Market Intervention


Smith talks of the benefits of banking practices and paper money exchange, specifically the created ability to employ what would otherwise be stationary capital into useful endeavors. He also brings up the risk this entails: in particular, the chance that during wartime, another country could seize the physical gold and silver assets of a nation, thus rendering the bank notes void in value and causing widespread chaos. He suggests that a proper balance would be to only offer bank notes in large denominations, thus ensuring that the large majority of note circulation would occur between dealers, rather than between the dealer and consumer. The following is his explanation of this proposal as it applies to his theory of natural liberty.

Such regulations may, no doubt, be considered as in some respect a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as of the most despotical.

“The Wealth of Nations,” Adam Smith
6th Edition, Copyright 1937, pg. 308

So ultimately, it appears as if he his arguing that “natural liberty” isn’t so much of a hard-fast rule as it is a guiding principle, which can and should be trumped if restrictions on a few are necessary to protect the security of society as a whole. In other words, the whole “leave the market completely alone” mantra that is usually associated with capitalism is more of an exaggeration of what Smith believed rather than what he actually put forth.

Hopefully someone in the U.S. will catch up on this next time someone decides to buy and sell shitty, doomed-to-fail housing loans.

Princess Art

The princess drew this one back in April:

She drew this one the other day:

I heard her saying “Fish! Fish!” from across the living room and didn’t think much of it at first (she has a tendency to yell out “fish” for no apparent reason at times), but was rather surprised to find that she had drawn one.