Tuesday, November 07, 2006

A Fistful of dollars

The fairy blogmother of the British blogscene has had an interesting discussion going on the nature of currency, largely in connection with the advisability of a pan-European currency, as compared to the pan-United States currency. She asks if it was the case that different states issued different currencies, essentially different versions of the dollar.

This was, I think, the case in the early days of the United States, but it was certainly the case throughout the brief life of the Confederacy. Every two-bit town that had a printing press was running off Macon County dollar bills or similar. The acceptability of these varied widely, with Richmond dollars being considered the best (apart of course from pre-war US dollars), and others being variously discounted according to their provenance.

The result of all this was, sadly, galloping inflation and the collapse of the Southern banking system. Which doesn't go to show anything much apart from the fact that it is a bad idea to give local regional banks the power to print money. And possibly that, for a state to have power over its money supply, it must have political control over all its regions. Otherwise you end up with inflation, and a collpase of confidence in the financial sector.


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