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FReeper Book Club: Atlas Shrugged, Atlantis
A Publius Essay | 6 June 2009 | Publius

Posted on 06/06/2009 7:23:17 AM PDT by Publius

Part III: A is A

Chapter I: Atlantis

Synopsis

Dagny awakens to the face of John Galt! He is surprised that Dagny braved his cloaking device to reach the valley. It is too painful for her to walk, so John picks her up and carries her. She hears the strains of Halley’s Fifth Concerto, played by the composer himself, coming from his house. She spots a three-foot statue of a dollar sign cast out of solid gold seated on a stone column – Francisco’s private joke, says John.

A car arrives, driven by Midas Mulligan, with Hugh Akston as his passenger. Akston is stunned by her arrival, having previously told her that she would never find the designer of the motor and now finding her in his arms. Mulligan profanely gives her a rich tongue lashing for having endangered her life by crashing into the valley rather than entering by the front door; he is flummoxed by the arrival of the first “scab”. John takes responsibility for Dagny and thanks her for hiring Quentin Daniels.

As they drive along, Dagny finds that Mulligan owns the valley, John works there, and Akston is one of John’s two “fathers”. The final penny drops. John Galt was the mysterious third student of Akston and Stadler, the second assistant bookkeeper, the designer of the motor – and The Destroyer.

At his house, John admits he has been watching her for years. The famous Dr. Hendricks, who had disappeared six years before, tends to Dagny’s injuries. As John cooks and serves breakfast, Dagny finds that Lawrence Hammond runs a grocery store, Dwight Sanders a pig farm, and Judge Narragansett a dairy farm. John Galt is merely the handyman. Dagny realizes that John’s motor is the power source for the valley and badly desires to see it in action. But she is astonished that Mulligan is charging John twenty-five cents to rent his car; she quickly learns that the word “give” is banned in the valley.

Quentin Daniels delivers the car. He apologizes to Dagny for skipping out without notice and tells her how John had come to his lab, erased his work and written down one simple equation. After that, he would have happily followed John Galt to the ends of the earth. With pride, he tells her that he is now a janitor and hopes to rise to the position of electrician!

The first stop on the grand tour is Dwight Sanders, who agrees to fix her plane for a mere $200 – in gold. But she can’t buy the gold, and all her cash and stock is worthless in the valley.

The second stop is Dick McNamara, the former rail contractor, who is in charge of the valley’s utilities. He now has three helpers: a former professor of economics who taught that one can’t produce more than one consumes, a former professor of history who taught that the poor of the slums did not build America, and a former professor of psychology who taught that men are capable of rational thought. Dagny understands that John is taking her on a tour of the men he had taken from her. The fourth stop is Ellis Wyatt’s oil shale facility. One of Wyatt’s two employees is the young brakeman caught by Dagny in the first chapter whistling the theme from Halley’s Fifth Concerto; he is now Halley’s best student. Wyatt is producing two hundred barrels of oil a day from shale.

Along the way she discovers that Ted Nielsen runs the lumber yard and Roger Marsh grows vegetables. The fifth stop is at Andrew Stockton’s foundry; he had to ruin a competitor, who is now his employee, to run it. Stockton says he would be happy to be ruined by Hank Rearden, who would revolutionize life in the valley. Ken Danagger turns out to be his foreman.

The sixth stop is the valley’s Main Street, home to Hammond Grocery, Mulligan General Store, Nielsen Lumber, and Mulligan & Akston Tobacco. Actress Kay Ludlow, who had disappeared five years earlier, now runs a cafeteria. Down the street is Mulligan Bank and Mulligan Mint, which produces coins of gold and silver like those from America’s past.

The seventh stop is the house of Francisco d’Anconia. Dagny now has figured out that John was the man to whom Francisco had pledged his life twelve years ago.

The eighth stop is the powerhouse. On the building is the inscription, “I swear by my life and my love of it that I will never live for the sake of another man, nor ask another man to live for mine.” As John pronounces the oath, the door to the powerhouse swings open, but he closes it quickly. When Dagny is ready to say those words and accept the consequences, he will show her the motor.

