I’ve been listening to some economics lectures made back in the 70’s by Murray Rothbard. Incidentally, iTunes U may be the most underrated aspect of the itunes revolution. There’s over 100,000 lectures from various colleges and universities up there, and they’re all free. You can hear some real heavyweights on there, and from some of the best schools out there.
Anyway, Rothbard was definitely of the “hard money” school of thought. Listening to his lecture on money and banking reminded me of the Monty Python skit that had people living public housing built entirely out of magic. Everything was fine until people stopped believing in it, then it would crumble around them. The fractional reserve banking system would implode overnight if everyone wanted their money tomorrow. Our currency has been, and continues to be, devalued by the government for political reasons. Fiat currency only has value as long as people trust it.
The other thing that has struck me about this lecture is the realization that for most of history, the government did not control money. Sure, they issued it, but the people traded in gold and silver and the value of the money was determined through market forces. It wasn’t until FDR confiscated gold bullion that government fiat money became the only game in town. So many people, and I was one myself, simply can’t grasp the concept of money operating outside of government control. It can be done, it had been for most of history.
Of course, right now, we do trust government money, and we are happy enough with our money in the bank. I can see why some people don’t though. And I think it’s plausible that that trust will erode over time if things continue the way they are now.
I have this sudden urge to buy gold and silver, even though it’s pretty expensive right now….