Cash, currency, paper bills, checks, credit cards, electronic deposits and transfers are all examples of money. But what is it really? What is its real value?
Money, the currency of each nation, is the means of exchange used within that society, the means of exchanging goods and or services earned in the present or at some time in the past and saved for present or future use. It is also a means of setting up the economic pecking order of individual levels within a society. In the United States, for example, the more you earn, the more successful you are. Generally it also denotes to which economic class you belong, what level of economic prosperity an individual has or has not achieved.
Determining the actual value of money is interesting. There is nothing behind any currency other than the word of the nation that issues it or the National Debt of that particular country. Up until 1933 when Roosevelt took the country off the gold standard by collecting all the gold coins, had them melted down into gold bricks, buried them in depositories, issued gold certificates to the Treasury, and had the banks issue paper bills denoting that they were “Federal Reserve Notes,” money had been exchanging value for value. A one ounce gold coin was a twenty dollar piece which could be exchanged anywhere for $20 worth of goods or services throughout the world. The Roosevelt Administration changed the value of gold from $18 dollars an ounce to $36 and required that all gold mined in the United States be sold to the Federal Government.
Historically, the problem was that there never, with the exception of the Sixteenth Century when the gold in the New World was looted and sent to Europe, enough gold available to serve the business needs of the various industrial nations. As a result of this, the amount of gold available for all commerce both within and between nations had been and was stretched by using paper bills that theoretically could be exchanged for gold at anytime. Of course when this was done there was a run on the banks, causing bankruptcies and a depression.
The amount of currency needed in circulation today has to be enough to allow for a full exchange of all needed goods and services in the society. The money itself has no real intrinsic value; it is merely a tool that allows for this exchange. The amount in circulation has historically been arbitrary, generally determined by the amount of gold coinage available, and then partially controlled by the state and by the financial institutions within the society that have continually operated on the basis of pure profit for themselves regardless of the consequences to the general society.
This lascivious control, mostly by private enterprises has led to innumerable economic disasters such as the Great Depression of 1929 and the Real Estate Debacle of 2008; both of which almost toppled the entire society. The two economic disasters were based upon an ever-increasing frantic race for increasing immediate gains, banks and a part of the general population rapidly acquiring massive amounts of currency for themselves. This issue was not understood until well into the Twentieth Century and the assorted nations have never yet exercised their sovereign power to totally control or regulate the money supply.
In the United States the myth that is constantly being propagated is that the Federal Government is inefficient or incapable and that only private enterprise and the Market System can properly run the economic system within the country. It is bogus nonsense! It was the Federal Government that both in 1933 and in 2009 saved the country from total economic collapse. And, in both cases, it was private enterprise and the Free Market System that almost destroyed the economy.
The reason we have had recovery since the bank caused disaster of 2008 has been through the actions of the Obama Administration and the creativity of the Federal Reserve in utilizing imaginative Monetary Policy. In 2009 and 2010 the President and Congress saved the nation from total economic collapse. Since 2011, when the Republicans gained control of the House of Representatives they have done everything they could to hamper economic recovery by their austerity program which has tended to actually shrink a recovering economy. They seem to be more concerned with discrediting the Obama Administration than working to bring about recovery. Their constant cry is to cut government spending, particularly in discretionary programs, and reduce the National Debt. One direct result of their austerity program has been the collapse of a fifty some year old bridge in Washington along a major highway.
Money has no real value; it is a tool that the society uses to exchange some form of labor for goods and services needed for comfortable living. As long as there is no wild inflation, more money being available in the general society than products that can be produced, there is no danger from rapid inflation. .
In the crazy escalation of currency during the Real Estate Bubble that exploded in the latter end of 2008, where people utilized their homes as bank accounts, there was no real inflation, only economic growth. The money supply shrank enormously as real estate values collapsed. We have still not fully recovered from that bank-induced recession that could have toppled the entire economy.
It is time to stop treating money as the ultimate object of wealth and begin treating it as an object of exchange, as a tool that can be utilized to create and maintain a healthy economy with everyone prospering.