The second volume is full of glory and splendor in the capital, and the spirit is full of vitality in the foggy city. Chapter 246: Gold Standard
Subtitle of this chapter: After much deliberation, I decided to write about "Socialism"
"How to restore the gold standard or how to replace it..."
After our Master Yuan finished speaking, he turned and bowed to the gaunt old man, saying, "Professor John Bates Clark, it is an honor to meet you here, and I thank the American Economic Association for inviting me."
The leading figure in the North American marginalist school nodded in return and said politely, "Dr. Yuan, on behalf of the American Economic Association, I welcome you."
Thus, the two most important economists of the North American marginal school, who were later recognized by generations, shook hands with each other.
Yuan Yanshu said gratefully, "Professor Clark, if it weren't for your care, I wouldn't have been able to get this Ph.D."
"Care?" The head of Columbia's economics department raised his eyebrows and said, "Dr. Yuan, how can awarding you a doctorate be considered care? With your knowledge of Socialism, you deserve a Ph.D. The only pity is..."
He also made a joke: "You are not my student."
I also feel bad about this. But can't I just say that? This is too disrespectful to Professor Julian Chandler next to me.
"Professor Clark, you're my teacher too!" Master Yuan said, looking flattered. "If I hadn't read your book 'The Philosophy of Wealth,' I wouldn't have noticed marginalism."
Clark's 1886 book, The Philosophy of Wealth: Economic Principles Newly Formulated, reflects some of his early views on value and utility. This book established his status as the founder of the North American marginal school.
In his original words, this book mainly talks about "the distinction between absolute utility and effective utility, and analyzes the role of society as an organic whole in the market valuation process."
"And if it weren't for your book The Distribution of Wealth, I would still be skeptical about capitalism and might even have become a socialist."
The Distribution of Wealth: A Theory of Wages, Interest and Profits in 1899 is also one of Clark's important works.
This book "scientifically" explains that the distribution of income in capitalist society is "governed by a natural law", and that both workers and capitalists get the products they create, which is fair and reasonable, and there is no exploitation.
In Clark's economic theory, capitalists and entrepreneurs are distinct. Capitalists are the owners of the means of production, and their income is interest. Entrepreneurs are the organizers and leaders of enterprises, and their income is wages plus profits.
Therefore, true capitalists are only a minority. Those who own the means of production and personally participate in large-scale social production and gain profits should be considered entrepreneurs with capitalist family nature. Such entrepreneurs have made great contributions to society.
"Finally, if it had not been for your book Social Justice Without Socialism I would never have noticed the subject of socialism. I must admit that my Socialism benefited greatly from your book."
Social Justice without Socialism, published in 1914, did not even have a Chinese version in later generations, which shows how reactionary it was.
At that time, many intellectuals believed that socialism was the only way to achieve social equality. For example, the famous British writer and homosexual Oscar Wilde once said: Now, we are all socialists.
But Clark disagrees with this view. He believes that capitalism can also achieve social equality. Of course, it is not the "absolute equality" claimed by socialists, but a relative equality.
In short, he personally admitted that his most important task as an economist is to prove that capitalism "has the right to exist."
The reason is simple: as an economist in the capitalist world, you can't just eat with your bowl in hand and curse others with your chopsticks down. You have to sing the praises of capitalism. You have to prove its rationality and advancement.
Do you still want to become a great economist? Dream on!
When Mr. Clark heard Master Yuan's words, he showed an expression of admiration and said, "Dr. Yuan, you are indeed a diligent and talented economist!"
He turned around and said loudly to the crowd, "Gentlemen, let us welcome our new member - Dr. Neo Yuan."
“Pah pah pah…Pah pah pah…”
There was a burst of warm applause in the room.
When the applause subsided, Professor Clark turned and said, "Dr. Yuan, I'm sorry that your thesis defense didn't take place as scheduled. I still have some questions for you..."
"I wouldn't dare," Yuan Yanshu said, waving her hands. "Professor Clark, I regret that I haven't had the opportunity to receive guidance from you and other senior economists."
The other party said naturally, "Dr. Yuan, why don't we use this opportunity to hold an informal Q and A? What do you think?"
Our Master Yuan never shook his head and said no, so he immediately nodded and said, "Of course."
In fact, he was invited by the American Economic Association this time. On the one hand, the economics community was very curious about this Serious economist who came back from the dead and worked part-time as a great writer.
