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Money Changes
2012-06-02 16:45So, the top lesson I got out of the Small Change book is how unstable and fluid money has been over time. Like, I get the impression that if money is stable over 30 years it's doing well. Or 60, anyway. An exaggeration? Maybe, but not a huge one. History seems full of shortage of small change, debasements, recoinages, shifts in silver and gold values and use, experiments with copper tokens, siege moneys of leather or other material, private tokens... plus of course a diversity of minted coins from lots of little kingdoms, and physical diversity even within a denomination due to wear and tear on coins. (So a coin might be 10% or more underweight, just from abrasion over 30 years. That's a lot of lost silver.)
( Insert coin to read more )
The Conclusion?
Given how much things have changed, I suppose we could be a bit more humble, rather than assuming the current regime is the apotheosis of financial economics. ('We' = economists or lay followers, who assume floating exchange rates are great and gold standard advocacy a sign of crazy.) Maybe capital controls will become the next big thing. Maybe quantum computers and high end replicators will shred both electronic banking (due to cracking encryption) and paper money (easy counterfeiting) and we'll have to go back to commodity coins. Maybe central banks will have their independence revoked due to insufficient attention to full employment.
OTOH, there have been advances in theory, about the nature and effect of money; we live in the century of Keynes, Friedman, and Mundell, themselves standing on centuries of painfully learned lessons (still being learned.) And, there's a weak direction in history: token or fiat money keeps coming up again and again, not just due to sovereign greed but often due to a need for 'money' of whatever kind... even stamped leather strips. If you can prevent counterfeiting and keeping from overprinting, it works great. Well, until your central banks become so allergic to overprinting that they refuse to print enough, as in Japan, the EU, and US...
( Insert coin to read more )
The Conclusion?
Given how much things have changed, I suppose we could be a bit more humble, rather than assuming the current regime is the apotheosis of financial economics. ('We' = economists or lay followers, who assume floating exchange rates are great and gold standard advocacy a sign of crazy.) Maybe capital controls will become the next big thing. Maybe quantum computers and high end replicators will shred both electronic banking (due to cracking encryption) and paper money (easy counterfeiting) and we'll have to go back to commodity coins. Maybe central banks will have their independence revoked due to insufficient attention to full employment.
OTOH, there have been advances in theory, about the nature and effect of money; we live in the century of Keynes, Friedman, and Mundell, themselves standing on centuries of painfully learned lessons (still being learned.) And, there's a weak direction in history: token or fiat money keeps coming up again and again, not just due to sovereign greed but often due to a need for 'money' of whatever kind... even stamped leather strips. If you can prevent counterfeiting and keeping from overprinting, it works great. Well, until your central banks become so allergic to overprinting that they refuse to print enough, as in Japan, the EU, and US...