In my last article, I asserted that money is not wealth. That wealth is instead, an excess of time and energy that can be shown by material goods that are of value to, and/or serve a purpose for the owner, and while money can be used as a medium of exchange for our time and energy, I would argue that it’s merely a representation. Like a photograph is a representation of a person. It may look like someone you know, but hugging it won’t get you hugged in return.
The first and largest problem with money is the tendency of people to mistake it for wealth. This mistake leads people to try to collect it, even to hoard it. All the while not realizing that with a mere whim of a changing attitude the money reverts back to the same value as the material from which it is made. The likelihood of this happening is increased by the hoarding. As the medium of exchange is made harder to obtain, it will eventually reach a point where the majority of the population will, of necessity, find another medium of exchange to replace the original. If its fiat currency printed on paper, its best use might be to start a fire to keep you warm. If, instead of being paper it is just a magnetic mark in the computer in a bank, it has even less value. Even if it’s gold, the actual uses for gold are highly limited. As a metal it can’t be used for constructing anything because it’s too soft and won’t hold its shape under stress. It’s an excellent electrical conductor, but there are others that serve nearly as well and are not as scarce. Its most common use is as an ornament. This is a use that doesn’t multiply energy or time and in the grand scheme of things helps no one and nothing.
The second problem with money is that intelligent individuals who are either misled or unscrupulous can find ways to manipulate it to increase their own supply without adding anything of value to the society as a whole. Mere manipulation of money doesn’t create food, or housing, or tools. What it does create is debt which is then used to capture the time and energy of those who are actually creating something of value to improve the overall lot of society. These debt holders are the functional equivalent of slave owners. Like the slave owners in my last article, they capture the time and energy of other people strictly for their own enrichment. Whether the slave enters into the captivity by choice or by force is irrelevant, he or she is still a slave. In a society that ostensibly abhors slavery, this is a morally indefensible position. This is the position of the privately owned central banks of the world. The Federal Reserve and the EU Central Bank fall into this category.
Here’s how they work:
Take a single Eurodollar. To keep things simple, we’ll assume it’s the only one in existence. It is loaned out from the Central Bank to a local bank so that it can be put into circulation. It’s loaned at 1% interest. As of the first transaction, there are more eurodollars owed to the Central Bank than exists by 1%. The same is true if we multiply that single Eurodollar by a trillion, or ten trillion. There is still more owed to the central bank (by 1%) than there is in existence. What the central bank has accomplished by being the only source of the medium of exchange and loaning that medium out is they effectively acquired the entire economic power of everyone using that currency. Without giving anything of value to the users of the currency, they have stolen all of the time and energy, the real wealth, of the society. This is true because all of the currency in circulation represents all of the goods and services (time and energy) available in the economy. All of the goods and services, plus 1%, are owed to the central bank.
Have I got your attention yet? Is there a solution to the conundrum?
As I stated in the last article, there is always someone out there who will exchange their time and energy for yours. The trick is finding them and establishing an exchange rate. If an exchange medium is used (dollars or other currency) then the transaction is further complicated by manipulation of the currency. If any individual transaction is compared to other transactions, that too can be an impediment to completion of the transaction. A healthy economy requires that all transactions be completed easily and consistently for everyone involved, but when people become confused about the reality of wealth and mistake money for wealth then it’s the acquisition of money that becomes the reason for the transaction. This drives every transaction to cost more in terms of money and rather than enriching those who gather more money, it causes the money to lose value in terms of real wealth. This is called inflation. Given this perspective, inflation has little to do with the number of currency units in circulation and much to do with greed and the confusion of money for wealth.
Concerning the economic debacle of 2008, there are pundits in the world who insist that the United States lost a significant portion of the wealth that had been building up over the last several decades. I disagree. Since the time and energy used to create the homes is still there in the form of the homes, what really happened is that the medium of exchange gained significantly in the amount of value it represents. This is very good for the central banks. Since the number of dollars the populous owes them is the same, but the amount of time and energy represented by each dollar is increased, you and I owe more of our time and energy to those banks. We’re destined to be slaves for a longer percentage of our lives. This is why the financial sector needs heavy, even burdensome regulation.
Long time denizens of PolicyMic will notice a lack of citings to back my statements in these last two articles. These are opinion pieces and represent only my opinion on the matter. My opinion is subject to change given contradictory facts. There will also be another installment in this series.