🚀 go-pugleaf

In article <58506@dime.cs.umass.edu> yodaiken@chelm.cs.umass.edu (victor yodaiken) writes:

>>You can attribute these to the National Banking Act of 1860. This 
>>legislation centralized reserves in a few banks in NYC, creating a 
>>quasi-central bank. These banks could then influence the money supply
>>much greater than would have been possible had true free competition 
>>had been in place.
>
>Well, it sounds like your golden era of the stable dollar was a mighty
>short time -- a couple of years from the end of the eighteenth century and
>then up to 1860, minus, I suppose the years when the economy was affected
>by such government actions as the MExican war or the Lousiana purchase.

The dollar kept its value very well during this period, but the 
National Banking Act caused the boom bust cycle. Inflation doesn't
necessarily have to cause the price rise, if production and trade
are growing faster, but inflation can still lead to the same disruptions--

What happens is the free money that now enters the economy causes consumers
to spend more than normal, and causing business to expand more than
normal. After the inflation is done, these over-expanded sections of the 
economy are now deemed no longer necessary by the public, and these
sections go under. This is the cause of the recession. 

>>I believe one of the most stable banking experiments in history was
>>the Scottish free banking system--there were no legal tender laws, no
>>reserve requirements, no government monopoly on the money supply.
>>A very sound banking system was established, much to the envy of the
>>neighboring British, and it was based on a de facto gold standard. It 
>>finally crumbled after legislation was passed regulating the industry,
>>I believe.
>
>Was Scotland an independent nation at the time of this experiment?
>I doubt it.

I am not sure. What difference does it make?

>Why do I get the feeling that yoou have already made up your mind about
>what works and what doesn't and are just snatching random historical
>straws to keep your theory afloat?

Sorry, the evidence is there. The CPI jumps when large amounts of currency
are introduced into the economy. The price jumps of inflation can be hidden
for *a while* by a productive economy, but the recession is bound to come.

Jim Hranicky (jfh@reef.cis.ufl.edu)