At dinner at Mulligan’s house, Midas introduces her in the US Navy manner as “Taggart Transcontinental”. Dagny dines with Ellis Wyatt, Ken Danagger, Hugh Akston, Dr. Hendricks, Quentin Daniels, Richard Halley and Judge Narragansett. To Dagny it is like going to heaven, meeting again the great people of one’s past. Danagger tells her what John had told him: “Well done.” Perhaps too well, in Dagny’s case.

Halley has composed more in the past decade than in all the previous years of his life. He appreciates Dagny’s recognizing his new piece from hearing just a few notes whistled by a brakeman, and he wants her to come over to his house for a private recital. Dr. Hendricks has made a breakthrough in treating strokes, the judge is writing a treatise on the philosophy of law, Mulligan is financing everything in the valley, and Akston is writing a book on moral philosophy. But no product of this work will ever be seen outside the valley; these men are on strike. John Galt launches into a speech about the mind, reason and how these men are on strike against the moral code that demands their martyrdom.

Each man at the table each went on strike for his own reason: Akston because he could no longer share his profession with those who denied the existence of the intellect; Mulligan because of the appeals court decision in the Hunsacker case, likewise Judge Narragansett; Halley because he could not forgive the public’s view of his success, seeing themselves as Halley’s compositional goal; Dr. Hendricks because the government took over the health care system; Wyatt because he decided not to be a meal for the cannibals; Danagger because he discovered that the men who wished to rule over him were impotent; Daniels because he did not wish to place his mind at the service of brute force; Galt because he refused to feel guilty about his abilities. After leaving Twentieth Century, John looked for any sign of talent in the world and pulled that man out of the world and into his. The men whom he recruited took an oath to deny their talents by withdrawing from the world or taking menial jobs. They would pursue their true interests in Mulligan’s valley – Galt’s Gulch – but share nothing with the world. Once a year they would come to the valley and meet for a month. Now things in the world are collapsing at a rate they had not foreseen. Soon they will be ready to return to rebuild the world.

At the Galt house, there is momentary pause at John’s bedroom, but the moment passes. Instead, Dagny is placed in the guest bedroom bearing the inscriptions of the men who had spent their first night at Galt’s Gulch there, each in his own private purgatory.

Rand and Technology

The first operational laser dates from 1960. Rand’s refractory ray and its magnetic effect on motors is interesting, but wide of the mark. The hologram that hides Galt’s Gulch is more on the order of the technology in the later “Star Trek” universe. For Fifties science fiction, however, it’s not bad.

The idea of extracting oil from shale was barely a glimmer in an oil man’s eye in the Fifties; not until the Seventies did the price of oil rise to the point where recovery from oil shale might be profitable. Here Rand was far ahead of the curve.

Rand never saw the possibilities of a global positioning system and spy satellites as a means of making it truly impossible to hide a site like Galt’s Gulch from the all-pervading eyes of government. The surveillance state’s technology was not on her horizon.

America’s Mixed Relationship With Gold

After of the Treaty of Paris in 1783, tensions with Britain eased, and the country got around to governing itself under the Articles of Confederation. But the war debt caused major problems, not the least of which was a deflationary depression. A few states took their debts seriously, but others engaged in partial or total repudiation. At the same time, the Continental Dollar, supposedly backed by one Spanish Milled Dollar each, was collapsing in value because there was no real backing except for a nebulous promise to pay. Enlisted men in the Continental Army had been paid in paper dollars, and they expected those dollars to be honored at full value.

There were only three banks in the entire country; these banks didn’t care about the farmer, the shopkeeper, or the wage slave, but only the owner of the textile mill in Lawrence, Massachusetts, the import-export business in Manhattan, or the iron foundry in Batsto, New Jersey. Ordinary Americans held their wealth in their mattresses and under their floorboards. Without a genuine coin of the realm, people relied on coins of gold and silver minted in Spain, England and France, along with base metal coins minted by the states. Coins of precious metal were often “clipped”, so merchants weighed them to see just how much gold and silver were really present.

While farmers and shopkeepers could survive without a coin of the realm, the owners of the banks and large businesses could not. How could a capitalist perform the Italian art of accounting if there is no coin of the realm? How can he construct a balance sheet or income and expense statement if there is no standard by which to measure value?

