I read _AS_ when I was 18 and I've thought about this quotation a lot through the last 20 months, as Reddit frothed about Ron Paul, Gold Standard, Banking collapse, etc.
As I've thought more and more about it, something seems off about Francisco's speech, namely: Money is _no longer_ the representation of value in green paper; no, it is the representation of transferrable obligation, i.e. debt.
Rand's philosophical position, expressed through D'Anconia, is that money is an expression of _value_, created by a man through his labor and that through its exchange, a rational process, a rational means for motivating and directing men's labor exists, "their only substitute, if they abandon money, is the muzzle of a gun."
I don't think this works quite as cleanly if you start consider that you're selling tokens of servitude, or indebtedness.
I got about 20 minutes into that "Money as Debt" video -- that's when he starts departing from, let's say, generally accepted theories of money. I don't have time to watch the whole thing, but I gather from other descriptions of the video that he advocates a policy of fiat money and repayment of debt via deliberate inflation, which is exactly the theory of the old Social Credit movement in Western Canada. That self-destructed.
He's correct that banks create money through loans. He's totally wrong when he says that money represents servitude.
He's ignoring that the purpose of debt is to create value, specifically to be able to do things today that make us all wealthier in the future. Yes, banks create money from nothing. That's because things of value - real wealth - are being created all the time, "from nothing", or at least, from nothing that is represented in the economy. They're mined out of the ground or grown from the sun, soil, and rain, or some complex permutation of all the above. Which is why we allow banks to grow the amount of money to represent it. When we take out a loan, we are saying something like "I'm pretty sure I can mine some copper out of that hill. So give me some capital now because I need to get a shovel." Rather than say money is debt you might as well say that money is certitude of present or future wealth.
By the way, this is the hidden truism of Paul Graham's mantra, "make something people want". Because "something people want" is another name for "wealth", and "wealth" is, under normal circumstances, easy to turn into money. So someone who says "make something people want and you'll make money" is expressing a near-tautology. (One that escapes most people, so it is good that he says it.)
I'm not totally in favor of our current systems, but that's another topic. And you have to know how the system works now to change it.
I agree, and I should have said this, “Money as Debt” takes a conspiracy turn at about halfway. I'm a reminded of Adam Savage's "Do you mean Tesla the inventor of AC power, the genius or Tesla the nut-job?".
I very much liked your explanation in the third paragraph, but under this model what does interest represent? If I step through your logic here.....
1. I believe there is copper in that hill which has a value ( say of 60K ).
2. I ask the bank for 10K to get started
3. Thus 10K has been added to the economy, recognizing that raw materials will be brought to the economy and growing the pie of wealth
4. I go into them thar hills, mine out the copper for 60K.
5. I pay back the bank, who now has 10K actual cash in their reserves, against which they may lend. I have also put 50K of my sale of this copper in their bank, giving them 60K against which to lend.
6. At this point, I think we're balanced in terms of what's been added to the value pie.
7. OK, so what does interest represent? The opportunity cost on the hope that I would find the copper? And, alternatively, say I found nothing in those hills, what happens to that 10K that was created? Shouldn't that be destroyed?
I'm not disagreeing, but I'm trying to understand your model better.
I'm not much of an economist, but I think interest basically represents risk. So it's insurance against being wrong. If we average it out over all the loans made by everybody, I don't think this is necessarily inflationary.
Even if the miner doesn't find copper, he's still obligated to pay back his loans. Maybe the bank seizes his property or he pays it off slowly from some regular job where he generates some other value. Either way it will work out in the end, although perhaps the effect is slightly inflationary until he pays off his loan.
And you have to take into consideration all the other loans made. If there is some other miner whose enterprise works out, then, if risk estimation techniques are good, it balances the one that failed.
When the techniques that everyone is using to estimate risk are totally wrong, you get the USA in 2009.
While I'm not a marxist, I think she goes too far in her opposition to this. All of the protagonists are capitalists (mostly with inherited money) and those who actually work to advance the cause of the "great men" - i.e. Eddie Willers - are given short shrift, and little chance to advance. Instead we have great men with inherited fortunes, doing very little actual work, preferring whining about "looters" and in one case (Hank Rearden) spending a month flying a plane over the Rockies looking for another great person.
"who actually work to advance the cause of the 'great men' - i.e. Eddie Willers - are given short shrift, and little chance to advance"
That's because he's never advancing much by himself beyond that which he is 'given'. Eddie is definitely an interesting character in the book. Like the 'man of not so great ambition' who still knows that he will, materially and spiritually, be better off by not looting those who made their fortunes exclusively through voluntary exchanges of their own successful products, efforts and work.
Yeah, in the book he lacks their talent but shares their code of value. He's like the character introduced just so that you can't complain 'there's only great men in this book, how unrealistic'.
How does he "lack their talent?" I see little talent on display. Though perhaps that's Rand's poor writing ability - not much is ever described to the reader, she just says "talented" or "great" about her protagonists, and expects us to accept it.
It's a work of fiction, by the way. But each of the characters has their own sets of talents and strengths and they are described rather than asserted throughout the book.
The question of whether these descriptions are 'true' is quite pointless in an entirely fictional setting.
> not much is ever described to the reader
> she just says "talented" or "great" about
> her protagonists
It's only fair to say you failed to sum up these 1000 pages accurately.
It's not the best written work of fiction, by the way. I'm around page 900 or so, and most of it seems to be thinly disguised rants by the author, interspersed with laughable descriptions of sex, and a really nasty strain of Social Darwinism. If this had been written by a German in 1934 it would probably be recognized as thinly disguised National Socialist Party propaganda.
That's a pretty silly thing to say. The prose may not suit your literary tastes, fine. But you will still agree that the Nazis and the Soviets were both the real templates for her 'evil collectivists'.
And collectivists they were, not just in their party name ('national socialists'). They more or less nationalized most of Germany's industrial private properties, some of it sooner, the rest of it later. They implemented most bullet points of the Communist Manifesto, only in a brown flavour and with a lot of add-on horrors on top of it.
Yeah, her 'heroic romanticism' style may resemble some of the red and brown 'romantic' literature. But her content is vastly opposed to theirs. If anything, she took a style that appealed to the masses in the 30s and 40s (including America) and showed that the same devices can be used to convey the opposite message, radical individualism and libertarian capitalism.
I would like to see how she would explain commodity valorization. If she does not subscribe to the Labor Theory of Value, how is that extra value imparted, if not from the labor (variable) acting on constant capital? It's a mistake to attribute it all to money. Even she say money is an expression of this value.
> how is that extra value imparted, if not from the labor (variable) acting on constant capital?
It depends on the value and the valuer. A thing's value and the labor spent on it are not intrinsically related at all: a wild flower may be very valuable to someone while having required no labor at all. Similarly, digging a hole in your back yard does not automatically increase the value of your property; the labor has no value of its own.
Value is entirely subjective, and can only be measured or assigned by people.
As I've thought more and more about it, something seems off about Francisco's speech, namely: Money is _no longer_ the representation of value in green paper; no, it is the representation of transferrable obligation, i.e. debt.
http://bit.ly/14idwP
Rand's philosophical position, expressed through D'Anconia, is that money is an expression of _value_, created by a man through his labor and that through its exchange, a rational process, a rational means for motivating and directing men's labor exists, "their only substitute, if they abandon money, is the muzzle of a gun."
I don't think this works quite as cleanly if you start consider that you're selling tokens of servitude, or indebtedness.