On the other hand, some people are inevitably prejudiced against the yellow race, while others, after reading the tome Socialism, feel that such a mature economic work is unlikely to have been written by an immature young economist. John Bates Clark is one of the latter.
But since the man was about to die, Professor Clark had to let it go out of humanitarian considerations. Now that he was alive again, he naturally wanted to find an opportunity to find out more about him.
You know, the first person in North American marginalism is the chairman of Dr. Yuan's doctoral thesis defense meeting. If Dr. Yuan's level becomes embarrassing in the future, it will be an embarrassment to him and his people.
Yuan Yanshu himself also understood this logic, so he didn't dare to refuse.
He looked around the room, then walked to the bar and asked the waiter for a drink.
Then our Master Yuan turned around and smiled at everyone, saying, "Gentlemen, please..."
What exactly is "Socialism" about? In fact, a hundred years later, it can still be seen and bought on Douban, Dangdang, and Joyo.
But apart from professionals and non-professionals who have nothing better to do, who would go to see it?
The first volume of the book is divided into three parts: "The Superiority of the Capitalist Mode of Production", "The Utilitarian Argument for Democracy" and "The Political Economy of the Family".
In the second volume, Mises...that Yuan Yan suddenly turned to examine socialism itself.
First, he expounded the profound meaning contained in the economic reality of Socialism.
Under this system, managers need to decide the "allocation" of all factors of production, which means not only how to use each piece of land, but also how to allocate "human resources."
That is, individuals must obey the will of the central planner. Obviously, Socialism will never be a "free" system.
"Professor Davenport, Socialism is a vast authoritarian complex that issues and executes orders. This is what is meant by 'planned economy' and 'anarchism that eliminates production.' Imagine the internal structure of the military to better understand the internal structure of such a society."
Not only is there a problem with labor supply, but capital supply is also affected. In such a country, where is the motivation for savings?
Obviously, he didn't know... or rather, he forgot how much the Seres are a people who love to save.
Secondly, another mortal enemy of Socialism is moral hazard.
The socialism system allows decision makers at lower levels to be irresponsible. Through the socialization of individual behavior, socialism induces moral hazard at every level of society.
"Sir, under Socialism, everyone is more likely to act recklessly than in a society with a strict private property system. Because under private property, no one can share the risk with him except the actor himself."
I have to say that history has proven this to be true.
Finally, the aforementioned "John Stuart Mill's weakness and compromise" is the issue of wages..
"Look, sir. How can Socialism unleash the initiative of workers? This is indeed a problem."
After analyzing Socialism, our Master Yuan turned his attention to the theory of Socialism itself in the third volume.
First, he denied class struggle.
Because class struggle cannot explain the origin and development of humanity. Violence does play an important role in social evolution, but whether violent conflict is constructive is a question.
"Sir, in my opinion, it is the collaborative relationship between human beings that drives the development of society."
Secondly, he denied the monopoly theory.
He believed that industrial "concentration" was beneficial, lowering the unit cost of production to an unprecedented level. He even believed that economic concentration was necessary to meet the needs of a growing population.
"This gentleman, like the medieval church, wields the power to grant grace to the faithful... Excommunication and cessation of religious authority are as terrible as dying of thirst and suffocation. In a socialist society, the state as an organized society will form such a monopoly that all economic goods will be concentrated in its hands, so that it can force citizens to carry out its orders, in fact, it is giving individuals a choice between obedience and starvation."
The final conclusion is that Socialism = Destructionism.
"Gentlemen, in fact, Socialism is not what it claims to be. It is not a pioneer of a better and more wonderful world, but a destroyer of everything that human civilization has created over thousands of years. It does not build, because destruction is its nature."
Socialism produces nothing; it merely enjoys what is created by a social order based on private ownership of the means of production. Since the socialist social order can only exist with fragments of an economic order based on private property, every step towards socialism inevitably destroys what already exists and thus leads to its own destruction.
"As I said, human society is a spiritual phenomenon..."
"It is ideas, not 'material productive forces,' or the mystical schemes of historical materialism that create history. As long as we can defeat socialist ideas, as long as we can make humanity recognize the social inevitability of private ownership of the means of production, socialism will undoubtedly be eliminated."
"Gentlemen, this is the historical mission of economic workers like you and me!"
“Pah pah pah… pah pah pah… pah pah pah…”
Amidst the thunderous applause, Yuan Yan took a sip of the drink and frowned secretly, because the juice in the cup was not something a man should drink.
