2016/09/05 Knowledge Forum
Thread: Adam Smith “The Wealth of Nations”
Book 2 Chapter 2 “Of Money Considered as a particular Branch of the General Stock...”
The full title of this chapter is:
Begin Quotation:
Of Money considered as a particular branch of the general stock of the society, or the expense of maintaining the national capital.
End Quotation.
A recurring them in “Wealth” is that money does NOT represent the wealth of a nation. The actual wealth of a nation consists of its annual production of goods and services. However, 240 years ago, and today in 2016, the accumulation of money was regarded as a way to accumulate wealth. Indeed, it seems to me that for an individual or a small group such as a family, that may be true. However, Smith addresses the issue at the level of a nation, and makes the point in a myriad of ways, that for the leaders of a nation to imagine that accumulation of money is equivalent to wealth is absurd.
Going forward, and certainly when human population is dispersed away from Earth, it seems to me that the practice of building a database of values of a great variety of commodities and services in order to compute the “correct” (ie, generally accepted) value of a fiat currency is appropriate, and indeed the ONLY practical way to implement trade between dispersed communities.
In Smith's day, and indeed, for many decades later, it was expected that balances between nations would be settled with exchange of metals (ie, gold and silver). Today this practice is for all practical purposes eliminated, although the United States still holds some accumulations of gold that are meaningful to nations who still adhere to a gold standard.
Smith spends some time in this chapter considering the topic of banks and banking. In my opinion, Smith is entirely too sanguine about the ability of the public to protect themselves from bank runs, in his concluding paragraph.
240 years later, in the United States and indeed, in much of the rest of the world, the local currency is NOT backed by metal, but instead (essentially) by the standing of the nation. At this time, the US dollar is the reserve currency of the world, but certainly there are competitors seeking to achieve this stature.
Looking forward, it seems to me that remote communities will need (and want) representation for their interests on Earth. These representatives will manage the exchange of digital “products” between the Earth and remote communities, including entertainment, scientific or engineering information, work products such as definition of control files for atom assemblers, and a great variety of other digital artifacts that I cannot presently imagine.
I am reminded of the “factors” who played such a role in the days of sailing ships. Indeed, there may be individuals who play such a role today, but (I think) corporations are now multinational so that they are (in effect) able to provide their own factor services internally.
Where I hope to end up over the course of these weekly ruminations is with a conclusion that the economy of the planet Earth of 2016 can support a class of distant communities with digital communications reflecting the greater variety of capability of the larger population, while at the same time providing a large and ready market for digital communications from the smaller populations, who may yet offer insights or achievements not occurring elsewhere.
(th)