Chapter 7
King
Franklinvelt was happy with the results of Korgan’s plan. Though the Gamerigan
economy was not recovering very dramatically, the King had plenty of funds,
both in the Treasury and borrowed, to use on putting his unemployed subjects to
work, building grand dams, canals, highways, and pyramids. The people were
grateful to the King for this opportunity to make some money for themselves.
One year
later, King Franklinvelt died, beloved by his people. His son, Nick Richardson,
also known as Tricky Nicky for his crafty and slippery ways, came to the
throne. Not long had elapsed before the new manager of the Royal Gameriga
Reserve, Greenly Alanson, came to the king with a problem: “Your Highness” he
began, “The King of Franconia, Gaul DeKarl, has been busy exchanging
Franconia’s holdings of Gameriga Dollars for gold, these actions are severely
depleting our gold supply, what should we do?”.
“Hmm,”
pondered King Tricky Nicky, “We can’t let a bunch of foreigners bankrupt the
great kingdom of Gameriga! How dare they be so audacious as to demand gold from
us! I say that we refuse to give foreigners any more of our gold”. “But Sir,”
replied Greenly, “ Isn't that just admitting bankruptcy to the world?”.
“Greenly, my friend” replied the King, “Where is your sense of finesse? Of
course we don’t admit bankruptcy. First, we get a convenient scapegoat to blame
for our action, in this case, ‘international monetary speculators’ will do the
trick, no one likes speculators. Second, we say that these speculators are
trying to attack Gameriga’s prosperity and strength, this will arouse a sense
of indignation in our loving, patriotic subjects. Finally, we get a bunch of
money experts to say that our money must be more flexible in order to keep the
Gamerigan economy strong. It worked when my great father did it.”
“Your
Majesty” Greenly said in awe, “you are truly the greatest statesman the world
has ever known”. “I like to think so” said King Tricky Nicky.
Chapter 8
And so, on a
broadcast to every television in Gameriga, the King made his announcement and
gave the reasons for it. Henry was at home, watching the announcement. The
announcement didn't shock Henry too much, after all it only applied to
foreigners didn't it? This was just a confirmation that Henry would not see his
gold again, he just hoped that the full faith and credit of the King of
Gameriga was worth as much so that he could pursue his dreams.
However,
over the next few months, Henry noticed an odd thing. Every month he went to
buy materials for his architectural project, but every month the price of these
materials would go up by a noticeable amount. Now, this unnerved Henry, as he
had always been a careful planner, but with the prices of everything changing
every day, poor Henry didn't know if he really had enough Gamerigan dollars to
finish his modest architectural project after all! Certainly if prices kept
going up as they had been, there would be no way that Henry could finish with
his current amount of money.
Not one to
give up though, Henry decided to supplement his current savings with some new
money, which he got by taking a job as a waiter at a nearby restaurant.
Unfortunately, this meant that Henry had less time to work on his project, but
he had to do what he had to do.
However, a
few months later, the restaurant owner told Henry that he could no longer
afford to employ him, for the economy had slumped again. Henry offered to work
for lower wages, but the restaurant owner said: “I wish I could Henry, but the
King has ordered that we are not to pay workers below a certain amount”. “But
surely the King would prefer that I make something than that I make nothing!
Please Sir!” pleased Henry. “Sorry Henry, I don’t make the rules, I just follow
them” said the restaurant owner.
Now Henry
was truly dejected. His saved money was becoming more and more worthless every
month and he had no job to make supplementary money with. He feared that he
would never be able to complete his project.
Henry
decided that he would seek help, and who better to seek help for money matters
than the famous money expert, Saul Kruggerman? So, Henry paid a visit to
Kruggerman’s house, and was invited in. “Hello my friend, you have come to seek
my advice?” asked Kruggerman. “Indeed Mr. Kruggerman” said Henry, “You see,
when I first came to New Cork City, I had 1000 gold coins in savings that I had
gotten from selling my farm. I deposited these coins in the People’s Bank and I
thought that those savings would be enough for me to complete an architectural
project. But now, I don’t know what happened to those 1000 golds coins. It
seems that my Gameriga Dollars that I got in exchange for them are worth less
every day, I can’t find a job, and I fear that my dream of constructing a
beautiful building is becoming more unlikely every day.” “I see” said
Kruggerman, “ I'm sorry but you are another victim of misguided economic
policies. You see, if I was advising the King, I would tell him to expand the
amount of Gameriga Dollars and spend like crazy on royal projects. That way, we could
employ people and get this economy moving again!”
