Ruining Public Credit with Imaginary Money

Commodity News Center ^ | 8/19/09 | Adrian Ash

[h20skier66]

IT'S NOT OFTEN that Sweden gets to lead the world. Saab mimicked BMW. Nokia improved on Motorola. Abba took The Carpenters and added a hi-hat.

In monetary matters, however, Sweden remains an occasional trail-blazer. The world's first central bank, beating even the Bank of England by 26 years, the Riksbank then copied the Old Lady by when it abandoned the Gold Standard in September 1931. But the Swedes chose to mimic Great Britain before anyone else, quitting the metal within two weeks of London's monetary bomb-blast.

Just like today (as we'll see in a moment), such monetary madness was hardly unique at the time. Destroying public credit with imaginary money was also ruining both England and France, where John Blunt's South Sea Bubble and John Law's Mississippi Bubble would explode in due course in 1720. But just like 2009, the Riksbank was only just ahead of the game. Because the success of its thinking still clearly impresses today.

[rednesss]

"Poor Goertz! His scheme collapsed with the death of his King and protector, Charles XII, in 1718. The new monarch - Charles' sister, Ulrica Elenora - abolished Goertz' paper money, and had his copper coins re-minted at something approaching their true commodity-price value. Forced to a show trial and denied counsel in court, he tried but failed to defend himself against execution, beheaded in front of a cheering crowd on 3rd March, 1719."

Can we do the same for Bernanke and Geithner and all the other a-holes who have ruined the country????

[FlyingFish]

I suspect many of the world markets understand the dollar is still overvalued; ironically, what props up its value is that so many world markets (e.g., China) cannot afford to sell it and, in fact, must continue to buy Treasuries-—if they don’t, they will collapse the value of their trillions in dollar reserve).