The states that wanted to treat their war debts honorably had a problem. The basic unit of governance in America was the county. The county collected the property tax, and a voter had to show his tax receipt at election time to the county clerk in order to vote. The county built the roads and maintained the poorhouse for indigents. States collected taxes for their own purposes, but repaying war debts would require a major hike in taxes, and a war had just been fought over that.

There is an old saying in the word of taxation: “Don’t tax him, don’t tax me, tax the guy behind the tree.” The states that wanted to retire their war debts found a way of taxing the guy behind the tree – they taxed the residents of other states. After all, residents of other states could not vote in state elections, so the states charged tariffs on goods crossing state lines. The Connecticut farmer who loaded his wagon and took his produce to New York to sell now found himself confronted at the state line by a New York customs agent who slapped taxes on his produce. Quickly other states took up the idea, and a full scale trade war erupted.

Then the issue of the legality of the Continental Dollar came to a head when Massachusetts refused to accept it in payment of taxes in spite of the words “legal tender”. And that led to Shays’ Rebellion, which led to the Constitutional Convention.

In 1790, Alexander Hamilton, now Secretary of the Treasury under Washington, pushed for assumption, the act of taking the debts of the states and nationalizing them. What Hamilton wanted was financial ballast. A ship without ballast is gyroscopically unstable and tosses and turns on the sea. Hamilton believed that a properly managed national debt would act as ballast and be a blessing. Hamilton didn’t figure this out on his own but copied Sir Robert Walpole who established the Bank of England in 1694. The key was “properly managed”. Hamilton saw a national debt as a way of encouraging a basic conservatism in American finance. By rolling the state debts into a national debt, Hamilton effectively monetized all those Continental Dollars whose value had dropped almost to zero. On a weekly basis, Hamilton’s clerk at Treasury went down to the New York Stock Exchange and either bought or sold Treasury bills, thus managing the money supply; this is similar to what the Federal Reserve does today. Was each new American dollar backed by the proper amount of gold or silver as mandated by the Constitution? No. And that is one of our lesser known financial secrets: the US Dollar started out as a fiat currency in violation of the Constitution’s Gold and Silver Clause.

It should be noted that the Gold and Silver Clause has been honored more in the breach than in the observance.

Hamilton intended the US Mint in Philadelphia to fix the gold and silver problem. Congress established gold and silver coins of different denominations, and people who owned foreign coins or bars of gold and silver could take them to the Mint, which would smelt them to the correct purity and mint coins of the realm, which would in turn be handed back to the owner to be placed in circulation.

Hamilton’s consolidated war debt was paid off by James Monroe’s first term, and the new debt accrued during the War of 1812 came close to being paid off by the end of Andrew Jackson’s first term. That led to a problem. Under Nicholas Biddle, the Bank of the United States had put aside its function of neutral arbiter of capital allocation and had played favorites. Biddle saw this as a prudent form of industrial planning, making him the father of Japan’s MITI, Max Palevsky, Felix Rohatyn – and Jimmy Carter.

When Jackson ran for reelection in 1832, his campaign slogan was “Jackson and No Bank”. Jackson referred to the Bank as “The Monster” and made its abolition the cornerstone of his second term. Biddle inadvertently helped Jackson when he fought the president in Congress by allocating capital to congressmen who were the Bank’s friends and punishing its enemies via foreclosure. It was a fatal mistake. With the end of the Bank, the national debt was gone – and so was the financial ballast. And the sharp practitioners of Wall Street were ready for a world under a gold exchange standard.

In the world of finance, there is Smart Money, Stupid Money, and Widows’ and Orphans’ Money.

With the end of good, safe government bonds, an asset bubble began to form on Wall Street in stocks. The Smart Money had already staked a claim, and the Stupid Money followed; next came the Widows and Orphans. It should be noted that the primary business of Wall Street is to fleece investors by inflating and bursting bubbles, known as “pump and dump” in the trade.

