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      What is Money?

      Frederic Bastiat (1848)

      Please watch this video before you read the text excerpt:

       

       

      B. You make my hair stand on end! What other evils can have been caused to mankind by this confusion between money and wealth?

      F. It would take me a long time to enumerate them. This doctrine is one of a very numerous family. The eldest, whose acquaintance we have just made, is called the prohibitive system; the next, the colonial system; the third, hatred of capital; the last and worst, paper money.

      B. What! does paper money proceed from the same error?

      F. Yes, directly. When legislators, after having ruined men by war and taxes, persevere in their idea, they say to themselves, “If the people suffer, it is because there is not money enough. We must make some.” And as it is not easy to multiply the precious metals, especially when the pretended resources of prohibition have been exhausted, they add, “We will make fictitious money, nothing is more easy, and then every citizen will have his pocket-book full of it, and they will all be rich.”

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      B. You are a grumbler. Make haste and dive to the bottom of the question. I am quite impatient, for the first time, to know if money (or its sign) is wealth.

      F. You will grant that men do not satisfy any of their wants immediately with coined dollars, or dollar bills. If they are hungry, they want bread; if naked, clothing; if they are ill, they must have remedies; if they are cold, they want shelter and fuel; if they would learn, they must have books; if they would travel, they must have conveyances — and so on. The riches of a country consist in the abundance and proper distribution of all these things.

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      F. Money serves only to facilitate the transmission of these useful things from one to another, which may be done equally well with an ounce of rare metal like gold, with a pound of more abundant material as silver, or with a hundredweight of still more abundant metal, as copper. According to that, if a country like the United States had at its disposal as much again of all these useful things, its people would be twice as rich, although the quantity of money remained the same; but it would not be the same if there were double the money, for in that case the amount of useful things would not increase.

      B. The question to be decided is, whether the presence of a greater number of dollars has not the effect, precisely, of augmenting the sum of useful things?

      F. What connection can there be between these two terms? Food, clothing, houses, fuel, all come from nature and from labor, from more or less skillful labor exerted upon a more or less liberal nature.

       

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      F. You have a dollar. What does it imply in your hands? It is, as it were, the witness and proof that you have, at some time or other, performed some labor, which, instead of turning to your advantage, you have bestowed upon society as represented by the person of your client (employer or debtor). This coin testifies that you have performed a service for society, and, moreover, it shows the value of it. It bears witness, besides, that you have not yet obtained from society a real equivalent service, to which you have a right.

      B. What harm is there in looking at money as the sign of wealth?

      F. The inconvenience is this — it leads to the idea that we have only to increase the sign, in order to increase the things signified; and we are in danger of adopting all the false measures which you took when I made you an absolute king. We should go still further. Just as in money we see the sign of wealth, we see also in paper money the sign of money; and thence conclude that there is a very easy and simple method of procuring for everybody the pleasures of fortune.

       

       

       

       

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      Economics in One Lesson
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