You only need it as long as you don't use it....

Terry Pratchett's book, Making Money, has a passage on gold that I found pretty insightful.
It is in Chapter 5 of the book, starting on page 136.

Moist grinned as the discussion wobbled back and forth. Whole new theories of money were growing here like mushrooms, in the dark and based on bullshit. But these were men who counted every half-farthing and slept at night with the cash box under their bed. They'd weight out flour and raisins and rainbow sprinkles with their eyes ferociously focused on the scale's pointer, because they were men who lived in the margins.

If he could get the idea of paper money past them then he was home and, if not dry, then at least merely Moist. "So you think these might catch on?" he said, during a lull. The consensus was, yes, they could, but should look "fancier," in the words of Natty Poleforth--

"You know, with more fancy lettering and similar." Moist agreed, and handed a note to every man, as a souvenir. It was worth it. "And if it all goes wahoonie-shaped," said Mr. Proust, "you've still got the gold, right? Locked up down there in the cellar?"

"Oh yes, you've got to have the gold," said Mr. Drayman. There was a general murmur of agreement, and Moist felt his spirits slump.

"But I thought we'd all agreed that you don't need the gold?" he said. In fact, they hadn't, but it was worth a try. "Ah, yes, but it's got to be there somewhere," said Mr. Drayman.

"It keeps banks honest," said Mr. Poleforth, in the tone of plonking certainty that is the hallmark of that most knowledgeable of beings, The Man In The Pub.

"But I thought you understood," said Moist. "You don't need the gold!"

"Right, sir, right," said Mr. Poleforth soothingly. "Just so as it's there."

"Er . . . do you happen to know why it has to be there?" said Moist.

"Keeps banks honest," said Mr. Poleforth, on the basis that truth is achieved by repetition.

Atlantic: Why Do People Have to Make Stuff Up?

I have found it interesting how many people have truly strange conspiracy theories about big money and libertarianism.

The other day I got a very angry letter from a colleague, claiming that the Koch Foundation was trying to take over NC politics.  I checked (by googling) the source.  And it was a fund-raising letter from Sen. Kay Hagan.  The point being that fund-raising letters by their nature are designed to use scare tactics, and have no obligation to be truthful.  I asked for evidence that the CGKF was trying to "buy" NC politics, and my colleague sent back something about Art Pope.  Ma'am, those are different people, and Art Pope lives in NC.  Lots of rich people (including my colleague who was sending these notes, by the way) had made contributions to NC politicos.

Now, the Atlantic has a piece wondering why people need to make up these bizarre stories.  The answer appears to be that folks on the left need, actually psychologically NEED, to think they speak for "the people."  They have never met the people, and they actually think the people are morons who need protection designed by smart leftists, but okay.  So when a leftist encounters someone they disagree with, their first instinct is to believe that the disagreer can't possibly ACTUALLY believe those things.  S/he must be getting paid.  And they must be getting paid by...the KOCHS.  Because the Kochs are everywhere.   (What about Soros?  Well, that money goes to leftists, and they are telling the truth.  So that money is not the same as the Koch money, which is for EVIL).

This argument gives two useful things:  1.  A bogeyman, a single enemy; and 2.  An explanation why someone might disagree (they don't REALLY disagree, but they are being bribed to pretend to disagree, with the claims of the left).  Since no smart, reasonable person could POSSIBLY disagree with a leftist, who cares so much about the people, and who knows the truth with scientific certainty.

You Say "Profit" Like It's a BAD Thing

Profit:  I don't think that word means what you think it means.

Here is what LvM thought it meant.  Pretty interesting.

But now kids think it's a bad word, a bad thing, and that making profits makes you a bad person. 

Jesus said it best:  Profits are not without honor, but in your own country, and among your own kin, and in your own house,  Or something like that.

Cotton Bond Bubble

A fascinating story, both a history and a modern caution.

...on Jan. 29, 1863, the Confederate Congress secretly authorized the Paris-based bankers at Erlanger et Cie. – which rivaled Rothschild for European royalty connections – to underwrite $15 million of Confederate bonds, denominated in British pounds or French francs.

But unlike ordinary bonds backed only by the faith and credit of the issuing country, at the option of the holder an Erlanger certificate could be converted into a receipt for a pre-specified quantity of cotton. Furthermore, the conversion rate was fixed at 12 cents a pound, regardless of the commodity’s market price, at the time about 48 cents. On top of that, the bonds paid a handsome 7 percent annual interest rate.

Put another way, a buyer of a £1,000 bond could convert it into 80 500-pound bales of cotton worth almost £4,000. If the price of cotton continued to rise, the underlying bond’s conversion-value would climb in lockstep. European investors flocked to the bonds, including the future British prime ministers William Gladstone and Lord Cecil.

But like any too-good-to-be-true investment, there was a catch: the cotton was located in the Confederacy. Upon conversion, Confederate authorities were obligated only to deliver the bales to a point within “ten miles of a navigable river or railhead,” where the new owner must arrange transport to the final destination.

ATSRTWT

Nod to JR, who asks:  "What would have happened in the war if they had followed Benjamin's way to sell cotton future instead of the banker's model?"
 

Other People's Money, Spent for Other People

Email from W.H.:

Many times when people discuss Milton Friedman's fourth category of spending they do so in a mistaken vacuum. How so? They forget to point out HOW other people's money came to be. Stated alternatively, other people spending other people's money on other people, the discussion thereof, many, many times leaves out Friedman's first point: coercion.

Hence one ends with an isolated discussion of how Friedman's fourth category of spending points out the careless way or ineffective/inefficient way that occurs by other people [politico]spending other people's money [taxpayer] on other people [recipient class]. True enough but it decouples the coercion and only discusses the single phenomena without discussing [coupling] the ability of such a phenomena to emerge. Think about it, how many times have you heard the discussion, in isolation, of other people [cheese master] spending other people's cheese [cheese payer] on other people [cheese recipient class]??

Meanwhile, twenty six discussions later a separate subject is discussed regarding coercion of forcibly appropriating other people's money. Better yet, this discussion many times appears in isolation from Friedman's total discussion.

Nay, nay! One must correctly discuss both subjects as coercion must occur first and only then can one arrive at other people spending other people's money on other people.

Problem solved! Please go to 11:00 to 11:34 of the youtube link below and hear Friedman himself properly layout the discussion.

Here is the video...