Thursday , 15 November 2018

Why Do We Have ‘Money’? What’s It Supposed To Accomplish?

Let’s think about the origin of this idea called ‘money’. Money, technically, does not exist within our greater material universe and there is no such ‘thing’ as money on planet earth, so why do we have ‘money’ and what is it suppose to accomplish?

 

 

This version of the original article, by Donald Swenson, has been edited* here by munKNEE.com for length (…) and clarity ([ ]) to provide a fast & easy read. Visit our Facebook page for all the latest – and best – financial articles!

What Is ‘Money’?

Money is actually ‘invented’ by people in a marketplace as they negotiate an exchange of ‘value’.  Money and Value go ‘hand in hand’ as mental concepts! Since ‘Value’ is subjective and imaginary we invent ‘money’ as a proxy (substitute) for this concept called ‘Value’.

The Concept of ‘Value’

…When I can exchange my product for your product or for a ‘money’ item which you give to me, the underlying issue in our exchange is this concept called ‘Value’. What is the ‘Value’ of my product and what is the ‘Value’ of yours?

We need to exchange ‘Value’ for ‘Value’ and this can be difficult at times. We need to understand that this concept called ‘Value’ – say of my smartphone – is subjective. The ‘Value’ of my smartphone may change from one venue to the next. It may also change based on the desire of a buyer who wants to own my smartphone.

What is a dollar, though?

Any exchange from me to you is made easier if we have invented some ‘money’ item to exchange (say dollars). I get your dollars and we monetize my smartphone with these dollars. This makes the transaction logical and real.

  • This currency unit needs to be ‘invented’ by some official authority so that I have confidence that this ‘dollar’ has ‘value’.
  • In reality, a ‘dollar’ does not exist until we ‘invent’ this concept and make it real for buyers and sellers.
  • If we ‘invent’ a dollar and then ‘define’ this name as one ounce of silver (let’s say), then I have a good idea what I am getting in exchange for my smartphone but,
    • if we fail to define this currency concept and you merely give me the ‘name’ and ‘symbol’ ($1.00), then I would not exchange my smartphone for this imaginary number/symbol…

America’s history of money started with the Plymouth Rock traders back in 1620… These traders (people from Europe) found that trading items with the Indians gave them items for their survival.

  • Trading cigarettes for deer skins was one trade that worked.
  • Trading silver coins for a bushel of corn was another trade which worked.

Gradually, the Plymouth Rock leaders invented the idea of private property and the idea of a money item for trading…

  • Over time, the best item that emerged in the marketplace was silver coins of a specified weight (say one ounce of pure silver).
  • This coin could then be given a ‘name’ (say dollar) and then we could trade these dollars for other items in the marketplace.

Over time this definition of dollar was changed to a paper note (convertible into one ounce silver). Then in 1934, FDR changed the definition of dollar to a mere paper Federal Reserve Note (no silver allowed).

What is our dollar today? You may be surprised.

Today, our dollar is a ‘digital’ number (a digit) within our computer screen. This digit is revealed as a ‘number’ in our smartphone screen (or computer screen). This number is really nothing physical. A banker can merely ‘type’ this ‘number’ into his computer screen and then set up an account for me/you based upon this transaction.

The goal of banking today is to eliminate all paper notes (called dollars) and all metal coins (called dollars) and transact exchanges with mere digits in the computer screen. Is this sound finance? Is this cashless world viable for trading internationally?

The problem with mere digits in the computer screen is that these digits are not a real ‘thing’ which we can access directly. All we can do is ‘visualize’ these digits in our computer screen. I can not access the ‘number’ (digit) as this ‘number’ lives in this imaginary space called ‘cyberspace’ so, essentially, our money (currency item) has evolved into a mere ‘number’ typed into cyberspace (the computer screen). The ‘number’ has no independent existence in real-time. Is this sound economics and finance?

I would suggest that a mere ‘number’ typed into cyberspace is equivalent to a counterfeit dollar unit. A banker does not need to mine or produce this dollar from the soil of planet earth, but he/she merely can ‘think’ up numbers in their mind and then ‘type’ these numbers into the computer screen. This means that our so-called money (now counterfeit or fake money) can grow to unlimited amounts (theoretically) and these ‘numbers’ (being imaginary) can vanish and disappear with a market crash…Is this legal and sound monetary policy? Has this type of money been vetted by our Congress and our Courts?

In Conclusion

I would suggest that cyber digits are not real legal tender (money) and these units (imaginary numbers) can not serve as real money which represents value in exchange.

What we have today is FAKE money, COUNTERFEIT money, and a form of FUNNY money. All this fake money must fail at some point down the road.

We need a total RESET of our monetary/financial system after this FAKE money fails…

  • Today, our National Debt is over $21 trillion.
  • Our total debt exceeds $71 trillion.
  • Our unfunded debt is some $200 trillion.
  • Our derivative obligations exceed $600 trillion.

The problems today are monumental and systemic. We all need to understand this concept called ‘money’ and this concept called ‘value’. Also this concept called ‘debt’. Then we need to understand the difference between that which EXIST’s and that which does not EXIST.

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(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)

One comment

  1. You did an excellent job of presenting the essential points from my missive. Thanks. D

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