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free trade & free markets national politics & policies

Who Wins With Faith-based Money?

A fascinating Wall Street Journal profile of one of this age’s pre-eminent investment advisors, Jim Grant, provides more than the usual “business interest.” Mr. Grant proves to be a very thoughtful man, not given following the Yes Men crowd.

He notes, for example, how deflation fears have unhinged the minds in charge of the financial sector. “The Fed, in assaulting a phantom deflation, precipitated an actual one.”

And this “inflation/deflation” problem is only the tip of a very large and scary monetary iceberg. He calls our fiat money system a marvel — “astounding,” in his exact wording — but that’s not necessarily a good thing:

That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It’ll be 40 years next month that the dollar has been purely faith-based. I don’t believe for a moment it’s destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better.

Let’s hope so.

But why has the system survived so long?

Mr. Grant has an answer: It serves Wall Street and “its supporting ‘interest group’” of “nimble, market-savvy, plugged-in folks.”

Exactly: Many of our biggest institutions don’t serve “the people” so much as the select few.

This is Common Sense. I’m Paul Jacob.