"Gentlemen, any questions?"
"Dr. Yuan, I have a question." The half-bald doctor stood up and said.
"Well, Dr. Holland, please ask."
"Dr. Yuan, how would you restore the gold standard or replace it..."
"Oh, about the gold standard..."
Our Master Yuan thought to himself, I know it all!
The historical process from 2017 to 1921 flashed through his mind like a kaleidoscope, and finally a shining gold coin appeared.
He took a deep breath, because he was the only one in the world who knew that the future of history would be shaped by GOLD...
It was after the Geneva Conference the following year that central banks decided to establish a fatally flawed hybrid gold standard, a "modern gold standard" made up of gold, inconvertible paper money, and central banks, rather than the "classical gold standard" that existed before World War I.
By the way, the Bretton Woods system can be called the "postmodern gold standard."
The United States became the only country in the world to implement the "gold standard", and the US dollar officially became the anchor currency of various countries, that is, the basic reserve foreign currency.
Britain and France operated a gold bullion standard, also known as a gold bullion standard. Under this system, gold bullion was stored as a national reserve. The exchange rate between various currencies in circulation and gold was restricted, and free convertibility was no longer practiced. However, in times of need, paper currency could be exchanged for gold bullion at the central bank of the country within a specified limit.
Pay attention, pay attention, pay attention! The central banks of the three surplus countries at the heart of the postwar gold standard have a strong incentive to accumulate gold. The shift of central banks from foreign exchange reserves to gold reserves will reduce the world money supply, thus increasing the gold standard's monetary tightening tendency.
Other countries, however, practiced the "gold exchange standard." Under this system, only banknotes circulated within these countries. Banknotes could not be exchanged for gold, but only for gold bullion or the currency of a country on the gold standard. Countries on the gold exchange standard maintained a fixed exchange rate between their currencies and those of other countries on the gold bullion or gold coin standard, maintaining the stability of their currencies through unrestricted foreign exchange transactions.
Okay, so why did this hybrid "modern gold standard" lead to the Great Depression?
Because everyone knows about Black Tuesday in 1929, but not everyone knows that Black Tuesday is not scary. What is scary is the response of Britain and the United States at that time.
At this time, the Hoover administration and the Federal Reserve made a truly idiotic move. Instead of lowering loan interest rates to release currency and rebuild confidence in markets, they raised them in the hope of stemming the flight of foreign capital, leading to severe deflation. Consequently, even those who wanted to bail out the market could not borrow money.
Well, they didn't do this because they were really stupid. The most important reason was to prevent the loss of US gold reserves. This is also the biggest problem of the gold standard system.
For Britain, the world's second largest economy at the time, this was actually a godsend. Since their cousin had accidentally caused deflation, their cousin should have inflation.
Of course, printing money relentlessly will devalue the pound, but on the one hand, it can boost exports and curb imports, thereby boosting the country's economic performance. On the other hand, it can also lend money to European banks that are short of funds, giving the global financial community a shot in the arm, at least preventing it from collapsing as quickly as in the original timeline.
However, under the insistence of "self-respecting" British economists such as Keynes, just like many crises in history, the British government chose to do nothing in panic.
Then the real Great Depression roared towards all countries, and finally the whole world was filled with corpses and blood.
During the subprime mortgage crisis eighty years later, the chairman of the Federal Reserve was none other than the "economics prodigy" Dr. Ben Bernanke, who wrote a book called "Essays on the Great Depression," in which he pointed out that the hybrid gold standard system rebuilt after World War I was an important factor in triggering the Great Depression in the capitalist world from 1929 to 1933.
Since he is so wary of deflation, it is no wonder that the Federal Reserve under his leadership has been steadfast in implementing Greenspan's loose monetary policy, ignoring the criticism from domestic liberals and the dissatisfaction of emerging market countries.
In 1997, the currency of a certain "emerging market country" refused to depreciate for the sake of "international image", but this time it doesn't have to worry about what others think.
So in the future subprime mortgage crisis, the world's first and second economies will learn their lesson and implement quantitative easing together. You did four QEs on the first day, so I will do four trillion on the fifteenth.
Do you understand? Don’t think that economics is a pseudoscience like “spiritual history”... at least not all economists are charlatans.
They have been summarizing the experience of the last time and then dealing with the next crisis.
