Brother, Could You Spare Some Fictitious Capital?

admin — Sun, 05 Apr 2009 16:01:51 +0000

I think it would be a great investment in the fictitious life I lead. My imaginary friends and I promise to spend it well. Lately, because of the fact that it seems the average working person’s grandchildren are going to be paying to support the offensively luxurious lifestyles of today’s investment bankers as their fortunes plummet, there’s been some buzz about the term Fictitious Capital. Marx is typically credited with defining the term, so the idea that a banker can arbitrarily say “See this simple sheet of paper? It’s worth A MILLION DOLLARS!” is generally accepted as a healthy anti-Communist activity. But wait! What’s this? Apparently Thomas Jefferson described the problem when Marx was less than a year old! It seems to me any child would understand that there’s something intrinsically wrong with creating value out of nothing, but the fact is, children don’t build cities, nations, and their infrastructure. This piece on econ professor Michael Perelman’s blog rounds up a few nice anecdotes from the 19th century which point out the virtues of imaginary money. For example, a hotel owner in Chicago explains to a visiting businessman why he should accept the “wildcat notes” in circulation: “…On this kind of worthless currency, based on Mr. Smith’s [the issuer's] supposed wealth and our wants, we are creating a great city, building up all kind of industrial establishments, and covering the lake with vessels — so that suffer who may when the inevitable hour of reckoning arrives, the country will be the gainer…” Apparently, there’s a built-in assumption about free markets that they didn’t tell most of us about, which is that capitalism is really just a big game of musical chairs; you just don’t want to be the one standing when the music suddenly stops!

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Brother, Could You Spare Some Fictitious Capital?