Roy talked about money. “Money is a matter of functions four, a medium, a measure, a standard, a store.” He repeated that four times like poetry. “Six Characters in Money: Portable – Durable – Divisible – Uniformity – Limited Supply – Acceptability.” With a sentence about each, his passion came through. He ended with “The first golden coins in history were coined by Lydian king Croesus, around 560 BC.’Rich as Croesus’ survives to this day. It’s been all downhill since then.”
— CHURCH 10●19●62 Chaper 22 page 110 “Roy’s entertainment”
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You asked me “What happened to the money?”
The answer is that “It’s complicated”.
Without being obnoxious, pedantic, or obtuse.
We have to establish a common vocabulary.
What is money?
Economists use “Robinson Crusoe Island” (There is a real island by that name.) as an imaginary place to perform mental experiments. It’s an isolated lab where we can set up and idealized society with limited players to illustrate a principle.
Populate the island with two castaways Tom and Dick. Tom fishes and Dick collects coconuts. Tom wants coconuts and Dick wants fish. Rather than kill each other, they barter directly. Eventually they decide that X fish is equivalent to Y coconuts. No need for money. And, all sorts of things happen. That we don’t need to study about savings and investing, Nets and climbing mechanisms.
Now introduce Harry. Harry collects potatos on the island. And, lets assume that there is a very strong union that prevents anybody but Tom from fishing and so on. How many fish are equal to how many potatos. Eventually that sorts out.
Now a raft drifts in and twenty people land. How are we going to do exchanges? Tom may want only one potato which is half a fish. So clearly we need a marketplace where everyone buys and sells. Eventually everyone finds bartering troublesome. Typically, the problem is Tom wants what Dick has, but Dick doesn’t want Tom’s fish. So Tom must find some one that has what Dick wants, trade for it, and return a trade with Dick. Very inefficient, time consuming, and ineffective.
Someone decides that seashells will be the medium of exchange. It’s beyond the scop of this how that decision happens. But eventually everything gets priced in seashells and you have money. Seashells are a problem because you can go to the beach and find them. An infinite supply. Sooner or later, there is genral agreement on somehting that is: Portable; Durable; Divisible; Uniform; Limited in Supply; and generally Acceptable. Let’s say it’s gold and silver coins. (Wampum, Cowery shells, the Great Stone Wheels, and the large totems have been money in strange places.) But eventually everyone used to settle on it.
So our market prices everything in gold and silver.
It’s: Portable – Durable – Divisible – Uniformity – Limited Supply – Acceptability. And it serves as: a medium of exchange, a measure of value, a standard of value, and a store of value.
OK so far. That goes from pre-history until the humans find paper or it’s equivalent.
Then gold smiths start acting like banks and issue receipts. Those receipts eventually turn into paper money.
Kings steal for the marketplace by adulterating the coins. Inflation!
(Go to the Smithsonian. See the Smithsonian exhibit of French Franc throughout history. From the hockey puck of gold from Louis 1 to the paper thin collar button of Louis XVII! It’s a visual of what every gooferment does with its power to define money for us.)
Fast forward to FDR in 1930 something. He takes the US off the gold standard for money. And, gives us Treasury Greenbacks, the eventually become Federal Reserve Banknotes. Redeemable in nothing.
Nixon in the Seventies completes the theft by closing the international gold window.
So now we have money that is NOT a standard of value, and a store of value. Ask anyone what is a dollar and you’ll get a blank stare.
So now you’re an expert in “money”. When the federal gooferment prints money, they can spend however they want.
The rub becomes return to Robinson Crusoe Island.
We have those people using seashells as money. And, Tom when fishing finds a lot more shells. He “spends” them in the market. Gets stuff for them. eventually prices rise to recognize the new amount of money in circulation. (Inflation!)
Producing more money doesn’t produce more goods. Wealth! The number of coconuts that Dick gathers is relatively fixed. Printing more money doesn’t produce more coconuts. It just makes them more expensive.
Now, you have to figure in savings and investment. Tom could stop fishing for a week and make a net. There has to be fish and coconuts for him to live on until the net allows him to catch more fish. There MUST be savings (delayed consumption) before there can be investment (Tom’s ability to make a new net.)
See the problem is that savings must delay consumption. When the gooferment counterfeits the money, some where some how some one must defer consumption to allow investment. All the money tricks in the world over all of man’s history can’t conceal that fact. Some one has to feed Tom while he makes that net.
The gooferment can print all the money it wants, but it can’t create wealth (i.e., food for Tom).
Right now the poor Chinese are “saving” and everyone is consuming.
What happens when the “poor” Chinese want to spend their savings?
When the money was gold, and it was relatively fixed, the gooferment had to tax or borrow, to spend. Now it can “inflate” (i.e., monetize the debt).
But it still can’t produce wealth for Tom to eat while he creates a new net.
It humorous to hear the politicians talk about “investment”! They are spending.
There is no “wealth” to allow them to spend.
The gooferment is bankrupt.
Robbed by the takers of all ilk.
All because we have forgotten what money is!
“The trouble with socialism is that you eventually run out of other people’s money.”
–Margaret Thatcher
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We’ve run out.
And it won’t be until the American people wise up that the merry-go-round will stop. But it will stop!
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