I’ve been reading lately about what happened to Spain in the 1500s following its conquest of Latin America.  The Spanish created mines and drained the area of its gold and silver, receiving a huge infusion of unearned money.  One might suspect that this windfall turned Spain into an economic powerhouse.

But some funny things happened when the easy money arrived.  The Spanish king proceeded to spend a huge amount of the nation’s reserves on wars against the enemies of Christianity.  The nobility and upper-classes poured vast sums into new estates, palatial homes, and luxury goods imported from other countries.  Many in the “lower classes”, attempting to emulate the gilded, ostentatious lifestyle of those “above them”, abandoned productive jobs and rushed into speculative pursuits.  Little of the new money was invested in domestic industries and tariffs were dropped to meet consumer demands.  In the end the new money flowed out of Spain, the local industries crumbled, and the nation ended up nearly bankrupt.

Sound familiar?  Replace the words “gold” and “silver” with “credit” and “leverage” and you have a pretty accurate description of the USA over the last fifteen years or so.  The parallel experiences of Spain and the US five hundred years later seems to suggest that you put the interests of finance and speculation over real investment and production at you own peril.  It also suggests that there’s a big difference between creating wealth (as real industries do) and making money (as stock market players and bubble speculators do).  You can make a ton of money and not create any wealth.  Making $100,000 flipping a house or trading stocks creates the same amount of real wealth for a country -- zero.

An enticing idea has been floating around for a while but not getting much attention or traction.  The idea is simple and straightforward: place a small transaction tax of one penny on every stock market trade and use the proceeds to invest in real industries that create real wealth.  In this way you tap speculation (ie money making) and use it to create real, long-term wealth.  At a very small cost to speculators the nation could give itself the means to launch a real program for building the industries of tomorrow that it desperately needs.

Getting that penny out of the speculators will undoubtedly be a fight.  But if the tea-partyers are any indication, working people won’t be ponying up the investment money anytime soon.  And they shouldn’t have to.  They’ve been surrendering their pennies for long enough while they work at companies that create America’s wealth.