Money has gotten so arcane that very few of us really understand it. Certainly, I do not. It used to be easier to grasp the thought. We carried bits of precious metal and traded them for goods and services. Then we decided that was too much trouble and we issued pieces of paper that were promises that we would deliver bits of precious metal upon demand. Then we decided that the precious metal bit was getting in the way of commerce so we just issued pieces of paper that were “backed by the government.” Then, we decided that the pieces of paper were getting in the way of commerce, so we invented plastic. And now we have trained our smart phones to keep track of our commercial interactions “electronically.” Some of us carry “real” money around today primarily for sentimental reasons and to facilitate purchases in the underground economy. If you really wanted to understand money, you would have to understand how big banks work, how hedge funds function, how the Treasury Department issues pieces of paper, how the Federal Reserve buys those pieces of paper, and what all of that (and a lot more) means to the “value” of the money in our bank accounts and our retirement funds. And then there is credit. If you have “money,” credit makes it possible for you to pretend that you have more. You can then use the pretend money to engage in activities designed to make more money. If you succeed, you give some of the profit back to your creditor and borrow some more. The cycle goes on indefinitely unless you screw up and don’t make more money. If that happens you go broke. Seems simple enough until you focus on the fact that none of the money, real or pretend, actually exists other than in the figures on a screen in one or another financial institution. A very long time ago we had a much better idea of how much money we really had as an individual and as a nation. People were actually assigned to count gold bars and keep track. Today, money has, to some extent, become an abstract concept for most of us. This makes it easy for many of us to believe that the government is infinitely wealthy. This has obvious implications, one of which is a constant demand that the government should do more to improve our standard of living. I confess that I am old school conservative when it comes to this subject and it impacts my views on a lot of the issues that are before us today. Obviously, I am not advocating a return to the gold standard, but I am uncomfortable around easy credit and worry about excessive debt. I believe that money has value in large part because we believe that it does. I do not believe that the government is infinitely wealthy and I worry that our monetary system has too much pretend money in it. It is one of several reasons why I would like to reduce the size of government.
Posted on: Thu, 06 Nov 2014 16:18:52 +0000