The bubble in stocks created the illusion of prosperity, and Jackson never understood what he had wrought. With the luck of the Scots-Irish, Jackson left the presidency to Martin van Buren before the Panic of 1837 erupted. People lost their savings, their homes, their farms, and froze to death in the cities. The road back was slow, arduous, and interrupted by other financial calamities, such as the Panic of 1857, when a ship full of gold coins minted in San Francisco was lost at sea in a hurricane off the coast of South Carolina. That hole in the money supply launched a panic from which the Cotton South recovered more rapidly than the industrialized North. In 1860, that led to a fatal miscalculation by the southern states.

To avoid usurious interest rates from the House of Morgan, Abraham Lincoln issued a paper fiat currency known as the greenback, which was to finance the War Between the States and then get mopped up via federal tax collections afterward. Upon being withdrawn from circulation, the disappearing fiat money triggered deflation and the Panic of 1873, which set off a depression.

In 1913, America established the Federal Reserve, which was not exactly a national bank because it was owned by a cartel of private banks. But the country was still on the gold standard. The calamity of October 1929 and the events that followed inadvertently made the dollar stronger with respect to European currencies. To permit expansion of the money supply via inflation, Franklin Roosevelt closed the gold window for domestic payments and made the possession of gold by Americans illegal. This permitted America to fight a deflationary depression and a world war by printing massive amounts of money.

The Bretton Woods Agreement of 1944 made the US Dollar the world’s reserve currency linked to gold at the 1934 price. This functioned well until Lyndon Johnson’s disastrous “guns and butter” decision of 1965, which led to the London Gold Pool as an attempt to support the dollar by suppressing the gold price. Charles de Gaulle put an end to that by demanding payment in gold for France, which prompted Richard Nixon to close the gold window to foreign payments, which in turn set off the double-digit inflation of the Seventies. In 1975 Americans again were permitted to possess gold as a result. Fed Chairman Paul Volcker pushed interest rates above 20%, thus ending the inflation of consumer prices, but the liquidity spigot was never turned off, which led to the inflation of asset prices in the 1982-2007 bull market in stocks and real estate.

Fiat currencies can be very messy and full of unintended consequences. But so can gold.

Discussion Topics

Next Saturday: The Utopia of Greed


TOPICS: Constitution/Conservatism; Culture/Society; Free Republic; Philosophy
KEYWORDS: freeperbookclub
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To: MARTIAL MONK
I agree, as others have said, that it's good business to sometimes extend a bit of "charity" to other businesses, as a means of building or preserving relationships. I have done it myself as a department manager.

I usually know what's going on in the industries I serve and know who's in trouble before they call or walk in the door. Some will outright ask for special consideration because of their situation. But often in the manner, "If you can't give me x, I can't continue to make and sell my product, and therefore can't pay what I already owe you". That serves to insult my intelligence and implies a sort of threat at the same time and I'm not down for it, so the ones who do that generally won't get anything within my sphere of authority, which extends to pricing or reasonable delaying of invoices and sometimes help with financing. They are, of course, free to go over my head but I am seldom overruled.

I don't quite understand how you are getting negative reactions from some customers, unless it's just an expression of general embarrassment due to their situation and not a reaction to whatever specific thing that you have done.

101 posted on 06/07/2009 2:01:38 PM PDT by Clinging Bitterly (He must fail.)
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To: Still Thinking
Exactly. But man, I can still see the fire in her eyes - I think the women knitting at the foot of the guillotines in revolutionary France must have looked like that.

It's a pretty good illustration of the Labor Theory of Value, though, and why Marx was wrong about it. If the only thing that counts in valuing a commodity is the cost of the materials and the labor to turn it into a product, then where did the process come from and how do you ever fund a new process that might make it cheaper? Joe, Ed, and Ivan all get tasked with coming up with a better process, Joe succeeds, and they all get the same money anyway - it's government money, after all - to Marx, Joe would be motivated to press on out of love for his comrades and the Collective, but in practice that and a kopek will buy you a cup of coffee. And when the next process is needed and nobody comes up with it, who's the first guy to get shot for not working hard enough? Yep, Joe.

That's why you get so little innovation from socialist societies, whether it be pharmaceuticals or art - no reward for risk means no risk taken. Or as Rand would put it, if success only gets you eaten, why succeed?

