Tuesday, November 23, 2010

Paper money: a Faustian bargain?-)

I've been enjoying Weatherford's delightful History of Money as an audiobook (that's the one plus of having to commute by car, now that I've moved to Sunnyvale so can't really walk to work in Mountain View as I used to -- in the 20+ minutes of drive each way, instead of radio which at any time might be speaking about interesting things or inane ones [or playing ads -- or thanking sponsors or hustling for donors, if it's NPR;-)], you can listen to cool audiobooks of your choosing!-).

Among its many charming details is a sound "monetary" (and literary) analysis of Goethe's Faust (Part Two) -- remember the immortal verses (in Lange's popular translation to English, cfr Google's version) in which Faust, alternating with Mephisto, pleads to the Emperor in favor of paper money...?
The excess of treasure frozen in your lands,//Deep in the soil awaiting human hands,//Lies there unused. The furthest range of thought//Cannot define such riches as it ought
...and therefore the Emperor should solve his monetary problems by issuing abundant paper money backed by all the yet-unextracted gold, silver and gems in the land belonging to the Empire?  I had always taught of that as the typical "Faustian bargain" -- a devil-inspired one.  However, Weatherford's reading is different: Mephistopheles' ends are of course evil (it's definitely possible, even easy, for paper money to be abused to evil, greedy, selfish ends by the State's rulers)... but, not Faust's own!

What Faust does with the newly abundant paper money is -- try to drain marshes, build roads, propel the Empire to new, real prosperity, which the scarcity of species previously held back.  And (in W's reading) that is why the Angels in the end shield Faust from the devil "for his unending striving"... because that's what the economy is, whether it's held back by scarcity of species or propelled forward by abundance of paper money -- an unending striving to make things better (albeit beset by rogues and  Madoffs...), to build real prosperity.  The great Poet is not just sounding a worried, backwards-looking alarm against the easy excesses of paper money, as he's usually read -- he's also, in the same breath, pointing to the positive, creative "unending striving" it makes possible (despite all the selfish rogues), for those who really do want to "unendingly strive" to build a better world for all.

In other words (and that's my own parallel, thinking of the "news of today") -- Bernanke is Faust.  The superficial observers (most of us) only see the "pact with the Devil" aspect, and want to take away the original part of the Fed's mandate (the one about full employment) to make it focus entirely on keeping the currency sound (as it did in 1929... fat lot of good it did back then, hm? only as nations, including the US, dropped the gold standard, and roughly in the same chronological order as they did so, did each of them manage to start the monumental task of draining the swamp of Depression -- only paper money enabled that, just like only it, the understandably maligned Continentals, enabled the thirteen colonies to finance their terrible wars against England...!).  But -- Bernanke's fighting to promote the "unending striving" that's the only possible path to prosperity.  In the end, even though the Devil may prevail, the Angels will come in to defend him and save him!-)

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