Henry
thought about this for a second, and then responded: “But Mr. Kruggerman, I
don’t really want to work on a royal project, with all due respect. What I want
to do is have the gold that I saved back so I can pursue my dreams the way I
want to.” Hearing this, Kruggerman flew into a rage: “You’re just a greedy
swine! You want to hoard gold and deprive this country of credit! You want
unemployed people to starve in the streets while you sit on your stash of shiny
metal! You don’t care about this country, all you care about is yourself!
People that have tired old mentalities like you, they are the reason that we’re
in the dark age of money thought!”.
Henry tried
to protest that he didn't want people to be unemployed, he just wanted to use
his hard earned money to follow his dream, but before he could, Kruggerman’s
guards roughly escorted Henry out of the residence.
Poor Henry
was now even more dejected. On top of having seen his savings erode away in
value, being unemployed, and having his dreams put on hold, he had been scolded by a
pretentious bearded man for wanting to use his own, hard-earned money! Henry
sat down in the town square, curled up in a ball, and, for the first time since
inheriting his father’s farm, Henry cried...
Chapter 9
Henry cried
in the square for an hour, then dried his tears and just sat dejectedly in the
square. After a while, a foreign man wearing gold-coloured clothing walked into
the square. “Gold! Gold for sale!” shouted the man. Henry looked up, and
thought to himself: “Let’s face it, my Gameriga Dollars saved up are getting
more worthless every day. I should like to hold some gold once again, even if
it is not very much”. Then again, holding gold was illegal, but who would know
if he just bought a little bit?
So, Henry
went up to the man, and proceeded to use all of his remaining cash and bank
deposits to buy gold. Henry managed to get 50 gold coins out of the man, not
the 1000 he started with, but at least he held something real instead of just
pieces of paper! Over the next few days, Henry noticed that many other
townspeople had the same idea as he had. They were withdrawing money from their
banks and stock market investments in order to stock up on gold. But, people
had to take care to hide their gold carefully, for the king’s men were on the
lookout for people holding gold illegally.
Noticing
this, Henry had an idea: Why not try to get together some of the townspeople’s
money in order to start a secret gold bank? So, Henry told his friends about
the idea, his friends told their friends, and so word spread quickly throughout
New Cork City of Henry’s idea. Many enthusiastic people came to visit Henry at
his house, pledging their support for the endeavour.
With their
financial help, Henry was finally able to complete his architectural project.
It was a modest building, yet it was elegantly designed, and Henry was proud of
it. But Henry was even more proud of the fact that this building would serve as
the secret gold bank. He placed a sign outside the building reading “Henry’s
Diner”. The bank would masquerade as a small restaurant, but, in the large
basement, Henry stashed the gold of his depositors. The whole operation was
done very discretely, and the King’s men were none the wiser.
Over time,
Henry got more and more depositors in his bank. He operated the bank like old
Anton had done at the People’s Bank a long time ago, Henry charged a small fee
for safekeeping, and diligently guarded every bit of gold that was deposited in
his underground vault. Henry also issued gold certificate notes, to be used in
secret of course, but depositors trusted Henry’s notes because they knew he didn't lend out their gold.
One day, a
man came in to Henry’s bank/restaurant and said: “Listen Sir, I heard you have
a lot of gold sitting in your vault. You see, I have this wonderful project
that I am going to embark on, but I need some funds to get started. Could you
please lend me some of that gold you have?”. Henry responded firmly but
politely: “ I'm sorry, but that gold is not mine to lend out”.
One of Henry’s patrons, a keen
businessman by the name of Hans Shoehorn, overheard the conversation and said:
“Henry can’t lend you the gold he’s keeping. But some of the gold he’s keeping
is mine, and I would like to hear about your wonderful project so I can decide
whether to invest in it”. So the man told Hans all about his planned project
and Hans liked what he heard, so he loaned some of his gold certificate notes to
the man.
The project
turned out to be a fantastic success, and Hans more than made back what he
had loaned. Soon, other patrons of Henry’s bank decided that they wanted to
loan out their money too to make some profit like Hans, but they didn't know
who to lend to. Hans offered his advice, and soon the investment wing of
Henry’s Secret Gold bank was opened, under the leadership of Hans Shoehorn.
Now, when depositors put gold in Henry’s bank, they could either choose to have
the gold kept in safekeeping, to be withdrawn whenever necessary, or they could
choose to lend their money to Hans and the Investment wing, who would try to
choose the most profitable loans to make. Patrons of Henry’s bank knew that the
gold they had on deposit would stay in the vault, while patrons who leant their
gold to Hans’s wing knew that their gold was currently being used by someone else.
