Tuesday, September 29, 2009

Understanding the nature of money

Money - most people are interested only in acquiring more of it, whatever its nature happens to be. The people who run the government and the banks are several giant steps ahead of the pack.

They understand that to get the most money possible they must be in charge of the production and use of money. That is why we use federal reserve notes (or their dictated substitutes) in everyday exchanges rather than gold or silver coins (or their accepted substitutes). Government, through its central bank, issues the notes and mandates their acceptance. The U.S. government no longer outlaws competing monies directly. They don't have to. It never occurs to most people to use anything else because of their lack of knowledge and interest in monetary affairs. This means alternative monies don't have the status of a generally accepted medium of exchange, which means they are not truly money, no matter how otherwise sound they might be.

Imagine if your neighbor could dictate that the paper notes he printed on a printing press had to be accepted as a medium of exchange. Imagine if he could do it but no one else could; anyone else who tried would be subject to prosecution for counterfeiting. Would you expect him to have an advantage when it came to acquiring the goods and services other people produce? Would you expect him to have a major influence on the overall economy?

Further, would you expect your neighbor, no dummy when it comes to money, to understand the possible resistance to such an arrangement and camouflage its nature through various proven methods? For example, when creating a truckload of new money would you expect him to avoid saying he was creating inflation and instead perhaps claim he was accommodating the monetary needs of a robust economy? Would you expect him to put experts called economists on his payroll to tell everyone his jargon made sense and his privileges were necessary for the overall health of the economy?

In short, would you expect your neighbor, as the sole producer of money in society, to abuse that power?

And would you consider such an arrangement a system or a racket?

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