Sunday, January 18, 2009

Where Montesquieu Was Wrong

Montesquieu's Spirit of Laws is remarkable. He outlines the basic principles of federalism: the three branches of government; the upper and lower house of the legislature; the independent judiciary. He discusses why federations of states work better than single states in establishing a republic. He contrasts the main forms of government: republics, monarchies, tyrannies and aristocracies with respect to the kinds of laws that are appropriate to each. Then, in a massive historical tour de force, he traces how various social, climatic, cultural, religious and other variables interacted with laws in a wide range of countries to make them effective or ineffective. He covers moral and religious law as well as monetary policy. The Spirit of Laws was written in the 1740s. The Founding Fathers relied on it heavily in writing the Federalist Papers and conceptualizing the Constitution and the earlier Articles of Confederation. Montesquieu is not the economist that Adam Smith was, but his political insight and the strength of his historical analysis, which spans ancient law and culture, to include law and culture of the ancient Egyptians, Greeks, Romans, Chinese, Japanese and the Barbarians, including a fascinating analysis of the Law of Salique, which he quotes at length and the customs of the Franks, Lombards, Visigoths, Ostrogoths, Burgundians and other Barbarian tribes in the times of Rome through Charlemagne are breathtaking. His expansive analysis of Rome could have constituted a book in itself. One of the things I found interesting is that as a Frenchman, Charles de Secondat Baron de Montesquieu, Montesquieu still conceptualized himself as a Frank and a German. When he mentions his "ancestors" he is thinking of a German tribe, the Franks, not Roman or Gaul ancestry. Also, he mentions that German tribal law was still dominant in the time of Charlemagne.

Here is his discussion of Roman depreciation of the currency, which he argues began when Rome was still a Republic during the Punic War. He does not believe that republics can inflate secretly, or that inflation is impossible in the modern world without it being evident:

"In the changes made in the specie during the time of the republic, they proceeded by diminishing it: in its wants, the state intrusted the knowledge to the people, and did not pretend to deceive them. Under the emperors, they proceeded by way of alloy. These princes, reduced to despair even by their liberalities, found themselves obliged to degrade the specie; an indirect method which diminished the evil without seeming to touch it. They withheld a part of the gift and yet concealed the hand that did it; and without speaking of the diminution of the pay, or of the gratuity, it was found diminished.

"We even still see in cabinets a kind of medals which are called plated, and are only pieces of copper covered with a thin plate of silver. This money is mentioned in a fragment of the 77th book of Dio.

"Didius Julian first began to debase it. We find that the coin of Caracella had an alloy of more than half; that of Alexander Severus of two-thirds; the debasing still increased, till in the time of Gallienus nothing was to be seen but copper silvered over.

"It is evident that such violent proceedings could not take place in the current age; a prince might deceive himself but he could deceive nobody else. The exchange has taught the banker to draw a comparison between all the money in the world, and to establish its just value. The standard of money can no longer be a secret. Were the prince to begin to alloy his silver, everybody else would continue it, and do it for him...If, like the Roman Emperors he debased the silver without debasing the gold, the gold would suddenly disappear, and he would be reduced to his bad silver..."

I guess Montesquieu never heard of Alan Greenspan, Ben Bernanke, and the Federal Reserve Bank!

1 comment:

MC Shalom said...

Chairman Ben S. Bernanke, We Are Opting Out of Credit.

All of Our Economic Problems Find They Root in the Existence of Credit.

Out of the $5,000,000,000,000 given out to the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE, The People, got?

The Credit Free, Free Market Economy

Is Both Dynamic on the Short Run & Stable on the Long Run, The Only Available Short Run Solution.

I Propose, Hence, to Lead for You an Exit Out of Credit:

Let me outline for you my proposed strategy:

Preserve Your Belongings.

The Property Title: Opt Out of Credit.

The Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: - .

Asset Transfer: The Right Grant Operation.

A Specific Application of Employment Interest and Money.
[A Tract Intended For my Fellows Economists].

If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless?

Since credit based currencies are managed by setting interest rates, on which all control has been lost, are they managed anymore?

We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

In This Age of Turbulence The People Wants an Exit Out of Credit: An Adventure in a New World Economic Order.

The other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

“The current crisis can be overcome only by developing a sense of common purpose. The alternative to a new international order is chaos.”

- Henry A. Kissinger

They Are Bailing Them Out, Let's Opt Out!

If You Don't Opt Out Now, Then When?

Let me provide you with a link to my press release for my open letter to you:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!

They Bail Out, We Opt Out. If You Don't Opt Out Now, When?

I am, Mr Chairman, Yours Sincerely,

Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640