The Dangers of Common Knowledge

by on February 17, 2010 at 3:15 pm in Economics, Education | Permalink

WASHINGTON–The U.S. economy ceased to function this week after
unexpected existential remarks by Federal Reserve chairman Ben Bernanke
shocked Americans into realizing that money is, in fact, just a
meaningless and intangible social construct.

…"Though raising interest rates is unlikely at the moment, the Fed
will of course act appropriately if we…if we…" said Bernanke, who then
paused for a moment, looked down at his prepared statement, and shook
his head in utter disbelief. "You know what? It doesn't matter. None of
this–this so-called 'money'–really matters at all."

"It's just an illusion," a wide-eyed Bernanke added as he removed
bills from his wallet and slowly spread them out before him. "Just look
at it: Meaningless pieces of paper with numbers printed on them.
Worthless."

According to witnesses, Finance Committee members sat in
thunderstruck silence for several moments until Sen. Orrin Hatch (R-UT)
finally shouted out, "Oh my God, he's right. It's all a mirage. All of
it–the money, our whole economy–it's all a lie!"

Screams then filled the Senate Chamber as lawmakers and members of
the press ran for the exits, leaving in their wake aisles littered with
the remains of torn currency.

More here.

Sean February 17, 2010 at 3:28 pm

I laughed out loud several times when I read this at work this morning. Several people stared, but there was no possible way I could explain the sublime joy that an econ geek/gold bug gets from this piece.

Popeye February 17, 2010 at 4:16 pm

Gold is just metal.

Dan February 17, 2010 at 4:28 pm

How true, and the sad thing is the people in charge of creating the meaningless and basically worthless pieces of paper, or electrons, are just politicians.

Geez, is it any wonder that we have a political system based upon generating more and more of these things? These imaginary, no cost to create little things that everyone in the social contract values so highly?

Which reminds me, I have a few tupip bulbs I’m willing to let go, cheap!!

rex pjesky February 17, 2010 at 5:06 pm

Steve…the issue is not one of scarcity, but one of something, like gold, being nearly a fixed quantity. And gold is just gold.

As for the article, the last line is the kicker. The person who wrote that has a deep, deep understanding of economics.

Business blog February 17, 2010 at 5:30 pm

This is so true and with what has recently happened around the world with the billions of dollars pumped into economies to keep them going highlights this even more!

anon February 17, 2010 at 5:39 pm

All of it—the money, our whole economy—it’s all a lie!

Our whole economy is made of cake?

Bernard Guerrero February 17, 2010 at 5:48 pm

All currency is fiat currency. And calls-on-resources are, as the last line notes, a necessity anyway.

BKarn February 17, 2010 at 6:10 pm

I have a a 1960s-era Tappan in my home. That’s pretty scarce. Maybe a gold bug would give me a bunch of gold for it.

Doug February 17, 2010 at 7:28 pm

I’ve heard Mormans say things that would make a sailor blush.

E. Barandiaran February 17, 2010 at 7:45 pm

It’s not only the Onion that makes me laugh. I’ve also had a great time with the statements of the many “experts” advising retaliatory measures against China because of keeping the yuan undervalued and the appearance that the Obama meeting with the Dalai Lama may be part of that retaliation; see http://online.wsj.com/article/SB10001424052748704804204575069321056720944.html?mod=WSJ_hps_LEFTWhatsNews

This stupidity prompted another pointed response from Don Boudreaux:
http://cafehayek.com/2010/02/renminbi-ad-absurdum.html

liberalarts February 17, 2010 at 9:25 pm

The Onion article was very funny, as always. Libertarian rhetoric in favor of gold as money is damaging to the libertarian brand, though. There are economic arguments that can be made for the use of gold as money. Calling fiat money “worthless” is not one of them. Since market economics is centered around the idea that supply and demand sets value, we can quickly see that a current fiat dollar is worth about 1/1100 oz. of gold.

Ricardo February 17, 2010 at 10:11 pm

This is actually the plot of “Galapagos” by Kurt Vonnegut. I’m a bit surprised the book is not more well-known among libertarians and Austrian-economics types. In the book, the world economy along with all the world’s governments suddenly collapse one day when everyone simultaneously realizes that the currency they hold is not worth anything.

Barkley Rosser February 18, 2010 at 1:25 am

Personally I’ll take certified checks out of accounts with balances greater than the checks. It the paper
is worthless, then those really are. After all, what is the physical existence of a bank account? Just a
bunch of electromagnetic wiggles on a hard disk in the bank, easily wiped out by a sufficient EMP shock. Hah!

Andrey February 18, 2010 at 2:08 am

World of Warcraft gold: it’s a gold and just a bunch of electrons at the same time. Picture, if you will, a world in wich people trade real gold for virtual gold.

nyongesa February 18, 2010 at 3:56 am

Drama Queenage is the order of the day among the cognoscenti… Abject object confusion as usual. The definition of money is a “medium of exchange and as a store of value”. Not absolute value but relative value, an interface is all.

liberalarts February 18, 2010 at 8:02 am

@Nick: money forced on us by the guns of government? Modern fiat money is the most convenient medium of exchange the world has ever seen. As a store of value, it is not bad, but who keeps their wealth in cash anyway? I have maybe 2% of my assets in dollars and maybe 10% more in unindexed, dollar denominated bonds. That allocation is my choice, of course.

@Otto: I presume that you have shorted long term government bonds or some other similar investment strategy? That way you will make a fortune if high inflation occurs and lose money if it doesn’t?

Barkley Rosser February 18, 2010 at 10:16 am

Hey, at least paper can cover a wall or wipe one’s behind.

r4 gold karte February 19, 2010 at 7:03 am

I like your post. Its informative really. There were only a few, and they were pretty tame, at least to my standards. Thanks for sharing!

pll fm August 1, 2010 at 11:00 pm

I laughed out loud several times when I read this at work this morning. Several people stared, but there was no possible way I could explain the sublime joy that an econ geek/gold bug gets from this piece. yes you say it very right!

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