Chapter 10
Inspired by
what they heard about Henry’s secret bank, many other ambitious people in towns
throughout the kingdom of Gameriga started opening secret gold banks like
Henry’s. King Tricky Nicky and his courtiers knew about the banks, they were
too prevalent to be secret any more, but he didn't dare to confiscate the gold
like his father had done as he knew the people would revolt this time, so he
decided to make the holding of gold officially legal again. The people rejoiced
and the King enjoyed a spurt of popularity. Nevertheless, the King constantly
encouraged the people to put their faith in the Gamerigan dollar, and only
accepted taxes in Gamerigan dollars, not in gold.
PJ Korgan
and the managers of the other banks in the Royal Gameriga Reserve system were panicking.
Their banks were losing customers fast to these gold banks, especially once the
King legalized the holding of gold. In an effort to keep customers, these banks
leant out even more of their money, offering higher interest rates for
depositors at their bank. But Korgan knew that something had to be done to turn
the tide, and so, as in the past, he turned to the King.
He and the
other bankers arranged an audience with King Tricky Nicky. “Your Highness”
Korgan began, “There is a troubling trend in the realm of your subjects
preferring to use gold, that barbarous relic of the past, as money again. They
reject your great Gamerigan dollar, and all the prosperity that has come with
it. Your Highness was wise to allow your subjects to hold gold to soothe them,
but something must now be done to protect the Gamerigan dollar. I would suggest
making the Gamerigan dollar the only legal tender in the realm, so all
contracted transactions must be carried out in Gamerigan dollars. That way, your
subjects will return to their senses, and will all start using the great
Gamerigan dollar once again”. “I like the way you think!” exclaimed King Tricky
Nicky, “Let the people hold gold, but make it impossible to use as a money!”.
And so, the
decree was promulgated, but this time, the subjects of Gameriga did not
acquiesce so easily. Most transactions, ignoring the decree, were done in the
gold certificate notes of the gold banks or in gold coins themselves. People
were wary of the Gamerigan dollar and the old banks.
PJ Korgan
was distressed. His plans had always worked in the past, why not this time?
King Tricky Nicky wasn't happy with the results either, the decree had made him
more unpopular and it was not having its desired effects, the Gamerigan dollar
kept becoming more and more worthless as people rushed to get rid of it and buy
gold. With this, the King’s extravagant wars and royal projects were not
getting the funding they needed, and printing more Gamerigan dollars, while it
had helped with this in the past, now seemed only to make his problems worse.
Korgan
rushed to see the King and said: “Great King, we must act now. Gameriga is in a
crisis, we must follow the example of your father and take an extraordinary
measure. We must confiscate your subjects’ gold once again in order to save
Gameriga”. “You’re right” the King replied, “I wish there was a more tactful
way, but my subjects are being too unreasonable to not trust me, THEIR KING,
with their money”. And so, the order was given to confiscate everyone’s gold
again, but this time, the results would be different...
Chapter 11
When the
confiscation decree was announced, many Gamerigan people flew into a rage. They
were not about to lose their savings again, not after working so hard to build
them up again! People all over the kingdom rose up in arms, and rallied behind
a peculiar nobleman who actually believed in a sound gold currency, named Paul
Ronaldson. Ronaldson had always been the laughing stock of the royal court,
always speaking out against measures which clearly were in the best interests
of the royal court. He was particularly vehemently opposed to the whole Royal
Gameriga Reserve scheme cooked up by Korgan.
But now,
this often ignored nobleman suddenly became the head of a popular movement.
Faced with the threat of revolution, the courtiers reluctantly switched sides,
forced King Tricky Nicky to abdicate, and threw their support behind Ronaldson.
Ronaldson became king, and he repealed the legal tender laws of Tricky Nicky
and dismantled the Royal Gameriga Reserve system.
Without the
backing of the King and the Reserve bank, many of the old banks were either
forced to declare bankruptcy, or forced to become gold banks, following the
model of Henry’s bank.
Chapter 12
Henry and
his friends greeted this news with delight. Henry’s bank became a world
renowned bank, while Korgan’s People’s Bank was forced to declare bankruptcy.
Henry decided he would buy the remnants of the People’s Bank.
Henry tore
down the old People’s Bank building and, in its place, had a brand new building
built, as per his specifications. Henry was finally able to realize his dream,
he designed a grand, beautiful bank building, on the very spot where, a long
time ago, he had originally deposited those 1000 gold coins.
THE END.
Note: For any reader interested in the actual historical account of the changes in monetary policy in the western world, as well as the theoretical concepts of Austrian monetary theory that have inspired this story, I would recommend Murray Rothbard's, What Has Government Done to Our Money? available for free here: http://www.mises.org/document/617/What-Has-Government-Done-to-Our-Money. For a great look into how the various banking systems loosely described in the story operate in the real world, I would recommend Murray Rothbard's, The Mystery of Banking, available for free here: http://www.mises.org/document/614/Mystery-of-Banking-The
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