Smith1776 wrote: ↑
Sat Jan 16, 2021 6:04 pm
vnatale wrote: ↑
Sat Jan 16, 2021 6:03 pm
What did you think of Rickards's current recommendation per his latest book?
I have not yet read it! If it's not too much trouble, would a quick summary of his recommendations be possible? I'm sure it involves gold.
As a fellow book reader of books involving money....the following passage from the book I am reading (Blood and Money) may be of interest of you regarding the place of gold many centuries ago.
Sacred Hunger: Gold, Money, and State Finance
As Hobbes recognized in Leviathan, published the same year the 1651 Navigation Act was enacted, world money—the money accepted as payment between nations—consisted of precious metals. “Gold and Silver,” he wrote, “being (as it happens) almost in all Countries of the world high-valued, is a commodious measure of the value of all things else between Nations.”3 In a European world economy increasingly characterized by the global movement of goods, an international means of payment was crucial. In the absence of a national currency that could function as international money, as had the Athenian owl, global payments relied on precious metals, be they in the form of bullion or high-quality coins.
In the sixteenth century, the acquisition of gold became the obsessive aim of European colonial policy. By the 1470s, Portuguese mariners were reaping the stuff along Africa’s “Gold Coast.” Meanwhile, Spain, the first European power with extensive colonies in the Americas, displayed a devotion to gold (and soon after to silver) that can only be described as maniacal. “Gold is the most excellent, gold is treasure, and who has it can do whatever he likes in this world,” wrote Columbus. “With it he can bring souls to Paradise.”4 It was the craze for gold that first induced “the discoverer” to deploy indigenous peoples as slaves, just as it inspired his earlier fixation on selling them in Europe.5 Yet, as Adam Smith would later argue in The Wealth of Nations, this “mercantilist” devotion to precious metal is fetishistic. It confuses the thing (precious metal) with the activity—labor—that brings it into being. It mistakes a result for a cause. As Smith could easily see by the second half of the eighteenth century, wealth accrues ultimately to those who succeed in raising the productivity of labor, capturing markets in the process, not those who pursue money as an end in itself. Win the battle for markets in goods, and money will flow your way. Spain’s leaders, like Portugal’s monarchs, were led astray in seeking to build up great hoards of gold rather than investing to raise the efficiency of labor. Almost a century before Smith’s great text, pamphleteer Charles Davenant had made a similar point. “Affluence of money,” he urged, may simply induce a “lazy temper.” After all, “it is not the taking in a great deal of food but it is good digestion and distribution that nourishes the body.” However, it was precisely this—good digestion and distribution—that had been scandalously neglected by the rulers of Spain. Disregarding labor and manufactures, they had allowed New World riches to pass through their country undigested, without having provided any “spirits, strength, or nourishment.”6
By the 1580s, Spain controlled vast New World territories, along with trading posts in India, Africa, the Philippines, and beyond. Its inflows of silver and gold were staggering. To all appearances, its imperial power was unrivaled. Yet already it was reeling from massive financial crises based on imperial overextension and the weakness of domestic production. Before the decade was out, upstart England would defeat the Spanish Armada. By now, crises were endemic. Portugal deserted its ally in 1640, while Catalonia set down the road of revolt. The manic pursuit of precious metals had come up empty, prompting talk of a “curse of gold.”7
Certainly, England’s rulers, too, were fueled by what one writer, in 1686, called “the sacred hunger of gold.”8 But generations of English experience with boosting profits via investment in agriculture, trade, and manufacture had instilled practices of “improving” the means of production. And by establishing plantation colonies in the New World, by building up a protected shipping industry, by investing in colonial trade and production—and by backing all of this up with unrivaled military force—England was moving into first place in the new imperial order. One ominous indicator of this is that between 1697 and 1702, as a new financial order was being established, the monetary value of enslaved people exported from Africa exceeded that of gold.9 It was now the means of producing wealth—enslaved labor power—not the metallic means of payment, that was central to New World fortunes. Nevertheless, prior to the 1690s, England’s rulers were financially constrained from fully unleashing English imperial power. These constraints would be burst only via revolution in state and finance.