Thursday, November 12, 2009

Can Paper Store Wealth?

Thomas Jefferson himself was quoted as saying "Paper is poverty". Milton Friedman disagreed, saying anything can be money. In fact, Friedman argued in his book "The Optimum Quantity of Money" that if the Federal Reserve did not allow the quantity of money to drop by 1/3 that the Great Depression, as we know it, couldn't have occurred.

So who's right?

Both are right. But Friedman makes arguments on how to keep a paper system afloat, while Jefferson sees paper as inherently flawed. Jefferson's long-term view of government can be well understood by his quote “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.”

In essence, Jefferson understands that gov't, regardless of the intentions, will become corrupt and/or ineffective. Paper money may work for a while, but eventually greed and power will overpower the systems inherent flaw - the ability to print whenever you want. Jefferson may not have the economic stature of Friedman, but he understood something Friedman didn't - something academics can't seem to grasp - that human nature will over come the best designed systems. More regulations, more oversight, more laws will never fix an inherently flawed system. Paper money is flawed.

But wait, you ask - "Wouldn't the Great Depression have been just as bad if Jefferson was in power, because he never would have advocated devaluing the dollar by 50% as the Federal Reserve did in 1934?"

The question is moot, because Jefferson never would have allowed the Federal Reserve to exist in the first place. And if it wasn't for the FEDS easy money policy of credit creation in the 1920's, the Great Depression never would have occurred.

Jefferson passed away before Lord Acton wrote "Power tends to corrupt, and absolute power corrupts absolutely.", but I believe Jefferson would have whole heartedly embraced the phrase. Intellectuals and academics, like Friedman, believe they can put rules and laws in place to keep powerful institutions from corrupting themselves and society.

Based on what we have seen through the course of human history, the economic genius of Friedman fails the most basic test, that of man's love of power and self righteousness.

Tuesday, November 10, 2009


It's an amazing correlation. The top 10 fattest states measure a happiness average of 41.8, while the 10 slimmest states have a happiness average ranking of 13.1.

It sure appears that the fatter you are the LESS happy you are. Of course, correlations don't prove anything, but there is a pretty strong correlation between weight and happiness (at least on a state-by-state measure).

[Scroll down to see table]

FAT Rank Rank
1 Mississippi 48
2 West Virginia 50
3 Alabama 33
4 Louisiana 40
5 South Carolina 26
6 Tennessee 42
7 Kentucky 49
8 Oklahoma 43
9 Arkansas 46
10 Michigan 41
11 Indiana 45
12 Georgia 23
13 Missouri 44
14 Alaska 20
15 Texas 21
16 North Carolina 34
17 Ohio 47
18 Nebraska 16
19 Iowa 27
20 South Dakota 39
21 North Dakota 28
22 Delaware 36
23 Kansas 22
24 Pennsylvania 32
25 Virginia 15
26 Wisconsin 24
27 Illinois 31
28 Maryland 6
29 Oregon 18
30 Minnesota 5
31 Idaho 11
32 Washington 7
33 Wyoming 3
34 Maine 29
35 Nevada 38
36 New York 35
37 New Hampshire 13
38 Florida 30
39 Arizona 10
40 New Mexico 17
41 California 9
42 New Jersey 25
43 Utah 1
44 Montana 12
45 Rhode Island 37
46 Vermont 14
47 Massachusetts 8
48 Connecticut 19
49 Hawaii 2
50 Colorado 4