At several points in Expanded Universe, Heinlein warns of the dangers of [In his idealized future story at the end, “The Happy Days Ahead,” the sensible new president “resumes” honoring money with gold – not clear how this works, but presumably if you demand gold in exchange for paper currency, the government would give it to you (at current market rates, again presumably). (I don’t think he’s envisioning a system where people conduct daily transactions in gold and silver coin, but I could be wrong.) He speaks of [url=Gresham's law - Wikipedia]Gresham’s Law](]“fiat money.”[/url) (had to look that one up) and the dangers of inflation, using currency debasements in the later Roman Empire as examples. In Friday, all transactions seems to be gold-based – Friday speaks at one point of having a certain number of grams of gold in her bank account. (Practical arrangement, I suppose, considering the U.S. has become Balkanized into numerous independent states.)
I know of no reputable economist nowadays who thinks a gold standard is a good idea. Makes the money supply too inflexible. Apparently that’s what RAH liked about it – there’s only so much gold that has been brought to light, so a gold-based currency would be inflation-resistant. (Many economists are also skeptical that inflation is always a bad thing, but there you are.) Nowadays we tend to associate this kind of thinking with right-wing extremists, at least some of whom seem to like the idea because they think the . . . ahem . . . “international bankers” ( ) fiddle the value of “fiat money” to their own advantage. Near as I can understand it. (Since inflation is good for debtors and deflation is good for creditors, this doesn’t make much sense.)
Heinlein was so practical and level-headed on most points – does anybody know where he was coming from here? Was it just his libertarianism and suspicion of government talking? Wanting to place something as important as money on a “natural” footing, independent of the state, with which no politician could interfere? Or was it some kind of nostalgia for the days when a coin was essentially a small ingot of precious metal with a government stamp assuring its weight and purity? Or dim memories of the “free silver” politics of the 19th Century? Or was he drawing on some actual non-crackpot economic theory? Or what?
Not really sure what forum this belongs in. Mods, move as you think necessary.
For me, it’s not that I envy my grandparents’ generation for having real silver and gold in their pockets. It’s just that they didn’t lug around pocketsful of change that couldn’t buy a bus ride or a sandwich. Instead there were all sorts of things you could buy for a nickel, and more things you could get for a dime, and even more for a quarter.
Back then if you had a pocketful of change, and it wasn’t all pennies and nickels, you could be set for the day. RAH probably foresaw chronic inflation, and the eventual state at which we have now arrived when pocket change is just about demonetized in practical terms, and people pay a premium to have “coins” converted into “cash”. It amazes me that people pay 8.5c/dollar to have this done, and there’s no outrage against the stealth tax this represents.
Heinlein drew on some strange theories, but I don’t think he was a crackpot. Read his newly-discovered For Us, the Living and discover economic weirdness. He treats of the value of paper currency in Time Enough for Love.
Heinlein liked to explore far-out ideas of government. I don’t know how far he subscribed to them, but they do have the virtue of illuminating the fact that our current practices of money, voting, and governing are not the only ones or the inevitable ones.
I think the idea here is to have the size and durability of “media” (coins and banknotes) correspond to the size and frequency of everyday transactions. The most frequent transactions would get the most durable media. If the most frequent transactions are in the one-to-five-dollar range, say, then it would make sense to make the one and five-dollar media be the most durable: coins.
Of course, to do this, you’d need to conduct some sort of statistical survey to find out what are the most frequent transactions. But this would allow you to tailoer the monetary meda to how people actually use them.
There’s nothing preventing those people from counting their change and exchanging it for larger bills at a bank, which AFAIK wouldn’t charge them for it. It’s not a stealth tax- it’s free enterprise at work. It’s no different than someone starting a housecleaning business that caters to people who’d rather pay someone than do their own cleaning, or someone starting a computer business for people who’d rather pay someone than set up their own computer. Enough people would rather dump their coins into a CoinStar machine and lose a percentage of that money, so the CoinStar company turns a profit.
What’s wrong with it is this: If you use the Coinstar machine to get bills, you’re saying in effect that you consider dollar in coins is worth only $.925 (or whatever it is–I forget what the exact charge is). You could get around that by rolling the coins, or finding a bank that doesn’t charge you to cash in coins, but either way either your time, or your money is being devalued. A jarful of pennies is money that you already have worked to earn, or someone in your family has earned it, so why should you have to work again (by rolling the coins), or pay a fee (by using Coinstar) to have it converted into money that can be easily used.
