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Benjamin Franklin and Glass-Steagall


By Patrick   Follow   Thu, 8 Nov 2012, 8:47am   405 views   5 comments
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http://etext.lib.virginia.edu/users/brock/webdoc6.html

A MODEST

ENQUIRY

INTO THE

Nature and Necessity

OF A

PAPER-CURRENCY

THERE is no Science, the Study of which is more useful and commendable than the Knowledge of the true Interest of one’s Country; and perhaps there is no Kind of Learning more abstruse and intricate, more difficult to acquire in any Degree of Perfection than This, and therefore none more generally neglected. Hence it is, that we every Day find Men in Conversation contending warmly on some Point in Politicks, which, altho’ it may nearly concern them both, neither of them understand any more than they do each other.

Thus much by way of Apology for this present Enquiry into the Nature and Necessity of a Paper Currency. And if any Thing I shall say, may be a Means of fixing a Subject that is now the chief Concern of my Countrymen, in a clearer Light, I shall have the Satisfaction of thinking my Time and Pains well employed.

Pennsylvania assembly. When the assembly assented, Franklin wrote in his Autobiography, "My friends there, who consider I had been of some service, thought fit to reward me by employing me in printing the money; a very profitable job, and a great help to me." There are many interesting aspects to Franklin's monetary theory.

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  1. Patrick


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    1   9:05am Thu 8 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I think old Ben contradicts himself by first claiming the virtues of inflating the currency, and later pointing out that all real value is derived from labor, and that as the quantity of silver increased, its value in purchasing labor decreased.

  2. curious2


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    2   12:38am Fri 9 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    I love Ben Franklin, and the wonderful phrasing of the 18th century. For example, "contending warmly" sounds much more pleasant than "arguing heatedly." Though, human nature being ever constant, the two phrases probably describe the same scene.

  3. Elwood P Dowd


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    3   5:02am Fri 9 Nov 2012   Share   Quote   Permalink   Like (1)   Dislike  

    I think part of the reason Franklin adopted the position he did is that when he first arrived in Philadelphia there was such a shortage of currency that it was strangling legitimate exchanges and trades. People were being forced to resort to barter in some cases, simply because there was no currency to be found This must have raised transaction costs, if nothing else.

    But the rest of his reasoning I'm not following. He seems to presume a stable or perhaps slowly increasing value to land, when I think you can find cases in Franklin's own life where the value of land effectively fell to zero in certain places. As with the stereotype of the farmer emptying his house, closing the front door and hopping in his wagon going westward. Granted Franklin missed the craze for migration to Texas, I think in the 1820s, when people simply hammered a sign "G.T.T." for "Gone to Texas" on their door and just up and left. And these were working farms in places like Tennessee, on arable land, that produced a living if not exactly riches. But were still not deemed even worth attempting to sell. Can't see a land backed currency working under those circumstances.

    'Course I can't see how today's Funny Money, excuse me, Quantitative Easing Parts I, II, III, and IV, with doubtless more sequels on the horizon, works either. (Must be quite a box office smash? Not having seen any of them at my local megaplex, I can only hope this is the one movie series out there where who I take to be the main actors all keep their clothes ON. The alternative is too frightening to contemplate.)

    Also, I must admit I had a chuckle when I got to the bottom of the link and saw that Franklin had written this under a pen name, "B.B." Whose initials might THOSE be?

  4. Elwood P Dowd


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    4   5:48am Fri 9 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Oh, duh. As interesting a read as I found that piece I'm not connecting the dots between it and Glass-Steagall. Was Franklin advocating that this currency be issued by private citizens or private banks, something like that? I'm afraid with his slightly archaic language and sentences of 600 words plus, I didn't suss that part out. But I did kind of presume they'd come out of government at some level, given the bit in the opening paragraph about him being given the (apparently) plum job of printing Pennsylvania's currency.

  5. Dan8267


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    5   7:59am Fri 9 Nov 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    all real value is derived from labor

    Value is always derived from the talents and efforts of man building things, not the atoms from which things are built. Atoms are cheap. There are 10^78 of them in the observable universe. Talent and innovation are not cheap. Good ideas with excellent implementation are far more rare than gold.

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