because a government demands it in payment of taxes, and that government has credible enforcement of its demand.
As you say, necessary but not sufficient.
Comments on this entry are closed.