Heinlein was- at least for a while- a great SF writer. This doesn’t make him an expert on anything other than spinning a good tale- and that clearly includes economics.
Somehow we seem to look upon experts in entertaining as experts IRL, but it ain’t nessesarily so.
Spectre of Pithecanthropus : 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.
Sorry for this being so far off topic but this should be addressed…The fee is a result of the free market economy. In this case the currency itself has become the commodity. You have change and you want bills. The free market economy allows someone to charge you a fee to provide this service. If we feel the fee is too steep we can carry around all those pennies and spend them. The real problem as I see it is that if you or I attempted to pay for dinner with the pennies we’d likely find the restaurant would not accept it. So what we have is the government issuing currency that the free market deems unacceptable for use. FYI…you can now use Coinstar for no fee if you take a gift certificate in return. Since I buy things on amazon.com I get the Coinstar service for free. So in effect I can buy things over the internet with a jar of pennies. Cool.
Wasn’t there inflation in the days of gold-backed currency? I doubt that prices were stable throughout your grandparents’ lifetime.
And another thing about fiat currency vs the gold-backed kind. What would happen in the case of a gold-backed currency? Would the M0 money supply be the same as the M1 supply?
Not true. I buy things all the time with pennies, never had one refused yet. In fact, just today my lunch was $8.03 and I paid with a ten dollar bill and 3 pennies and the cashier didn;t even blink an eye, comment on the 3 cents or complain. In fact, I have never had a problem with paying with pennies. Now, I do image that if I was silly enough to hoard the pennies until they got to a significant amount, then perhaps a retailer might have problems with accepting a load of metal that would gum up their drawer, etc, but why would I want to dump my problem on a retailer?
This is straining my rusty brain-cells, reaching back to my basic economics classes, but as far as I can remember widespread persistent inflation is pretty much a twentieth-century phenomenon. There were occasional episodes throughout history (such as in Spain, where the influx of metal from the new world pushed up prices) but in general The Age of Inflation was pretty much from WW1 up to the eighties. For most of the rest of history prices fluctuated up and down due to bad harvests, wars and the like, but were pretty stable in the long term.
here is a series of UK numbers from 1750 onwards for example.
I’m probably well out of my depth here, but I think M0=M1 would only ever be the case if banks held 100% reserves. As soon as one bank takes the gamble that customers won’t withdraw all their money at once and lends some of their reserves at interest, M0<M1. I think.
That does seem to have been one of the points he was thinking of:
No. Throughout most of the Nineteenth Century, when we were on a specie standard, the trend in prices was down. The economy was expanding faster than the supply of gold.
Really? Gold- if uit was taken off the trading market and sold just for it’s value as a material- would have about the same value as silver, is my WAG. In other words, your gold bullion is dependent just about as heavily on the “market” as a dollar is.
Makes no sense. Other than printing up more money so it can spend more without raising taxes (a temptation to which some governments have sometimes succumbed, leading to inflation or even hyperinflation), I can think of no way the government can use its control of the currency to make the people easier to control.
I mean, once the government prints a note and puts it in circulation – they can’t control where it goes after that. At least, no more so than if it were a gold coin.
But it never will be.
msmith537 was speaking of gold as having a permanent market value independent of government policy, or even of a particular government’s existence. A particular government. OTOH, it’s debatable how much market value gold would have if no government at all existed; food would probably be more valuable, ounce for ounce.
I try to buy as much as possible with cash, partly for the specific reason that I want change. If my total is $9.07, I don’t hand the cashier a ten and a dime, or some such thing; I maker her give me the 93¢ in coins. I do this because it “cuts” every dollar I spend, and serves as a small brake on my total spending. When I gather enough coins up–it usually takes about 3 months to gather about $75–I roll the coins up and take them to the bank to “paperize” my money.
Nowhere in this process do I find it to be burdensome; even the rolling of the coins is OK with me, because I enjoy lingering over that pile of clinky cash, so I don’t worry about the value of my time–it’s a kind of recreation. And I’ve never had a bank hassle me about changing the coins for bills. (I usually go to a branch of my own bank, which may help, but I’m never asked if I’m an account holder or not.) I know about those Coinstar machines, but I never use them, because a) they’re usually out of order, and b) I know there will be a surcharge, and I’m not enough of a sucker to pay the surcharge.
So I don’t see any problem with gathering up coins. In fact, I find it fun and useful. If you don’t like your coins, send them to me.
As for Heinlein, I’m not expert enough to comment on his love for “hard” currency, but I also remember that–in his stories at least–the old man wasn’t exactly down on gambling (back before there was an indian casino on everyone’s front lawn), or everyone walking around naked and humping like crazy, or even incest (assuming there were no bad genes in the mix). He had his quirks, and the currency thing was just another one of those, it seems.
