Paper money

. . . .the invention of paper currency, one more modern idea that Faust en.wikipedia.org/wiki/Goethe%27s_Faust and Mephisto en.wikipedia.org/wiki/Mephistopheles concot as part of their takeover the world. Let us recall the alchemical and magical practices still play a big part in the first Walpurgis Night. en.wikipedia.org/wiki/Walpurgis_Night There, Faust dosed with fluid god, a magic potion that makes him young and attractive so that he can make a conquest of Gretchen. But not until the paper money scene is the level of genuinely modern sorcery reached, namely, the creation of value from speculation on the future, i.e., from nothing. Apparently, the whole idea is quite simple; it just has to occur to you. Money has become short at the imperial court, with state indebtedness becoming immesurably large. What’s to be done? Faust’s and Mephisto’s idea is this: perhaps there is gold -- some natural, some buried -- to be found in the ground. The emperor should use the real estate tht belongs to him as security against an increase in the amount of money in circulation. And so they print paper money. On each bill are the words,

Herewith let it be known to all and sundry;
This paper’s worth a thousand crown of money,
As for the pledge of what is in your hand:
Vast riches lie beneath the Kaiser’s land.
And it’s been all arranged: this buried wealth
Replaces the paper as soon as it’s unearthed.

This by the way, was the very same idea behind the introduction of the so-called Rentenmark after hyperinflation in 1923, for the Rentenmark was backed by the real property of the German empire.

It also seems the best solution to the emperor in the paper money scene in Faust. More money is put into circulation, secured by real properly. Moreover, in this way money becomes unprecednetedly liquid. People don’t have to drag around gold coins, that heavy form of cash:

A banknote handy carried in the breast
Where it pairs nicely with a billet-doux.
The priest keeps on devoutly in his prayer book
It lets the soldier turn around right quick
When he can lighten the belt around his hips.

Two things are needed for the whole scheme to function. One is imagination: you’ve got to be able to imagine the real value on which the paper money is based. The other is trust: you need to trust that the valuation is correct, which is why verification by a higher authority is required -- in this case, by the emperor.

This is not exactly the way Faust had imagined it, however. Goethe, who for some periods was also in charge of the duchy’s finances, had been inspired by the financial revolution put in motion by the Bank of England when it began basing the amount of money in circulation not just on gold and existing securities but on the expectation of further creation of real value to which the increased circulation are meant to contribute. That is also Faust’s intention: to crank up production by putting more money into circulation. But instead, he only unleashes consumption until there is nothing left to consume. The final result is inflation, the ‘paper ghost of guilders.’ . . . . Page 535