102 posted on 06/07/2009 2:27:24 PM PDT by Billthedrill
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To: Clinging Bitterly; MARTIAL MONK
I agree, as others have said, that it's good business to sometimes extend a bit of "charity" to other businesses, as a means of building or preserving relationships. I have done it myself as a department manager.

I do too, based on the Biblical principle that it's the right thing to do, but also that it will work. If doing it for a particular individual doesn't work, it's probably not the right thing to do for that individual.

I don't quite understand how you are getting negative reactions from some customers, unless it's just an expression of general embarrassment due to their situation and not a reaction to whatever specific thing that you have done.

I don't either, but if the recipient doesn't feel grateful, and it actually causes me to be treated worse down the line (loss of business), it ain't gonna happen. I do it to enhance my value to them. If they just take it and run away, no way. I can't imagine why Martial Monk does what he does.

103 posted on 06/07/2009 2:37:51 PM PDT by Still Thinking (If ignorance is bliss, liberals must be ecstatic!)
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To: Clinging Bitterly
I think that it starts as a general embarassment. The rest is lost in the way that the human mind works. These guys are normally independent and self sufficient. It's a blow to their ego to be dependent on or owe anyone. The debt weighs heavily on them and pretty soon their mind starts to seek justification. In modern society that justification turns out to be "Well he's a son of a bitch anyway" even though experience tells them otherwise.

I make it a point not to base my actions on anyone else's reaction or judgements. It is worth it to me to help these guys (most of whom I've known a long time) out of a pinch. Someone else couldn't do it but I'm in a position where I can.

Somewhere down the line, when they keep getting Christmas cards from me or I call and invite them to a barbeque they'll be able to put it perspective and things will return to normal. Until then I will be a symbol of desperate times. That's how the mind works.

104 posted on 06/07/2009 3:15:45 PM PDT by MARTIAL MONK
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To: Billthedrill
I had no idea you once worked for a pharmaceutical firm.

I find it astonishing people like your neighbor don't stop to think that drugs available today, drugs that save lives, weren't available 20 years ago.

Your neighbor doesn't want to stop and think that such life saving drugs weren't available at any price 20 years ago.

105 posted on 06/07/2009 3:26:23 PM PDT by stylin_geek (Greed and envy is used by our political class to exploit the rich and poor.)
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To: stylin_geek; Billthedrill
I find it astonishing people like your neighbor don't stop to think... (multiply by millions!)

This phenomenon isn't new. Our founding Fathers were up against the same type of people. Some through sheer ignorance as your neighbor demonstrated, some through fear of ending up supporting the wrong side. Many waited on the sidelines, hoping to jump on the winning side at the last moment. The point I hope to make is that many won't be on board for a major societal shift. Some simply don't care as they are still within their comfort zone.

At best I think the following numbers would be similar to what a return to our original Constitution might look like...

_Historians have estimated that approximately 40-45% of the colonists actively supported the rebellion while 15-20% of the population of the thirteen colonies remained loyal to the British Crown. The remaining 35-45% attempted to remain neutral._ (ref. Greene and Pole A Companion to the American Revolution (Blackwell Companions to American History)

106 posted on 06/07/2009 4:54:00 PM PDT by whodathunkit (Shrugging as I leave for the Gulch)
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To: sig226

It was in fact this chapter that on re-reading AS some years ago caused me to switch my thinking about the book’s characters. As an adolescent I thought the protagonists were heroic and the antagonists cartoonish. Now when reading about Galt’s Gulch I see its inhabitants as the cartoons, mere literary devices, while the thuggish looters and their advocates are malevolent flesh and blood more real than tomorrow’s news.

Still, I find the chapter thought provoking as I am a prepper putting together my own retreat out in the mountains of Virginia. I do spend a fair bit of time wondering who will/should join me, and who I should cultivate as invitees. Sure, my siblings and extended family, but who else? Even in our large family we do not possess all the necessary skill sets to remain self sufficient in perpetuity.

The concept of “going John Galt” is not merely an abstract consideration for me as a (non-policy or regulatory) Federal employee in the DC area. When the Martial Law strikes there (I see it as inevitable, but am not sure if it will be in 2012 or 2015)is no doubt they will be able to maintain stability and a veneer of normalcy locally if for no other reason to protect the uber-looters. But do I really want to be here when it happens?

