Sunday, February 26, 2012

Adam Smith Against Gold

Adam Smith in "Wealth of Nations" was a critic of gold. Why? Because a country either has too much or not enough. In other words as Milton Friedmans monetary theory says. dM/dt (money supply) + dV/dt (velocity) = inflation/deflation + dR/ (real output)

In other words. The amount of gold a country has does not equal the amount of real output. They either have too much gold or not enough. When they don't have enough, historically, nations have gone to war to steal enough gold to keep their countries economy going.

Money does need to be backed and redeemable with a real asset. But it doesn't need to be gold. Money can be backed by anything real .

Loan approval is the point of money creation. If a system made sure money was only lent and thus created for "real output", and "real assets" then banks could always repossess something in case of individual default.

This Safety Society Banking System is Full Reserve Banking and immune from banking failure.

Gold vs Fiat is a false dichotomy.

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