Has anybody seen the PBS series “The Western Tradition” ? It is a series of lectures on European history, by Professor Eugen Weber of UCLA. I occasionally watch it, and the lectures are generally very interesting. Prof. Weber was talking about the Viking invasions of W. Europe (of the 8th-9th centuries), and he made the assertion that there was an economic benefit to the raids on monasteries and churches-apparently, so much gold and silver was locked away (in the form of religious articles) that the economies of these countries were suffering a prolonged deflation. Weber said that the Vikings put this money back into circulation, and thus provided a stimulus to the economies of Europe. Which goes to my question – are rapid expansions of the money supply always a bad thing? Usually we fear inflation-but is it sometimes good to make a lot of money? When you have a large increase in the supply of precious metals (gold and silver), such as takes place during a gold rush-does the economy grow faster? Are bank robbers doing us a favor?
That all depends on the current state a country is in. Take for instance the current U.S…
We’re in a period of rapid expansion and inflation right now. Increasing the money supply would only cause more inflation. On the flipside, if we were in a recession, then increasing the money supply would be good, as it would help us out of that recession.
But, as for the Viking scenario, I’m a bit confused. You said the gold and silver was locked away? That means that the money was not in circulation to begin with. It was merely stored. By taking it out of storage, I don’t see how it could have that much of an effect on the economy.
When you mentioned it was later put back in circulation, there should have been a period of inflation or even hyperinflation, since all of a sudden a large supply of money has been introduced into the economy with no apparent need (since it was originally stored).
Whoops, sorry. Didn’t see the deflation part you mentioned. Nevermind anything I said about the Vikings. I’ll just go hide in my corner now.