united for freedom 

Money: what it is

The biggest problem this world has is money yet who realizes money is a problem except in its lack and so we think we shall solve our economic problems by getting more money when money (or the currency we use) is actually the source of our problems.

Money does not exist as an emprical entity - money is just numbers representing value. The paper you carry around is no more real than the numbers in your chequing account. These are currencies or the hysical manifestation of money.

Paper money is paper used as money because it is paper given a number that represents a value. Paper money is not real money because nothing is real money. Currency is a convention. Money is simply the quntification of value akin to the marks on a wall we make when we are keeping track of the days without the use of a calender. The days are not the marks on the wall and money is not the paper we pass back and forth.

Anyone can make numbers on pieces of paper of designate something as money without reference to anything the banks do or own. Indeed banks do not use what they tell us is money when they transact business between themselves, they merely use debits and credits listed in accounts.

No one has more right to make money (in the literal sense) than the people who create the real wealth. Money is simply the wealth we create. Wealth is given a numerical value to make it easier to exchange goods and services. Instead of bartering chickens for bread we barter numerical values for assets.

Inflation is when the numerical values are tied to assets that have commercial value because this has the tendency to create self-reinforcing feedback loops. It is something those who propose a return to the gold standard do not understand but then all the financial institutions that fuel speculative bubbles seem not to have grasped this fundamental fact either.

If cigerettes are used as a currency then they will obtain a value above and beyond there value as cigerettes. It will not just be those who smoke cigerettes that will want to own and even horde them anyone who buys and sells will also need a supply. The harder it is to get cigerettes the more their value will inflate relative to other goods.

Rational Exchange suggests that what the economy needs is a way to eliminate cigerettes to the level where they have no value as a currency whatsoever and yet leave the use of cigerettes intact, Of course this poses a rather serious phenomenological problem being as the use of cigerettes as something to smoke and the use of cigerettes as a form of currency cannot be put into different realities.

Currency is primarily created by banks and lent into circulation creating debt and interest payments and of course inflation. This makes bank money a commodity with a price and a value and it is this that Exchanges serve to eliminate by the issuance of Carbon Neutral Currency (CNC). CNC takes the commercial value of money away from the currency we use.

Money is created and used when we wish a value to be swapped for an asset to balance the account books that exist provisionally behind the economy and which guides the buying and selling we all do. Money is really just a way to balance accounting. When we sell a chicken a chicken or its value is owed to us. We could write down or record the fact that one chicken is debited and one chicken credited and balance the books this way but this would provide wrong information as no chicken has been received and we may not even want a chicken in payment since what we need is milk. By putting down $5.00 in the credit colomn we know there is an unspecified asset due us valued at $5.00 which at some later date can be redeemed for milk.

Currencies create a more convenient way to record debits and credits than using account books. It is at heart just a numerical quantification of value by which we keep accounts. Anything that can be denominated in multiples of itself can serve as a currency, whether these be coins, cigerettes or pieces of paper with numbers on them or just the numbers themselves arranged in ledgers. It all serves as money because they are all a form of currency.

 

 

 

 

 

home

about us

contents

time

money

money 2

economic paradox