ECON 101 LECTURE 1

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Courtesy of Professor Fekete @ New Austrian.org:

Inaugural Lecture

AYN RAND’S HYMN TO MONEY

July 1, 2002

– Gold Money Is the Root of All Good; Paper Money Is the Root of All Evil –

– A Blueprint for a New Gold Coin Standard –

Millions of people who have read Ayn Rand’s 1957 monumental work “Atlas Shrugged” must have been impressed by an insert that could be entitled “Hymn to Money”. This insert is buried in the 1600 pages of the novel and is difficult to find. However, it is a self-contained literary masterpiece in its own right. For these reasons it may be a good idea to publish it separately.

Some remarks may be in order. Ayn Rand uses the word “money” in the sense of gold money. This may not be in line with current usage, but it is certainly correct etymologically. The English word “money” is derived from the Latin moneta, meaning”forewarner”, epithet of the goddess Juno. Her temple on the Roman Capitolium doubled as the Mint where the gold and silver coins of Rome were struck.

According to legend, during the siege of Rome by the Gauls, the sacred geese of Juno that lived around the temple forewarned the Romans with their loud cackling of the surprise attack the enemy has mounted. Under the cover of the night, the Gauls tried to scale the cliffs just below, thought to be an unassailable point of the Capitolium. The Romans, forewarned, could successfully repel the attack. In gratitude, they honored the goddess calling her Juno Moneta, or “Juno the Forewarner”. And Rome went on to great things.

Irredeemable currency, in Ayn Rand’s words “a counterfeit pile of paper”, the output of the paper mill in Manhattan, does not deserve to be called “money”. At any rate, you have been forewarned, and should be prepared for the attack of looters on your Capitol, already in progress.

We still don’t know whether the 911 forewarning of Juno Moneta about the approaching collapse of society has been in vain or, perhaps, there is enough moral rectitude left in America’s political and economic leadership to denounce globalization, and open the Mint to gold, in order to avert the coming tragedy.

Hymn to Money Ayn Rand

Must Give Value for Value

So you think that money is the root of all evil. Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced, and there are men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must do so by trade, and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by men who produce. Is this what you consider evil?

When you accept money in payment for your effort, you do so on the conviction that you will be able to exchange it for the products of the effort of others. It is neither the moochers nor the looters who give value to money. Neither an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into bread you will need to survive tomorrow. Those pieces of paper, which should really be gold, are a token of honor – your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on the moral principle that is the root of money. Is this what you consider evil? Continue reading

One Plus One Equals Two?

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Courtesy of Sandeep Jaitly @ Fekete Research:

Gold coins were offered in series by the various mints. Standard gold brought to the mint could be returned not only in the unit gold coin (for example, the Sovereign) but also any the fraction (Half-Sovereign) or multiples. Should there be a preference for one’s gold to be returned in half-unit gold coins, would it be as simple as opting for twice the number of half-unit gold coins, instead of the original number of unit
gold coins?

On a slightly closer inspection, it cannot be. The work expended in making two half-unit gold coins is greater than the work expended in making one gold unit coin. This much is obvious. On further inspection, two half- unit gold coins could obtain more goods than a unit gold coin could. What one is willing to do with two half- unit gold coins and not willing to do with one unit gold coin leads to the idea of change.

For example, imagine you need a pair of shoes. An acceptable pair is on offer for one unit gold coin and one half-unit gold coin. If you only had a double-unit gold coin about your person and the shopkeeper didn’t have the means to offer change for it, you wouldn’t walk out with a pair of shoes (unless you’re an exceptionally charitable tipper.) However, were you to walk into the shop with four half-unit gold coins, you would walk out with a pair of shoes (and one half-unit gold coin.) Continue reading