Galt’s Gulch is not a place or even a pretend place. It is a theatrical setting, befitting the author’s screenwriting skills.


107 posted on 06/07/2009 5:23:47 PM PDT by crusher (Political Correctness: Stalinism Without the Charm)
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To: stylin_geek

Some years ago I had a moment of blinding clarity about the continuum of jealousy, covetousness, and envy. We tend to lump them in together as thought they were the same thing but they are not.

Jealousy is resentment resulting from the beneficence created by or accrued to another. It is primary an expression of insecurity. Jealousy says “I resent what you have.”

Covetousness builds on jealousy and says “I resent what you have, and I will try to take it.”

Envy is the name of the perniciousness abounding in the collectivist mind, and says “I resent what you have, and I will try to take it from you. If I cannot succeed in taking it, I will destroy it so that you cannot have it either.”


108 posted on 06/07/2009 5:44:15 PM PDT by crusher (Political Correctness: Stalinism Without the Charm)
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To: Publius

Thank you once again for this thread.


109 posted on 06/07/2009 6:50:33 PM PDT by austingirl
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To: crusher

What looters never understand is how theft affects those who create and produce.

Looting is all well and good, as long as there’s something to take.

Beyond a certain point, creation and production ceases, leaving an ever shrinking stock of goods that will not be replaced.

Once thieves run out of victims, they start in on each other.


110 posted on 06/07/2009 7:01:49 PM PDT by stylin_geek (Greed and envy is used by our political class to exploit the rich and poor.)
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To: stylin_geek
Once thieves run out of victims, they start in on each other.

Ah, yes. The French Revolution.

111 posted on 06/07/2009 7:36:03 PM PDT by Publius (Gresham's Law: Bad victims drive good victims out of the market.)
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To: MARTIAL MONK; Still Thinking
The rest is lost in the way that the human mind works.

Doesn't need much explanation beyond that, does it? I do understand how someone with an all consuming issue can push away from others though. I have been there, where my whole mind was focused on a particular set of problems, and I didn't I didn't want to associate with anybody beyond those encounters that could not be avoided.

Time marches on though, things work out, and those who are true to one another eventually return to business as usual, as you say.

112 posted on 06/07/2009 8:46:10 PM PDT by Clinging Bitterly (He must fail.)
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To: Publius
Another great thread ! And good luck in your new venture with Bill. Maybe something will come out right around the time the movie is released.

Been overly busy the last couple of weeks....but will try to find the time to study this excellent thread. Your discussion of money was outstanding. Already printed it out to read while smoking a cigar. Later.

113 posted on 06/11/2009 6:57:12 AM PDT by mick (Central Banker Capitalism is NOT Free Enterprise)
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To: Publius
And that is one of our lesser known financial secrets: the US Dollar started out as a fiat currency in violation of the Constitution’s Gold and Silver Clause.

Late to the party again. Maybe someone else has already commented about this but I am impelled to comment before reading further.

Your statement about the dollar is simply not correct. The Coinage Act of 1792 set out to codify what a US Dollar would be. People then obviously knew what a dollar was as the word is used twice in the Constitution (just as people knew what a year was). It was one of those Spanish silver coins. So the Coinage Act had the US collect a reasonable sample of these dollars and then determine the average content of fine silver in a single dollar. This turned out to be 371.25 grains and this became the definition of a US Dollar. So far as I know this definition has never changed. (Federal Reserve Notes are merely denominated in dollars; and quantities of gold were eagles, not dollars.) The single best review of this, IMHO, is Vieira's Pieces of Eight. The link takes you to the 1984 edition which was a single volume. Dr. Vieira has since expanded his work to two volumes, but I have not seen the expanded edition.

ML/NJ

114 posted on 06/12/2009 12:59:48 PM PDT by ml/nj
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To: r-q-tek86
that other utopia

This is a great observation, which also has the advantage of being obvious. I wish I had thought of it myself!

I've always been uncomfortable with Galt's Gulch, and Rand's heroes in general. These people simply do not exist. The reason we (or I, at least) keep coming back to Atlas Shrugged is because of the villains. Rand's heroes, for me, serve only to expose the philosophies (if that's what they are) of the villains.

