July 31, 2006
Bad economic reasoning of the day?

I'll open up the comments section for this one. From a Money Week.com story concerning five major trends in the world, number two concerns the "experimental money system" in which the following two paragraphs appear:

Worldwide, oil is calibrated in dollars. But what is the dollar calibrated in? More and more oil producers are beginning to ask. And the answer is that the dollar floats in the air like a willow leaf. If the winds are favorable, it stays up. If it gets caught in a downdraft, it falls.

We say that this is an`experimental' financial system, because nothing like it has ever existed. Not that this is the first experiment with lighter than air money. No, the U.S. Treasury did not invent pure-paper money. In the modern era, it has been tried many times – but never with happy results. And never, ever on such a grand scale. Now, practically every currency in the world is backed by dollars. And the dollar itself is backed by nothing. In fact, the whole world’s financial system rests on the shoulders of a single currency – which everyone knows is a shirker.

Posted by Craig Depken at 04:16 PM in Economics

Comments

The excerpt is melodramatic and self indulgent, written by a novelist manque (one hopes a very young one). Economically it's ignorant, to the extent there's any there there at all. If today is radically different from the "petrodollar" era of the 70's and 80's, how? Winds have a lot less to do with relative exchange rates than growth rates, inflation rates, and the soundness of economic policies. Beyond that, arguing with the passage would be wrestling with a pig.

Posted by: NR at July 31, 2006 08:27 PM

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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