What's the Lek Lacking?
As I type these words, I have before me a small scrap of paper nicely engraved with a picture of a smiling peasant girl carrying a basket of grapes on her shoulder. It resembles paper "money," and it is. Specifically, it is three leks. You could spend it in Albania, where I bought it for "dollars," exchanging those unspecified amounts of nothing in particular for these undefined quantities of illusory "medium of exchange." The clerk at the hotel consulted a chart to find the number of leks which I could buy for my dollars; without this reference, the exchange could not have happened. The reason why it couldn't is fascinating. It is, in short, what's lacking in the lek.
Years ago, gold was money in much of the world. Were you walking down the street in some exotic city, and found upon the ground a coin of gold, it wouldn't make a bit of difference what it had engraved upon it. Back in America, you could have used it to make purchases without too much difficulty. It is not at all hard, nor does it take elaborate equipment, to determine the purity of a gold coin. Weighing it is simplicity itself. And once you know the weight and purity (i.e., the "value,") you know all that you need to know. Indeed, if goods were priced in terms of grams of gold, and gold coins were denominated in grams of 100% pure gold, mankind would have the universal currency to which it is said to aspire. How different it is today!
Were I to take my three leks to my bank and ask for it to be exchanged for American "money," I would probably only succeed in amusing the staff of that institution, which would regard my leks as so much scrap paper. It would do me little good to explain that in Albania, people scramble to get those pieces of paper, although, quite obviously, they do. The lek, although desirable in Albania, is a joke in the rest of the world. Why should that be? Is my piece of paper "three leks" redeemable in anything from the Albanian authority which created it? Of course not. Does it represent some wealth placed upon deposit to justify its issuance? No. Exactly the same, however, can be said for my Federal Reserve Notes. Yet the American currency is "strong;" the Albanian, weak. Obviously, the lek lacks something.
Actually, it lacks a couple of things, at least. For one thing, there isn't much you can buy with it. Albanians, sad for them, don't produce anything that the rest of the world wants. I bought the leks to obtain some Albanian goods to bring home as a souvenir; in the whole town we couldn't find anything worth buying. So if you have a currency only good in Albania, and there's nothing worth buying in that country, what good is it, except to an Albanian, who has nothing else to use, and has to buy food and clothes with something. So one characteristic of a "soft" currency is that it is the currency of a country that doesn't produce much in the way of desirable goods or services. You can be sure that if the Albanians were to announce that they had discovered, and were offering for sale, a cure for cancer, that the lek would suddenly become very desirable.
But it's more complicated than that. The Swiss franc is a "hard" currency, and the Swiss aren't big producers of desirable goods, are they? Oh, of course, we all know of the Swiss importance (though less so than in former years) in the watch trade, and we all enjoy Swiss chocolate, but can you base an economy upon clocks and candy? Yet the franc is vastly more desirable than the lek. So something else must be at play here; and it is politics. Bankers, with their power to create money with the stroke of a pen, can buy anything, and in general, they buy governments. It's a good deal for both parties: the bankers becomes the authorized, official, counterfeiters, and the government gains not only enough money to finance its grandiose schemes, but a weapon as well.
That's right: money is a weapon. The lek is an example. At home in Albania, the exchange rate between leks and bucks is whatever the Albanians want it to be. It's their country, after all, and their scrip. But internationally, it's another story. If they wish to buy western goods for dollars, they must buy those dollars with leks at a rate determined by Americans; and that rate will be unfavorable. Now, of course, the Albanians could crank up the presses and buy whatever they wanted in America, by printing enormous numbers on their currency. The bills are small, but how much room does it take to print a 10 to the fifteenth power, for instance? But if they did that, and American bank vaults became full of leks, the Albanians would have destroyed themselves, for American bankers would flood the world markets with leks, reducing their already minimal value to nothing. Similarly, by offering highly desired dollars for Albanian goods, the American bankers could drain Albania of what desirable goods or resources it might possess. So the other aspect of a hard currency is that it must be acceptable to the "big boys" of international banking. The lek isn't.
In general, the domestic situation of a country favors inflation. With populations convinced that governments have the answers to all their problems, given only that governments be able to afford it, there is a strong domestic demand for "easy money" to finance those wonderful programs which will, just coincidentally, make everyone dependent upon government. So it suits everyone (well, except for a few old curmudgeons) to have easy money at home. But internationally, it's a different story. As Americans become reluctant to borrow still more, in our efforts to borrow ourselves out of debt, it becomes necessary for the bankers to indebt foreigners. Once any group of people owe "dollars," they are hooked, for dollars are only produced by American banks, and then only to be returned with interest. If you borrow something from someone who is the only source of that material, and demands back more than he loaned, you will never satisfy him, but you may die trying. The American economy is moribund, but things can be kept going for a while longer if foreigners will borrow some of our bucks. This makes bankers, of necessity, internationalists, or, if you will, One-Worlders.
Suppose Chase Manhattan, which has had a branch in Moscow for decades, were to lend the Russians a few billion to "jump-start" their economy. Things would boom as the Russians purchased Western goods and technology to begin their own manufacturing of desirable high-tech goods. And once they had borrowed dollars, they would have to repay them with interest. That would mean more borrowing, or obtaining the dollars by selling goods in America. And to ensure their success in American sales, the Russian government could subsidize Russian producers by printing up lots of rubles, which Russian workers accept in lieu of payment, as we accept dollars. (Oddly, the Russians have lots of gold. Wouldn't you think at some point it would occur to them to exchange it for other goods, thus avoiding debt altogether?) The result of this strategy would be to put Americans out of work, as has happened with the Japanese, and automobile production here. Either way, of course, the banker collects his interest. He can't afford patriotic sentiments. He is willing to see his own country's economy suffer if it will enlarge the extent of his sphere of influence, i.e., the number of his debtors.
And as the economy suffers at home, and there are calls on all sides for more government assistance, it may be that those calls for more inflation will be answered with a local scrip, used only in America for domestic spending, while a more tightly-managed currency will be used abroad. Such a two-tiered system is already in use in some countries, and it offers the money-creators an opportunity to have their cake and eat it too. Easy money at home, but a better regulated currency for foreign investors, who will, therefore, get a relatively larger return on their investments in America than Americans. Well, as we mentioned above, bankers are naturally inclined toward internationalism.
And funny money not only makes it all possible, but necessary. How tragic that human freedom, so widely touted and discussed, is never associated with the repeal of legal tender laws!
If the lek were a quantity of gold, and ditto for the dollar, a hotel clerk wouldn't need to consult a list of arbitrary ratios to find the exchange rate. And the publishers of those rates would not control our economies, which means that they would not control our lives!
Paul A. Hein Jr., M.D.
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