Debt: The First 5000 Years - autonomous learning

AGE OF THE GREAT CAPITALIST EMPIRES 341
Therefore, he argued, the only recourse was to recall the currency
and restrike it at exactly the same value that it had before.
This was done, and the results were disastrous. In the years immediately
following, there was almost no coinage in circulation; prices
and wages collapsed; there was hunger and unrest. Only the wealthy
were insulated, since they were able to take advantage of the new credit
money, trading back and forth portions of the king's debt in the form
of banknotes. The value of these notes, too, fluctuated a bit at first,
but eventually stabilized once they were made redeemable in precious
metals. For the rest, the situation only really improved once paper
money, and, eventually, smaller-denomination currency, became more
widely available. The reforms proceeded top-down, and very slowly,
but they did proceed, and they gradually came to create the world
where even ordinary, everyday transactions with butchers and bakers
were carried out in polite, impersonal terms, with small change, and
therefore it became possible to imagine everyday life itself as a matter
of self-interested calculation.
It's easy enough to see why Locke would adopt the position that he
did. He was a scientific materialist. For him, "faith" in governmentas
in the quote above-was not the citizens' belief that the government
will keep its promises, but simply that it won't lie to them; that
it would, like a good scientist, give them accurate information, and
who wanted to see human behavior as founded in natural laws thatlike
the laws of physics that Newtoq had so recently described-were
higher than those of any mc:;re government. The real question is why
the British government agreed with him and resolutely stuck to this
position despite all the immediate disasters. Soon afterward, in fact,
Britain adopted the gold standard (in 1717) and the British Empire
maintained it, and with it the notion that gold and silver were money,
down to its final days.
True, Locke's materialism also came to be broadly accepted-even
to be the watchword of the age.83 Mainly, though, the reliance on gold
and silver seemed to provide the only check on the dangers involved
with the new forms of credit-money, which multiplied very quicklyespecially
once ordinary banks were allowed to create money too. It
soon became apparent that financial speculation, unmoored from any
legal or community constraints, was capable of producing results that
seemed to verge on insanity. The Dutch Republic, which pioneered
the development of stock markets, had already experienced this in
the tulip mania of 1637-the first of a series of speculative "bubbles,"
as they came to be known, in which future prices would first be bid
through the ceiling by investors and then collapse. A whole series of