Written by Davian Views

 

“Money makes the world go round.” Like any bit of folk wisdom, it is true only in the narrowest of sense of human economic activity, because if you have no access to money, you cannot participate in human economic activity. The world was going round long before humans and money arrived on the scene, and will still be turning long after they have gone.

Money makes the world go round – however: it is the shape of the world that determines how the money makes the world go round. The failure of economists to look at the shape of the world when doing their calculations has led to massive impoverishment of large sections of the planet, owing to the fact that they have ignored a large portion of the information available to them.

Supply and Demand Observations

Economists observe populations and Corporate Entities with access to money, the actual demand cannot be estimated. The creditworthiness decides access to money, many people do not have access based on this measure.

Technology improves production but decreases the value of that production through the reduction of wages and the economies of scale. While it is true that this price reduction stimulates demand, what happens is that the reduced ability to pay owing to lower wages, is made up for by various forms of credit, giving the illusion that the economy is growing by far more than it actually is.

Money has two functions: a store of value and a medium of exchange. If a particular currency of money loses either of these functions, it ceases to behave as money and other forms will emerge to occupy that habitat.

All activity on planet Earth exists thanks to the power, or lack of it, received from the Sun. All economies need some form of fuel to keep them going too, they are not perpetual motion machines. 

Money of the First kind

“I promise to pay the bearer, on demand, one Goat” – or was it a sack of oats ?

The very first form of money was Carbon. As life itself was based on Carbon, in order for life forms to survive and reproduce themselves, they needed Carbon: the first economy was the food chain, and so for the first four billion years this economy grew and prospered as new forms of life developed to exploit the ever expanding and diversifying web of life on Earth. There were recessions and booms, primarily depending on the weather, to which each lifeform was suited to thrive. Not to mention the occasional depression when a large meteor hit, and produced the wrong kind of clouds!

The Carbon Cycle is in essence a symbiotic trade between animals and vegetables. Animals release CO2 and vegetables capture CO2, via the mediums of the atmosphere and oceans. The land, (whether above the oceans or below them) provides both the medium and mineral resources that animals and vegetables need to exist. This cycle maintains the Optimum Relative Balance or ORB for life to survive and thrive.

Money of the Second kind

In 1844: “I promise to pay the bearer on demand, 7.32 grams of gold for £1.00”. 

20th April 2020: 7.32 grams of Gold costs £1369.00 to buy.

As primates rose to dominance, their puny stature was supplemented by tools, such as fire and the bones of the dead which make a handy clubs. Although they had bigger brains, most of the extra brain power was devoted to social climbing, once the minimum of hunting and gathering had been done. Tributes were organised for those at the top of the social ladder, by those wishing to improve themselves. The rarer the tribute was, the more valuable it was, so gold, silver and jewels became highly prized. They also had the advantage of being portable, unlike Carbon, in the form of Topsoil, which was much too heavy.

Gold and Silver have been stores of value for over five thousand years, for the simple reason that they do not rely on promises: if you own Gold or Silver, it belongs to you, there is no counter-party risk of a broken promise. 

Money of the Third kind

“I promise to pay the bearer on demand the sum of twenty pounds”. Twenty pounds of what’? Twenty pounds of nothing, just what it says on the note.

Once money is freed from the constraints of being tied to a physical commodity such as Gold or Silver, and becomes an article of faith as the US Dollar did in 1971, peoples perception becomes warped, and they judge the value of one promise, e.g. the US Dollar against another, e.g. the Pound Sterling or perhaps the Zimbabwe Dollar. An observer from outside the system would be extremely puzzled as to why one promise which has an intrinsic value of nothing should be worth any more than any other. The players within the system are watching events with an eye to see which emperor appears to have no clothes first.

At the same time the money they are using is being measured against tangible commodities, which makes valuing things in multiples of nothings, i.e. promises of nothing, whichever currency you are using, part company with reality entirely.

[To be continued tomorrow with Part 2]

 

Photo by AZAdam

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