Friday, 12 July 2002

Scotland's shame

There is an extraordinary article in the Edinburgh Evening News today.

John Law was a pioneer of the art of creating money out of thin air. But the article puts it like this:

He alone among his contemporaries fully grasped the notions of credit and the potential of paper money. It was not until 1931 that Britain left the gold standard - yet Law had realised that reserves of a precious metal do not serve the needs of trade as early as 1705...
But the News goes on to say:

It was a massive bull market to make the 1980's yuppie era look like pocket money day for five year olds. The shares started at 500 livres each, quickly doubled, and then marched from 1,000 to 10,000 livres before the inevitable collapse.
Indeed so. But the article continues:
Yet Law's economic theories, despite his French disaster, are vindicated today. We not only use paper money but also plastic too. Law would have understood, as he said himself that money is "a functional medium with no intrinsic value..."
"Vindicated today!" The recent stock market and housing booms - both here and in the US - are the consequences of the creation of huge amounts of unbacked money by central banks. We are now seeing the beginnings of the inevitable collapse which always follows such governmental speculation. Unfortunately, millions of ordinary people will be wiped out financially - the politicians who caused this tragedy will, as always, blame others.