fis200_week1_reading1 (1)

It wasnt until the introduction of the gold linked

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worth a Continental” was a casual term for worthlessness. It wasn’t until the introduction of the gold-linked dollar that the U.S. cur- rency grew to be accepted throughout the world. The British pound had been the world’s premier currency for two centuries, but after Britain broke with gold in 1914 and again in 1931, the world aban- doned the venerable pound and the dollar rose to world supremacy. Fortunately, monetary systems are better understood today than at any time in the past. The theory and history in this book is from a clas- sical standpoint, which is fundamentally different than the conventional wisdom of today, often called neo-Keynesian but perhaps rightly labeled “neo-mercantilist.” Classical economics is the original economics of the Industrial Revolution and the original economics of capitalism. It is a counterpoint to constitutional democracy, just as the mercantilist system was a reflection of absolute monarchy and despotism. The classical viewpoint is as old as civilization and is echoed in the writing of Confucius, Mencius, and Lao-tzu. In the days of Adam Smith, David Ricardo, and John Stuart Mill, all economists were classical economists. Even Karl Marx was a classical economist at the core. The thread of study was taken up in the later nineteenth century by thinkers such as William Stanley Jevons, Carl Menger, and Léon Walras. In the first half of the twentieth century, classical mon- etary theory was developed further by the Austrian school under the guidance of Ludwig von Mises and Friedrich von Hayek. Murray Rothbard, Henry Hazlitt, and other writers carried many of the Austrians’ discoveries into the latter half of the twentieth century. Beginning in the 1960s, major new advances were made in the un- derstanding of taxes, tariffs, and regulation by such people as Robert Good Money Is Stable Money 10
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Mundell and Arthur Laffer, which in turn helped clarify monetary issues still further. The classical framework is the product of an unbroken line of investigations stretching centuries. Although the economic theory presented here may seem un- orthodox, that’s because its roots are so old that much of the knowl- edge has been forgotten by today’s academics and monetary authorities. A hundred years ago, much of it was conventional wis- dom, so self-evident that it hardly needed repeating. The proof of the pudding is in the eating:This theoretical structure produced decades and even centuries of stable money and economic abundance. It has been thoroughly tested, and it works. Those who are confused by today’s conventional wisdom are more likely to throw up their hands and swear it cannot be done. Nonsense. It can be done; it has been done; and if history is a guide, it will be done again. GOLD: THE ONCE AND FUTURE MONEY 11
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