About utopias, I hand an opportunity a few years a go to participate in one class at Cornell in a course that focused on utopian societies. None of the ones considered on that day I was there, some small - some large, turned out well; and my impression was that none of the others studied during the course turned out the way their founders envisioned. (Alas, we could say this of Jefferson and Madison's vision too.)

ML/NJ

115 posted on 06/12/2009 1:20:49 PM PDT by ml/nj
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To: ml/nj
Ah, so Continental paper money was merely denominated in dollars, while the actual dollar was a silver coin. Makes sense. But that opens up another question.

Hamilton had assumed the state debts by rolling them into a national debt with the intention of creating ballast, but also giving full value to all those Continentals. He was accused at the time of doing this to favor speculators over veterans who had held their Continental money, and there were even suggestions that speculators not be able to use their Continentals. Madison killed that amendment in the House.

But were there enough dollars (silver) and eagles (gold) to back those Continentals and the consolidated national debt that Hamilton created? Logic tells me not because we didn't have a domestic supply of gold until the 1820's when gold strikes were made on Cherokee land in North Carolina and Georgia. (We all know how that ended.) The Coinage Act sucked up all those foreign coins for the Mint where they became dollars, eagles and sub-units of those coins. But in 1792, did we have enough gold and silver to back our bonds and Continentals?

Maybe I'm missing something.

116 posted on 06/12/2009 1:33:13 PM PDT by Publius (Gresham's Law: Bad victims drive good victims out of the market.)
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To: Publius
But were there enough dollars (silver) and eagles (gold) to back those Continentals and the consolidated national debt that Hamilton created?

Reasonable question. I would guess that Vieira addressed this but I don't remember and it's more than something I can look up quickly. Hamilton did establish a Bank of the United States, and they printed notes (again not the same as money). Eventually this bank was closed and there was an interim before then Second US Bank was established and then this second bank was shut down by President Jackson. I an not aware of anyone being stiffed by either of these banks so my guess is that there was enough specie.

Another good, less academic, exposition of what money is and what it isn't can be found in a chapter of tax protester/felon Irwin Schiff's The Biggest Con. I find interesting that this book and the other one I mentioned both carry big prices in FRNs today.

ML/NJ

117 posted on 06/12/2009 2:08:09 PM PDT by ml/nj
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To: Billthedrill

Great comments on this thread, Mr. Thedrill.

And best of luck on the book.


118 posted on 06/12/2009 3:02:43 PM PDT by Ramius (Personally, I give us... one chance in three. More tea?)
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To: Publius

This business of gold currency remains one of my few minor quibbles with Rand’s worldview. I admire objectivism on the whole, but to me it seems that gold is every bit the fiat currency as anything else. As any currency must be. Its value is merely a perception of our expectation of use in future exchange. You can’t eat it, or make a decent sword out of it. Its intrinsic value has practical limitations. The value as a medium of exchange based on our expectation that it will continue to be valued by others, is what makes it work.

Of course as a currency it has the benefit that it is slow to grow in supply and therefore hard to suffer inflation, unless a nugget the size of Vermont is discovered somewhere... then all bets are off. :-)

The size of the economy, our real GDP and by extension the money supply needs to be able to expand as productivity expands, not as a function of how much shiny yellow metal we can dig up out of the ground.

I’m not an economist and I don’t play one on TV but that’s my .02 (in gold, if you please) on the gold standard.

:-)


119 posted on 06/12/2009 3:18:36 PM PDT by Ramius (Personally, I give us... one chance in three. More tea?)
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To: Ramius
it seems that gold is every bit the fiat currency as anything else

No one requires you to accept gold in exchange for anything. So far as I know no one ever has. You are required by law to accept US currency in the US for any debt owed to you or in exchange for any goods or services that you offer for sale here. If the US disappears from the world scene, US currency would be worth absolutely nothing. Those little gold and silver coins stamped out in US mints, however, would continue to be worth approximately what they were always worth, more or less, because all the mint was doing was certifying the weight and fineness of the metal in those discs.

ML/NJ

120 posted on 06/13/2009 4:58:39 AM PDT by ml/nj
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