Apocalyptic Geographies GEOG 2N
Week 8 Lecture 2:M.O.N.E.Y. What do the items in this picture have in common? Last time in Apocalyptic Geography Firms pursue profit at the expense of everything else because we require them to do so by law. The profit cycle –firms invest and return a profit, then have to invest again—the economy has to grow to function Downward pressure on wages closes gap between work and slavery
--I will be coming back to all of these points, so don’t fret if they don’t make sense yet. Today Money is fiction
This is important, because if we are going to have economic collapse, this is the mechanism that will bring it on. What is Money anyway?
With appreciation for NPR’s “Planet Money” program the source for much of what comes next. History of Money Part 0 The time before money History of Money Part I “Choose a Trinket” Yap
History of Money Part II—”Trinket Harmonization” Everyone everywhere agrees on the same trinket. They agree on Gold.
Recap: 0. Barter 1. Trinket II. Trinket Harmonization (Gold) III. Paper backed by Gold. The Gold Standard Fireside chat Executive Order 6102 It is illegal to have gold George F. Warren: Ag. Economist June 5th, 1933 Going off the gold standard meant…. The gold was still there…but you couldn’t have it. The exchange rate between gold and the dollar could change.
Money still not ‘fiction’ yet. The U.S. had 70% of the world’s gold and was ready to use it to keep the value of the dollar up. You couldn’t get the gold for your piece of paper, but the economic power of the U.S. meant that paper money was worth something. Recap: 0. Barter 1. Trinket II. Trinket Harmonization (Gold) III. Paper backed by Gold. (trust us, we have the gold) IV. Paper backed by nothing (trust us) Bretton Woods and Money after WWII The U.S. had the money dollars became the currency for virtually all international transactions. What does this do for dollars?
But it also means that, as the global economy grows, demand for dollars increases. The 50’s, 60’s, and 70’s U.S. dollar remains the de facto international currency even after other currencies stabilize in the late 50’s.
War expenditures, aid, and payments for imports mean there are LOTS of dollars outside the U.S. The amount exceeded what was held within the U.S. by 1961 Fear of having assets frozen means that people start depositing dollars in banks outside of U.S. “Eurodollars” Then people start trading dollars held outside the U.S. Not subject to direct control by the Treasury They get lent out at higher interest rates… The Crisis 1971. 4.5 times as many dollars being traded outside the U.S. than held within. People get nervous and start trading their Eurodollars in for gold. Soon you need more Eurodollars for less gold As this heats up, the Federal Reserve doesn’t have the reserves to defend the value of the dollar. Nixon’s Gold Shock Nixon to world, “There is no external basis for valuing the dollar and, by the way, it is worth less than you thought.” [rough paraphrase]
Money is fiction.
Next time(s)… Firms and the profit cycle. A virtuous cycle leading to apocalypse in so many wonderful ways.