In the days of specie, people turned in paper to get metal. Now we turn in metal to get paper.
Who cares? 90% of what you buy is payed for using a piece of plastic roughly the size and shape of a credit card.
Not knowing that much about Heinlein beyond Starship Troopers, I would imagine his concern was that fiat money was dependent on the government that issued it in order to maintain it’s value. Gold bullion (not the little cubes you use to make soup), on the other hand, has value even if the government that issued it is defunct.
Point taken, but it’s pretty clear the position discussed in the OP, and put forth in essays in which RAH was speaking in his own voice, was one to which he did personally subscribe.
Gathering a jarful of pennies though is a product of people being too macho to buy a change pouch. I never have more than ten coins in my possession, simply because taking out my change with my wallet is really easy. Complaining that it takes too much time to deal with a thousand pennies is a pretty cheap excuse when overall you wouldn’t have to deal with a thousand pennies to begin with if you weren’t being lazy.
Well, those essays in “Expanded Universe” were written while we were just starting to recover from the disasterous round of inflation of the 70s. At that time it was a widely held belief that the inflation was unfixable, and we’d have to go through another Great Depression to end it.
The idea is, a fiat currency is worth whatever the goverment says it is worth. So they will always “print more money” rather than raise taxes. And of course, this would just be a stealth tax, because the value of each dollar in circulation would be reduced by the amount of money the government created. Since taxes would always be unpopular governments would rather inflate the currency rather than make people pay for the government they were getting. And so, runaway inflation that can never end except in a general economic collapse and the reinstatement of sound currency.
I think Heinlein would have been shocked to see that we ended inflation while maintaining a fiat currency. Remember that despite his progressive ideas, Heinlein literally grew up in the horse and buggy era, back when money wasn’t banknotes, it was ingots of precious metal. Although he stated explicitly that he wasn’t tied to a gold standard, just any kind of standard…uranium, bushels of wheat, something, anything other than the government’s promise to pay. But of course, gold backed currency doesn’t prevent economic collapse…just look at the example of Spain.
The problem with fiat currency, as opposed to a monetary system based upon a nonperishable commodity, is that the governing body (in the case of the US, the Federal Reserve Bank) can increase the “money supply” (the amount of individual units of cash) at will. Doing so indiscriminately can cause hyperinflation, as seen in several South American nations in the Seventies and Eighties that should have otherwise been relatively stable. The Fed, and the European Central Bank in Europe (and presumably some analogous monetary body in the Pacific Rim) tightly control monetary policy so as to prevent massive gluts in the money supply, even if this results in attenuation of short-term economic growth. The International Monetary Fund oversees exchange rates and transations between national/regional bank systems to harmonize financial transations.
Gold has been the traditional primary material of monetary exchange due to its scarcity, even though its intrinsic value for any practical use is pretty nominal. (It has good corrosion resistance and conductive properties, but is a poor structural metal.) There’s no particular reason we have to use gold (or silver, or platinum, or whatever) but it’s an established commodity. You could use pebbles, seashells, or leaves, but obviously this would make controlling your money supple problematical.
Heinlein was fixated on gold because of the US being taken off of the gold standard, initially by FDR (who nationalized private gold stockpiles and prohibited the direct use of gold in business exchange) and through the Bretton Woods system until 1971, when Nixon ended US involvement in Bretton Woods (see Nixon Shock) and eliminated direct convertability from dollars to gold. This took control of the monetary system entirely out of the laissez faire free market and into the hands of the government (or rather, a private corporation wholly owned by the government). Since Heinlein was a little-l libertarian with Randian leanings, he objected to this strongly. Heinlein also had not just a little Red paranoia in the Fifites and Sixties and was strong into the hoarding/bomb shelter mentality. (Personally, I doubt that gold is the best thing you could hoard in preparation for post-apocalyptic survival, but to each his own.)
People always forget that Heinlein was born in 1907 and was writing most of his future history with a worldview based on the Depression and World War II. Culturally and socially he was completely a man of his times. While some of his extrapolations into the future seemed, ahem, futuristic, most of the societal variations he inserted into his fiction were standard, even a bit conservative or reactionary by the standards of his day.
