By: Michael O'Malley, George Mason University

I’ve always liked this image, an illustration done by political cartoonist Thomas Nast for a book called Robinson Crusoe’s Money, written by David A. Wells in 1876. The cartoon captures an important transition in American culture, a new way of thinking about exchange and money.

Americans had used paper money to finance the Civil War—the government simply printed money and insisted that you had to take it in payment. It was “legal tender” for all debts. For Lincoln and his allies, it was better than raising taxes, but for more conservative Americans paper money was an immoral fraud, an act of wishful thinking. “Gold Bugs” wanted to burn all the paper greenbacks and return to gold as money.

Nast captioned the cartoon “Milk Tickets for Babies, in Place of Milk,” and as you can see it’s a powerful critique of the idea of paper money. “This is milk by act of Con. [gress]” “This is not a rag baby but a real baby, by act of congress.” Nast often referred to paper money as “the Rag Baby,” a valueless fantasy, and in this cartoon he wants to attack the whole idea of symbols that “stand for” something else. He’s being a “Gold Bug.”

But it’s a very backward looking, reactionary cartoon. “This is a cow, by act of the artist.” Well, it would certainly be possible that if an artist painted a really fine cow, the painted cow would be worth more than the real cow. And in the commodities markets of New York and Chicago, traders regularly bought and sold beef and pork “futures”—not actual existing cows, but paper representations of cows, bets on what cows would be worth in the future. The buyers and sellers would never see the actual cows, and in fact in the futures market the actual cows did not yet exist; they were just paper.

Similarly, in the marketplace a piece of paper, a deed, can represent a house and lot, can “be” a house and lot perfectly well. Anyone with money could buy a house without ever even seeing the house—the paper, the deed, would to all intent and purposes “be” the house.

The cartoon suggests how the American economy was becoming more “virtual” in the Gilded Age, and how uncomfortable that made people feel. In the cartoon Nast imagines back to the world of barter, a world where a bushel of apples was a physical bushel of apples you traded for a real sack of wheat, not the world where a bushel of apples was a paper symbol traded by strangers who gave you other paper symbols in return. He’s upset about the way the sign, the symbol, seems to be confused with the thing it symbolizes.

But the economy of his day was moving more and more towards the virtual, and today most people have no idea at all what money “really is.” We use it every day, we use credit cards, and there is no “real money,” just blips of data.

The cartoon is a powerful example of how wrenching economic transformation can be. Nast is deploring a world where nothing has any stability, where anything can be anything. It’s a lot like the world we live in today.



I must confess that until relatively recently (circa 2008), I never gave too much consideration to the pros and cons of fiat currency. I might have even included fiat money among the great technical advances of modern civilization.

Now, however, I have come full circle. It is not quite the uneasiness with "virtuality" expressed by Nast and the "goldbugs". It is the realization that the system is inherently corrupt by its nature.

Just like it is impossible to expect markets to self regulate fraud. It is too tall an order to expect a fiat based monetary system controlled by the privileged class and their bankster/money changers, to exercise any self restraint. It simply is not in their nature.

In the end the result is another form of high falutin confidence game. A PhD shell game couched in the kind of bombastically smooth oratory exemplified by Bernanke's speech yesterday.

I read that speech several times and was vexed.  Is it so easy to get shilled into the trap of allowing seemingly elegent verbiage to logically imply an outrageous conclusion, even when the facts as you know them are screaming to the contrary.

Helloooooooo, everything is not A.O.K. and the situation is not improving! Helloooooo, the bailouts are not being implemented at zero cost to taxpayers! Helloooo banks are covering their asses not financing a recovery. Helloooooo, pumping shitloads of money into a finite economy results in price increases!

The central banking midgets who manufacture this PhD horse shit are diabolical.  There is no other way to put it. Either they truly drink and believe their own kool aid or they are skillful liars and thieves of the nobeliest Goebellian order.

It reminded me of yet another diabolical American intellect who to some, looked perfectly reasonable on paper...





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