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Enterprise, Number 5, February, 1996.
A Brief Fantasy...
By Louis James
Exclusive to The Libertarian Enterprise
I had the pleasure (?) of spending last weekend with a large group of economists and congressional staffers. Late Saturday night -- or maybe it was Sunday morning -- a bunch of us were in the hotel bar discussing Alan Greenspan, international money markets, and M1. What party animals!
Someone was defending Greenspan, saying that he's had to play the political field very carefully, or he'd have been ousted and someone much worse would have been put in. It's not fair, the argument went, to compare his policies with what should be done in a pure market; he's doing all he can to help the market without getting kicked off the Fed.
Someone else countered that in years past international money markets used the dollar for anything that required hard currency. Governments and other organizations were estimated to have up to 90% of their hard currency reserves in dollars. That number is now down to 60%. The Fed is being marginialized as an international player and our currency is being debased. People who want to use "real" money use Deutchmark.
The only reason we don't have ruinous inflation, it was argued, is because the dollar is still (mistakenly) viewed as pretty "hard" and vast and growing quantities remain overseas. I had actually heard this before; that the US government has resorted to the printing press, but the effects have been minimized by the flow of cash out of the country. What woke me up (I was tired, and I'm not an economist, okay?) was a "serious" economist's estimate that M1 (money supply: cash and liquid deposits) holdings overseas are about five times as great as all the money (M1) in the US.
All it would take would be a significant reduction in the confidence in the US dollar, and international traders would start dumping dollars. This would precipitate a wholesale dumping of dollars that could lead to a massive devaluation. We're talkin' less than 20 cents on the dollar. Protectionists might crow "victory" at first, but when imported oil soars to five times its current price, and VCRs, cars, food...
The upheaval would make the Great Depression look like a bad hair day by comparison.
That's when I started fantasizing. What if...
What if Greenspan really is a mole? What if he read F. Paul Wilson's brilliant story, An Enemy of the State? What if wily old Alan -- former member of Ayn Rand's inner circle -- decided to teach America a lesson in the critical importance of sound currency, such as gold (or gold-backed media)? What if he's done this on purpose and was just waiting for something like the current impending default of the US government on some of its obligations to trigger the biggest financial disaster the US has ever seen?
After the dust settles, we might find Alan gone and a message scrawled on the most prominent billboards across the country, signed by Francisco Alan D'Anconia Greenspan.
Y'all know what it would say.
Louis James is a father, a Libertarian, and an advocate for self-government. He reads, he writes, and he has the good fortune to earn his living by helping to spread the idea of liberty.