There were many theories of the Depression then - still are today, for that matter. However, large numbers of people were unhappy that Roosevelt took the U.S. off the gold standard and were equally unhappy that he advocated some, limited, deficit spending to aid the economy. The hyperinflations that crushed European economies after WWI were still fresh and many economists thought that a similar inflation would strike the U.S. after WWII.
This was the fear that came to pass in Europe. However, most economists today look to stronger central banks, extreme liquidity of currency, and the simple need for larger pools of money than a fiat currency can provide as hedges against massive inflation is the settled western economies. Besides, gold itself is as intrinsically worthless as money. It’s only value is that which is agreed upon by everybody and U.S. currency or the Euro or the Yen or another strong currency can play exactly the same role without the limitations.
Many of Heinlein’s “far-out” notions are merely extrapolations of or comments on what was to him current events that have been all but forgotten today. Take some of the things found on this page “The Happy Days Ahead”.
He talks about the water bed being something that was invented elsewhere and sent to him. Nudism was a booming German pastime that was making inroads into the U.S. in the 30s. The 1920s were widely thought of as “crazy years;” there are any number of books on the wild and wacky media storms and sensations that blew through the decade. One of the predictions that didn’t come true is for a new way of building housing: the 1930s had dozens of schemes for mass produced housing that would be centrally made and shipped to a location for set-up in a couple of days. World’s Fairs featured these regularly.
Many of the sf writers of the era were significantly influenced by the technocratic movement. Read this description and see if you can’t spot guiding principles for Heinlein and Asimov and just about all the visions of the future that appeared in the Astounding of the 1940s and 50s:
Fear of debt was why the Technocrats had their peak years in the Hoover administration. They died out more because of problems with the leadership and the swing in the national mood after Roosevelt’s election than because the public rejected their ideas.
You can pretty much explain all of classic sf via American popular culture of the 1920s and 30s. But most of the most influential pieces are now deader than King Tut, itself the sensation of 1923 and probably responsible for half the pulp fantasy published in the next decade. It would be a good job for a good historian to go through the period and detail it before it’s all lost.
But people like to be lazy, and there’s good money to be made in finding ways to let people be lazy. Why shouldn’t someone take advantage of that business opportunity?
I had to laugh the last time there was much push for for a return to the gold standard, back in the 80s, most new gold was being found in the USSR and South Africa and I figured if anybody gave it much thought they’d not want our economy in the hands of the kommissars and the Boers.
The other thing is, the 60s and 70s convinced Heinlein that America was doomed. Our nerve was broken, our economy in shambles, the kids were illiterate drug addicts, and the Communists were gonna nuke New York any day now and western civilization would be finished.
And all this was simply from a linear extrapolation of the trends of the 70s. Read “I Will Fear No Evil”, if you want a taste. Or back to “Farmer in the Sky”, where you have food shortages coupled with total conversion energy, and the prediction that a civilization-destroying war caused by overpopulation was inevitable. And this explains his obsession with survivalism…some people would live through the collapse, and those people would be survivalists, so if you wanted a chance for your kids to survive you were obligated to be a survivalist. That we’d somehow muddle along and solve problems didn’t seem to be an option until we had some scientific theory of human behavior. Heinlein really was a very pessimistic sort.
I have nothing against the Coinstar people themselves; it’s just that it’s a business opportunity that, IMHO, should not have existed in the first place. It makes no sense to mint and circulate coins that are worth so little in terms of practical, everyday purchases. It’d take 80 quarters to buy a couple of movie tickets, it’s like they’re the new pennies. And, presumably for our convenience, we get to subdivide them even further into nickels, dimes, and pennies, the last of which are truly infinitesimal in value.
Back on topic of science fiction, it amused me that in Jack London’s short story The Scarlet Plague, in which a plague destroys civilization around 2015, a character still owns a 2014 silver dollar, “from the last year they were made”. If London had only known.
Who cares? 90% of what you buy is payed for using a piece of plastic roughly the size and shape of a credit card.
Not knowing that much about Heinlein beyond Starship Troopers, I would imagine his concern was that fiat money was dependent on the government that issued it in order to maintain it’s value. Gold bullion (not the little cubes you use to make soup), on the other hand, has value even if the government that issued it is defunct.
Maybe he viewed fiat money (like paper money) as another method of control used by the government?
) fiddle the value of “fiat money” to their own advantage. Near as I can understand it. (Since inflation is good for debtors and deflation is good for creditors, this doesn’t make much sense.)