What's more than a little depressing is reading helplessly as the French national assembly, which was composed immediately after the revolution of many very intelligent and able men (this is before the Jacobin hijacking and purges) take steps toward a paper currency, knowing full well the dangers, composing reasonable measures to alleviate those dangers, and then convincing themselves that the laws of nature and economics did not apply to them when the temptation came around to print just a little more, then a little more. The French, who took 70 years to recover from their first experiment with unbacked paper money, convinced themselves that they knew better this time. It turns out they didn't.
But what I find most depressing is not the author's understanding of the economic consequences, but the moral ones. And as I'm thinking about Senator Sam's bluenosed voyeurism or GWB's incessant calls for government to save the family, marriage, and the poor, I see from history that the government is absolutely powerless to fix those things because it is the government that is ultimately causing the problems to flourish in society. Not by national legislation or programs, but by the inexorable workings of moral law, as noted by Madison* at the end of the 18th century and by Keynes at the start of the 20th^. Because honest money is a moral issue, ignoring it - cheating as it were - will have moral consequences no matter what else the government does to suppress the forces they have loosed.
White notes the moral problems that arose in the French economy thus:
Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business became a game of chance, and all business men, gamblers. In city centers came a quick growth of stock-jobbers and speculators; and these set a debasing fashion in business which spread to the remotest parts of the country.Dd we not see this today in America where a significant part of our economy (known as financial services) is dedicated solely to the manipulation of pieces of paper? We have built a pyramid of derivatives larger than all the good created in the entire world. Half of all new mortgages are on properties the owner is buying only to sell to a greater fool. Americans bet their life savings - what little they have - on margined stocks and bonds and yet cannot distinguish between the two.
Instead of satisfaction with legitimate profits, came a passion for inordinate gains. Then, too, as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. So came upon the nation the obliteration of thrift.Our companies are as short-sighted as they are profligate, manipulating both financial statements and markets for immediate gain regardless of long-term damage. So is our government, lying about budgets, and manipulating and "seasonally adjusting" unpleasant numbers to the point that no person can rely on them for anything. And as individuals we are no better: "the obliteration of thrift" might as well be our national motto.
In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a fashion. To feed it, there came cheatery in the nation at large and corruption among officials and persons holding trusts.Like I even need a comment on this one. (cough...Congress...cough)
While men set such fashions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to corruption. Faith in moral considerations, or even in good impulses, yielded to general distrust. National honor was thought a fiction cherished only by hypocrites. Patriotism was eaten out by cynicism.When money has no value, the value of everything else is eaten away eventually, especially those things that the Republican conservatives want so badly to use the government to shore up..
Thus was the history of France logically developed in obedience to natural laws; such has, to a greater or less degree, always been the result of irredeemable paper...It's no coincidence that the things conservatives are most outraged about today are those things which came about in France with the proliferation of unbacked paper money and the heady years that followed.
Such, we may fairly expect, will always be the result of them...
They have occurred slowly in America, but as the pace of debt and manipulation and speculation arises with the volume of our money, so are the very problems conservatives are trying to fight. And yet is never occurs to them to attack the root cause of those problems in society: the government's own over-issuance of unbacked paper money and credit.
Ironically, consevatives are themselves the worst abusers, and GWB's fiscal policies are creating and exascerbating many of the same problems his myriad programs are designed to alleviate. Like a race pimp 'fights' racism while aggravating racial tensions, so the conservatives 'fight' social decay.
That might be the most depressing lesson of all.
* The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the States...which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice, of the power which has been the instrument of it.. - Federalist 44, 1789
^ "Lenin was certainly right. There is no subtler, no surer way to overturn existing society than to debauch the currency. The process engages all the economic forces on the side of destruction which not one man in a million is able to diagnose." - John Maynard Keynes, "Economic Consequences of the Peace," 1919