Wackonomics

[alexamenos]

fwiw...a few notes on the semantic evolution of the Dollar...

The Dollar became the official currency of the US Government in 1792 and was, by definition, about 1/15th of an ounce of gold. The punishment for debasing the Dollar was death, and if this law were intact today we'd have a lot of dead bankers -- a Dollar today is worth about 1/1000th of an ounce of gold.

The big green piece of paper with a pic of Geo. Washington, aka the Federal Reserve Note, was introduced in the early twentieth century (along with the introduction of the Federal Reserve, not too coincidentally). At the time, this Federal Reserve Note would not have read "ONE DOLLAR", but instead something to the effect of "Payable in gold on demand, pay to the bearer ONE DOLLAR."

This, in my estimation, is an important thing to grasp firmly -- what we call a dollar today was once not considered a Dollar but a promise to hand over a Dollar. Somewhere along the way it's like somebody made a promise in writing and then later said...

"ummmm...you know what...that promise I made in writing...well instead of me making good on that promise, you just keep the piece of paper and we'll call it all square. See ya."

I don't know about you, but I think that's quite a leap--it's hugely beneficial to the guy writing the promise but a real kick in the crotch to the guy bearing the note.

Let's bear in mind that if you've got a chunk of gold, whether it's a coin or a ring or whatever, you can go just about anywhere on earth and exchange it for something. The transaction may be tedious, but there's no question that the value of that thing doesn't depend on whether Timothy Geither and Ben Bernanke keep their stuff together. Gold has value which is not dependent up on the decree and (even less reliably) the prudence of the king. This has been the case with gold for the last few thousand years and it'll likely be the case for a few thousand more (unless the robots take over).

Anyway....I suppose one could argue that the evolution of "Dollar" in the US from a certain amount of gold to a promise to pay a certain amount of gold to a useless piece of paper is a good thing, but there's not much arguing that this is the history.