T Nation

The Death of Credit


#1

"An old motif in popular culture was the Death of Credit. Prints greeting this macabre denouement bore images of grinning skeletons bearing worthless notes and empty purses. On August 16, 1788, Credit died in Paris and its demise threw the huge market in government paper into panic. Unlike Franklin Roosevelt's version of the statement in 1933, the royal edict's observation that 'nothing is imperiled except through...fear' reassured no one. The Caisse d'Escompte was besieged with bondholders demanding redemption and had to close for fear of violence. The run lasted three days and nights before two further government announcements guaranteeing paper had a temporary calming effect. But only a clean break was likely to restore the modicum of confidence needed to keep the government from disintegrating."

--SImon Schama, Citizens: A Chronicle of the French Revolution, A. Knopf, 1989.


#2

The royal edict was a good observation on the market's susceptibility to panic.


#3

Fear not good citizens; here, have some more of our paper.

Hahahaha!

People are dumb.


#4

The dollar is up today.


#5

Not against real money it isn't :slight_smile:


#6

Yup. Considering that gold is now at $1550+ per ounce as opposed to the $250 it was at the beginning of the decade and the government shows no sign of fiscal sanity its fairly safe to say the days of the US dollar are limited. although since the Euro is also in deep trouble the dollar will probably remain above water for the immediate future. The more panic that sets in for the Euro the more inclined investors will be to jump into the dollar.


#7

Hahahahaha

Against what? other paper currencies that are backed by the same worthless paper?


#8

I take it that this is the same old problem that you have in how the world economy operates.

Ho hum.


#9

Dr Sceptix just posted how it operates.

At some point people lose their trust in the system and then it crashes down and there is nothing anyone can do about it.

We are on our fifth currency now in just 100 years and of the Krone, Schilling I, Reichsmark, Schilling II and the Euro the Schilling II is the only one that did not collapse, assuming that the Euro will go down too.

Of course it was linked to the Deutschmark which was hard as nails, as far as fiat currencies go.


#10

Stop being silly ZEB. Claiming that the dollar is "up" when it is merely less "down" than some other fiat currencies is beneath you. The fact is its purchasing power is diminished, ergo it is down.


#11

Maybe that is why Moodys is attacking the Euro to take the heat off the dollar! Oh and before anyone says it I know that Fitch is owned by a French company but all three are located in you know where.


#12

People think it can't happen to the US but it can and it will unless fiscal sanity returns. The only question is when.


#13

"...Some, who had celebrated the Revolution so long as it was expressed in abstractions like Liberte, gagged at the sight of blood thrust in their faces. Others whose nerves were tougher and stomachs less easily turned made the modern compact by which power could be secured through violence. The beneficiaries of this bargain deluded themselves into believing that they could turn it on and off like a faucet and direct its force with exacting selectivity. Barnave, the Grenoble politician who in 1789 was among the unreserved zealots of the National Assembly, was asked whether the deaths...were really necessary to secure freedom. He gave the reply which, converted into an instrument of the revolutionary state, would be the entitlement to kill him on the guillotine:
"'What, then, is their blood so pure?"

ibid., p 406.

A lesson translated into modern politics for the Tea Party (and Democrats): "Do not take a hostage that you are not prepared to shoot."


#14

Is there going to be a test?


#15

'The men who sat and disputed in the National Convention and the Committee of Public Safety were Frenchmen and mostly French politicians. If their revolution failed, they could expect to be hanged. They thus had risked their lives, their fortunes, and whatever degree of personal honour they might possess. Also, they were mostly very much afraid and had excellent reason for it, working as they did in constant danger from each other and from the Paris mob. Sensible, moderate behaviour was hardly to be expected from them.'

Swords Around A Throne, Colonel John R Elting p.38

And, yes there WILL be a test.


#16

Basically, our leaders have used their respective revolutionaries to get this far. But now, staring at an upcoming default (and later, possible downgrade) up close, they might be victims of their own revolutionaries if their respective goals aren't achieved? So they must press on, walking into chaos. No compromise.

Um, any bonus points available?


#17

Dingdingding! A winner!
Bonus point: we are the hostage who is about to be shot.


#18

Paper is not worthless when it buys what ever the hell you want.

Gold is, of course, a great standard but we operate in a fiat monetary system and have done so for quite some time.


#19

I am kinda speechless about all of this. It seldom has happened that leadership has failed us so badly.


#20

So what do you use to purchase goods and services? Goats, gold, what?

It's easy to criticize, what's the solution.