What is Money ?
February 16, 2010

 Besides being the root of all evil, according to some we should ask ourselves what is money.   One of the most common answers is that money is a medium of exchange.   It allows for anything to be traded because everyone put a value on money.   No matter what your product was you were willing to exchange it for money,  knowing that the seller of whatever product you needed to buy in turn would gladly exchange it for the money you had to give to him.  

The important thing was that everyone placed value on whatever was used as money. Gold and silver in modern times but rice, shells, large stones for example were once used. The Indians believed wampum beads had value so they were willing to sell land, pelts and goods for a few beads.   That sounds crazy but is in fact less crazy than a 10 euro note. The money itself had an intrinsic value. The bead itself or an ounce of gold was worth a value. It took an equal amount of effort to get the ounce of gold out of the ground as it did to produce the product it would buy.   The value of the gold did not fluctuate much and neither did the value of the product.   It was a pretty good unit of measurement. Things began to go astray when the bankers entered the picture.   They began as simple metal smiths.   They coined the metal into coins.   They of course kept some metal on hand to work with.  They offered to hold the excess metal of others in safe keeping.   In time they issued a receipt for the gold which was acceptable to trade as it could be exchanged for the gold at any time.   The hidden secret was that as long as the gold was not withdrawn then who was to say the bankers were not issueing more receipts than there was gold in the vault.   As they had the use of the gold they could lend it at interest and make money on other peoples money.   It was a great moneymaker.  

The bankers hit the jackpot in 1694 when they convinced the King of England to allow them to set up the Bank of England.   In exchange for them lending the King money they were allowed a monopoly and given the right to issue the currency.   The King would borrow as much as he liked.   The interest paid the bankers was gravy and the debt was never intended to be paid back but to continually rise.   The King passed the Legal Tender Laws and created a demand for the new currency because taxes had to be paid in the new notes.   Eventually the peg with the gold was broken entirely so the central bank could just print as much as they liked.   The money no longer had intrinsic value and was a fiat currency.   To nobody’s surprise they have printed trillions since then.   

Now the question is  “Why should the bankers be allowed to print money when by doing so it decreases the value of money already in existence?”   Everybody is getting robbed.   When the Bank of England expands the money supply by 200 billion it means that most are worse off by 200 billion and a few have gained 200 billion.   The unit of measurement called the pound has been reduced in size.   It is dishonest plain and simple and is theft. It has allowed the government to spend money not honestly gained in taxes. The result is a hidden tax called inflation.   If inflation is 10% you are paying 10% tax and most do not even realise it.  

Any society must have a currency which does not lose value.   The supply must be kept constant. It is not necessary to back a currency by gold, necessarily.   As long as the state issues the currency directly and keeps the supply constant that is fine. The issuing of the money must be taken away from the bankers.   This calls for a balanced budget and not state borrowing.   It also calls for the fractional reserve banking practices to be outlawed.   It is called a sound money policy and inflation would be a thing of the past.  

One step toward a just society.

Youngdan   16. 02. 2010

Reginald's Tower Waterford - The First Mint in Ireland