We open today’s reckoning with a hypothesis:
The current monetary system debauches the culture.
Long-suffering readers are familiar with our… diminished regard for paper money.
Paper money — or digital money nowadays — is the great bogeyman of the boom/bust cycle. It inflates bubbles of every model and make.
Meanwhile, paper money fuels big government… as oxygen fuels fire.
But paper money’s effects on the culture?
“It has a very important impact on our culture,” writes economist Jorg Guido Hulsmann.
Under “natural money” like gold Hulsmann explains, prices tend to fall over time.
So natural money encourages the virtues of saving… thrift… deferred gratification. It sets the mind to the future:
In a free economy with a natural monetary system, there is a strong incentive to save money… Investments in savings accounts or other relatively safe investments also play a certain role, but cash hoarding is paramount.
Before the 20th century, explains Hulsmann, debt was a cultural taboo… a big scarlet “D.”
Credit for households was virtually unknown, he says. And only the poorest households resorted to debt-financed consumption.
Ah, but then the 20th century came along with its wars… its social movements… and its cranks…
Gold is a famously uncooperative agent of change.
It resists social uplift, in the same way an old man resists a new pair of shoes.
It turns away from the sound of trumpets.
“You go over there,” gold says. “I’m staying here.”
“The trouble with gold is that it turns its back on world improvers, empire builders and do-gooders,” wrote Bill Bonner and our leader Addison Wiggin in Empire of Debt.
“The nice thing about gold is that it is so unresponsive,” they continued. “It neither laughs nor applauds.”
And that’s why it couldn’t last…
Only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered dreams of the 20th century.
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