What would be more interesting to me was how Heinlein would have felt about the seeming move towards the elimination of money altogether. This thread touches on that, at least in terms of the attitude of the commercial makers. I can’t imagine RAH being cool with paying for everything with a piece of plastic, and thereby leaving a paper trail of where you’ve been and what you’re buying everywhere you go. Being tracked like that seems antithetical to his ideas of freedom (mine, too, for that matter). Given that choice, I think he’d accept paper money over credit transactions, whether the specie was backed by gold or not.
Yeah, I agree. But gold, for the most part, has always been viewed as something that has tangible valuable (even if it really doesn’t). A Federation Dollar or whatever is only valuable so long as there is a Federation to support it.
What about interest rates? If you control interest rates, you control people’s ability to borrow money. It’s not absolute control, but it’s just one more lever the goverment can pull. (Not that I’m saying they shouldn’t or anything.)
Ohcrapno. Frist, note that the USA was on a Gold Standard until 1933.
Here’s a cite that inflation has occurred throughout history- in the time of war, true.
http://inflationdata.com/inflation/Articles/Inflation_Iraq_War.asp
"Wars almost by definition are inflationary this has been true throughout history.
Inflation is determined by the quantity of goods compared to the available money supply. See The Definition of Inflation
But the very nature of War results in the destruction of goods. In normal times money is spent to produce goods which makes the world a richer place.
But during a war. Things are produced but… the money is spent to destroy things. Often this is combined with an increase in the money supply in order to pay for the destruction. This increase in the money supply combined with a decrease in goods is classic inflation."
There was very high inflation right after WWI but while America was still on Gold:
1918 17.97%
1919 14.57%
1920 15.61%
From the same cite:
"Conclusion:
As a crisis hedge Gold is excellent.
But as an inflation hedge it has a very spotty record although it has had its moments. "
Here:
http://www.measuringworth.com/calculators/inflation/result.php
we have inflation rates going back to 1265. Plenty of years with “double-digit” inflation.
1269 34.81
1270 -0.36
1271 13.04
1272 25.10
1273 -19.39
1274 9.87
1275 0.31
1276 -16.25
1277 26.46
1278 -11.88
1279 -10.40
1280 0.00
1281 -4.63
1282 8.51
1283 4.91
1284 9.02
1285 -25.44
1286 16.17
1287 -8.00
1288 -27.60
1289 9.01
1290 25.59
1291 19.63
…
1795 15.70
1796 2.42
1797 -9.98
1798 1.35
1799 20.95
1800 30.02
1801 -5.41
1802 -22.84
1803 -1.38
1804 6.93
1805 12.28
…
1852 1.37
1853 15.66
1854 7.91
1855 1.97 "
and so forth.
Yes, inflation does link to war, but there hasn’t been too many years without war.
Usually true, but both Confederate and Nazi paper banknotes are fairly valuable today. Sometimes in excess of face value. 
There is at least one Debit Card that will do the same thing for you. They even match your funds partially (100% for a few months, then 5% thereafter). This may not be for you if you enjoy the coin rolling, but it seems like a cool option for others.
There certainly has been inflation even with a gold-backed currency or “specie”. See: California, 1849, Gold Rush, etc. etc. Still, gold has been the currency par excellance for thousands of years - because it is impossible to counterfeit, and governments can’t print it or mint it at will. Nobody has ever launched an expedition to recover some long lost monarch’s checkbook, have you? You will hear people say “You can’t eat gold”, but the same is true presumably of paper currency. Or “gold doesn’t pay interest”; which is true only because the government outlawed posession and use as a monetary instrument. It seems to me the concept of loaning money at interest must surely be as old as using gold as money itself. But, there is nowhere near enough gold to act as a currency.
This is one of the big arguments for backing currency with gold, but it doesn’t make any sense to me, since the amount of printed and minted money is such a small fraction of the total amount of money out there.
Gold doesn’t pay interest if you keep it in a strongbox. If you deposit it with a bank, or otherwise lend it out at interest, then you no longer have gold, you have transmuted it into credit, which is what is earning the interest. It has nothing to do with the legality of gold money.
But government can control interest rates even under a gold standard. The Federal Reserve System was founded in 1913; the U.S. didn’t go off the gold standard until 1971, as discussed above.
So why the heck has it been so difficult to keep a $1 coin in circulation in the US? (As an aside, I think the new Presidential Dollar Coins may finally do the trick; the idea just feels right!)