Monday, June 4, 2007

Inflation & Economic Development

I was just reading at random from a book at home, Money and Banking in Canada from the Rowell-Sirois Report. The book mentions the economic crisis of 1837, which was caused by the US defaulting on British creditors. That reminded me of something that used to be quite the hobby-horse of mine; that a great deal of economic development did not come from stable prices and strong currencies, but from reckless spending, defaults, and inflation.

Frontier-style economic policies, war industrialization based on massive government debt, appear to have been responsible for a lot of economic development over the years. John Kenneth Galbraith's Money: Whence it Came, Where it Went was a big part of my economic education early on.

I used to think quite a bit about economics, and I'd determined that society's really weren't capable of self-financing. Eventually, a little bit of magic becomes necessary, devaluations, revaluations, credit created out of thin air. It's either that or plunder, which isn't always an option for weaker societies.

Jane Jacobs's The Nature of Economies points out that the first source of economic wealth comes from nature. And we cannot transcend nature.

Ah, I used to have the time to give this all much more thought.

Oh well.

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