Man invented money. It is not a process of nature like gravity or sunlight. Man conceived of this thing called money to make it easier for folks to trade stuff.
Money is not a physical thing; it is a mental concept, a social contract. It is nothing more than information, often disguised as a coin or a paper bill. And what is the information that it carries? It is that the bearer is entitled to exchange this money for various items or services.
The money has many other uses: it can be stored up for later use, it can be invested, it can be given as gifts, donated to charities, loaned, gambled, willed, used as bribes, paid as taxes... the list of its uses is long.
The ways to obtain it are likewise many. Money can be had as wages, as interest on investments, as an inheritance, by government grants, by theft, by gambling winnings, by bribery, by finding lost money, by selling goods or services, and so on.
Money has become so embedded in nearly all of human behavior that it has far surpassed its original primitive function as a substitute for physical things in trading.
And yet we think of money in much the same way its primitive inventors did.
Please follow me below the fold to consider the implications of this disconnect.
Economists and financial leaders will not deny that money is intangible, that it is purely conceptual. And yet they treat it, probably unconsciously, as a physical thing that is in limited supply.
The presumed limits of the money supply have resulted in concepts and situations damaging to human society and to our world, such as national debt limits, spending caps, spending cuts, austerity, deficits, taxation, borrowing, hoarding, bankruptcy and more.
If one views money as possessing characteristics of physical things, the obvious conclusion is that the amount of money in the world is limited, as all physical things are. And since it is limited, all the money in the world is already owned by people and by other entities such as governments and corporations. And if all the money were spread around equally among the world’s population, individuals would each own only a small amount. Therefore, for an individual to become wealthier, others must become poorer. And thus there is no cure for poverty because there will always be competition for the limited amount of existing money, and the smartest and most aggressive will gain the lion’s share of wealth.
These seemingly logical ideas are pervasive in the world’s population, but they are probably rarely adopted through rational analysis; rather, they are mostly unconscious beliefs derived from many centuries of following our primitive ancestors’ views of money—beliefs practically embedded in our DNA.
But if economists agree that money is a concept rather than a physical thing, why do we have the world’s leaders acting as if money were physical and limited? Concepts do not possess the same limitations as physical stuff like gold or oil. Concepts can be limited or unlimited depending upon our will to make them so. We cannot change the limits of physical stuff (unless we physically destroy it).
When our leaders refer to deficits, spending caps and austerity, they are assuming that there is a physical limit to a nation’s or the world’s money, and they know what the limit is. When corrupt leaders declare that citizens must survive with less government assistance, they are doing so not only because lobbyists for wealthy groups have paid them to do so, but also because both they and the lobbyists are afflicted with concretistic thinking about money, a holdover from "Stone Age" trading notions.
The world’s economy needs to be humanized. If world leaders agreed that money should be based upon human needs rather than its relationship to commodities, goods and services, these beneficial results could follow:
- Taxation would be unnecessary, since a government can produce as much money as its needs require.
- A Basic Income Guarantee could be applied to all its citizens.
- Needed government programs such as infrastructure building and health care could be funded at levels based upon need rather than upon arbitrary federal budget limits.
- Poverty would be eliminated.
- Recessions and depressions would be eliminated.
- General prosperity would ensue.
- Capitalism could continue as usual.
- Governments might no longer be viewed as enemies of the people.
It should be obvious that the main function of money is to facilitate or make possible a vast array of human behaviors. Even life itself usually depends on the possession of money, as when parents decide whether or not they can afford to have children, or when people die because they cannot afford proper medical treatment. Over the ages, money has become involved in, even critical to, virtually every aspect of human existence. It has evolved a long way from its prehistoric role as a shiny metal to trade for food.
From my book
Governments can declare that all men are created equal and endowed with inalienable rights, but it can do little more to advance and preserve these rights, because they usually require money. A Basic Income Guarantee (BIG, similar to Social Security, for every citizen) would be beneficial in this respect.
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I very recently discovered that there is an organization promoting BIG. Although discussions have been held for many years, no agreement as to the funding mechanism for a BIG has been reached. I believe that recognizing money as informational, carrying the information that the government certifies that the bearer can use it for any of the usual uses of money, would provide a funding means for BIG.
These are obviously radical proposals and I have no way of guessing what their chances of adoption are, but at least I can toss these ideas out for discussion. Once they are injected into the conversation they cannot be taken back, and hopefully they will eventually take root, producing a better world not screwed up by a dysfunctional economic system.
BTW, I am not an economist, so you can expect to find naivete and misunderstandings about formal economics, but hopefully nothing that undermines these basic ideas:
1. Man invented money, a non-physical entity.
2. What man invents, man can change.
3. Our present money system is dysfunctional.
4. Money must be humanized by tying it more closely to the real needs of people.
I posted an earlier diary on this topic, my first diary effort, but it quickly scrolled out of sight. I had promised another, hopefully better one. My book goes into much more detail. I would really like to make these ideas go viral to promote a serious discussion. They would hopefully be an answer to many of the difficult problems facing the world.