The Monetary Economics of Thurston Howell III

DLWormwood writes "In what has to be the Strangest... Essay... Ever... The libertarian Ludwig von Mises Institute website has posted an essay which goes way too in-depth over the topic of why the castaways of Gilligan's Island used Thurston Howell III's 'worthless paper' instead of gold or seashells."

Comments

I smelt a slashdotting coming...

[djsmiley]

So here is some caches...

http://216.239.59.104/search?q=cache:f9Bdhed8_h8J: www.mises.org/+&hl=en

http://216.239.59.104/search?q=cache:8-dfbA5SWVwJ: www.tvtome.com/GilligansIsland/+&hl=en

Also i have to say this is a rather strange artical. I've taken a quick look at it and if im honest, im totally lost!.

P.S. Sorry for the untidy formatting, its late at night.

Re:I liked it, but...

[Nick of NSTime]

Within the science of economics, fiat means "having no intrinsic value." So fiat money is paper currency that has no intrinsic value because it is simply representative of something of value. The paper itself has no value. Contrast that with gold coins, which have an intrinsic value outside of the currency (its value in gold).

The word fiat, IIRC, comes from the Italian word for "in faith." You're taking it on faith that the $20 bill you slap into a stripper's t-back, for example, is actually worth $20, even though you will never see the gold that backs up that $20 bill.

Re:I liked it, but...

[Anonymous Coward]

Acutally, fiat is straight from Latin, where it means "let it be." Fiat money is used as money because of governmental decree (or fiat), as opposed to commodity money (e.g. gold) which arises from the market.

Re:Gilligan's Island is a "hook", not the contents

[ahdeoz]

The whole point of government backed "fiat" money (which was completely missed in the article) is that the supply of money is regulated. Current dollars represent an amount of previous dollars, which represented an amount of gold, which represented an amount of coconuts, which were bartered for fish for cream pies once upon a time. The "fiat" is there to primarily to prevent counterfitting to make sure that the supply remains fairly constant (though gradually increasing over time as more wealth is "created.) The money exchange market (and the market in general, i.e., the price of goods and services, and especially loan interest rates) act as checks that the declared value does not exceed the actual value in previous commodities. Dinars doubled in value because there was a fixed amount (as long as counterfitting did not occur -- which is why it could only continue for a short time) and the quantity of dollars in circulation was rapidly increasing. The "post-fiat" dinars were still directly tied to the dollar (gold) standard but there was a massive influx of gold (greenbacks) at the time, resulting in inflation.

what about soldiers buying old dinars?

[spook brat]

When I was there the main use I saw for the dinar was selling them to GIs who wanted souvenirs. I figured the rise in price was due to the Iraqis learning what passed as an acceptable price, as well as the Gis realizing that the supply of good-quality bills was diminishing (ie. fixed demand but dwindling supply).

When I left people in the shops were still selling large quantites of former regime currency for prices ranging from $1 per bill to $20 for a bundle of identical bills. There's a good chance I just wasn't in touch with the local economy, but when the locals are consistently selling their old bills for loose change over the course of a year I have trouble seeing their dead currency as picking up value.

Re:Good timing

[jdavidb]

Basically, the government is forcing you to accept the US Dollar at gunpoint. If you do not, they can arrest you. (seriously, they can!)

I'm at least as anti-fiat money as yourself (being an anarcho-capitalist, I do not believe the government should engage in any decrees of value for any item; means of exchange can be developed by the free market), but you are actually wrong on this point. Nobody is required to accept the US Dollar. Unlike taxes, you will not be shot for refusing to particpate. :)

This is actually a common misunderstanding arising from the phrase legal tender. Check out that link and you'll find the following:

There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.