fis200_week1_reading1 (1)

Historically governments are the prime offenders the

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Historically, governments are the prime offenders, the institution with both the motive and the ability to carry out the deed, and many industrial or social groups are always ready to entice the government into manipulating the currency for their benefit. But governments rest on the approval of the entire citizenry, not just one part, and no government can act at the citizenry’s expense indefinitely and remain in power. Democratic governments can be cleansed by the vote, and the members of less flexible political systems will eventually resort to assassination, civil war, emigration, military coup, or secession. Today the forces for a sound currency are again ascendant. Gov- ernments and central bankers around the world today agree unani- mously on the desirability of stable money, ever more so after some GOLD: THE ONCE AND FUTURE MONEY 7
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monetary disaster has reduced yet another economy to smoking ruins: Mexico in 1994, Thailand, Korea, Indonesia, and the Philip- pines in 1997, Russia and Brazil in 1998, Japan throughout the 1990s, Turkey in 2001, Argentina in 2002, Germany in the 1920s, Latin America in the 1980s, and virtually everyone in the 1970s, to name just a very few of the more well-known cases. The govern- ments and citizens cry out together for good money, stable money, boring money, forever the same, supremely reliable, the bedrock upon which the extended order can flourish, not this stuff that wig- gles and waggles unpredictably every second of every day, a never- ending chaos that saps the vitality of all countries’ economies. On the political side there is near total unanimity. The problem, first, is that nobody apparently knows what exactly this stable money consists of. Second, nobody knows how to accomplish the task of creating and maintaining it. But even the briefest study of history shows that today’s condi- tion of floating currencies is a very new phenomenon. It began August 15, 1971, the day Richard Nixon severed the dollar’s link with gold and destroyed the world monetary system, which at the time went under the name of the Bretton Woods system. In the three centuries before 1971, the world for the most part had stable money. After 1971, or more properly after a series of steps in the late 1960s and the early 1970s, it did not. The capitalist economy since the Industrial Revolution, and a long time earlier as well, was based on stable money. The advocates of laissez-faire never ceased to support stable currencies. Their critics, the early socialists and communists, agreed with them on little other than the necessity of a sound unit of account. Floating currencies are not a phenomenon of the free mar- ket but the market’s inevitable reaction to unceasing currency manipulations by world governments. Since the system today is the exception rather than the rule, it should be easy to find a solution to the monetary problems that plague humanity on a daily basis.
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