Day 244: Transforming Currency into Money with Living Income Guaranteed

In the video "Hidden Secrets Of Money - Ep1 'Currency Vs Money'" Mike Maloney and others present one of the problems we are facing in our current economic system and that is - how the value of our currency is able to change over time - where it can both appreciate and depreciate - but throughout history it has mainly depreciated until it becomes worthless and then a new currency is introduced. The video explains the problem, but it doesn't offer a real solution - which I will be discussing in this blog.

Now - when I said 'the value of our currency is able to change over time' - with 'our currency' I am not referring to a specific currency such as Dollar or Euro or Rand - I am referring to fiat currency. For those who are not aware of the history of our currencies: paper bills were introduced as IOUs - a piece of paper stating that: I owe you 5 gold coins, for instance. Say that you deposited 5 gold coins at the bank. The bank would then write you a claim check that specifies that with that piece of paper, you can at a later time come and claim those 5 gold coins back. Now - over time what started happening, is that when people would go to the market place and wanted to buy something for 7 gold coins, but they only had 2 on them - they would go: "You know, I only have 2 gold coins on me, but I've got 5 at the bank, how about I give you the 2 gold coins plus the claim check for the 5 gold coins at the bank, and then you can just go and claim them." And from there, the ball started rolling and less and less people went to actually collect gold at the bank and started simply trading with the paper claims - which is what we currently know as paper bills. From there, it didn't take long before banks would just start printing money that was no longer 'backed up' by any gold at the bank. From this point onwards - we started trading with fiat currency - a currency that is not limited by the resources that is 'backing up' the value of the currency.

Why does that matter? It matters from the perspective that the amount of gold in the world is limited and therefore, the value of gold stays round about the same over time. What determines the value of gold? It's determined by how much of it is in circulation, and thus - by consequence, how much we are able to buy with it. So - let's take an example of a little village where 10 people live and there are in total 10 gold bars in circulation in this mini-economy. These 10 people have certain goods they want to buy and each a certain amount of gold that they are willing to spend on it. This determines the demand for the goods in the village. The suppliers balance their costs with profits - where they know that if they charge a high price, there will be less villagers able to buy the product, and if they charge a lower price it will become harder to make a profit and eventually even difficult to cover their costs. So - balancing demand and supply - a price for the goods is determined. Now - let's say that suddenly - instead of 10 bars of gold, there are 20 bars of gold - what will happen to the prices? They will go up because the demand goes up. Herein - understand that demand means: people want it and they can pay for it. So - when there is more money - it doesn't mean that people suddenly want more of something - it means they always wanted that amount, but they couldn't demand it because they didn't have the money to demand it. So - with demand increasing - the suppliers will realize that they can now charge a higher price - and so the prices of the goods in the village go up. What has happened to the value of gold? The value of gold decreased, because with the same amount of gold, people are now able to buy less of the goods - because the price went up.

So - with currency initially being backed up by gold - it limited how much money was in circulation - and so, it kept the value of money stable - because it was tied to the amount of gold that was available in the world. Gold is not something we can create - we can melt gold down and change the form but we cannot make new gold. So - the amount of gold we have in the world today is the same amount of gold that we had centuries ago. With fiat currency, however, reserve banks are able to simply print more paper money, increase the money supply - and in turn prices increase and the value of the money depreciates.

So far the reasoning of the economists seems sound - however, it is not - because they are misusing the term 'inflation'.

When they discuss inflation they assume that it means: the prices of all goods and services in an economy go up as a result of an increase in the money supply - and therefore, money becomes worth less and people can buy less and less stuff.

But what is not considered is the following: with inflation - the price of literally EVERYTHING in the economy goes up - and that includes the price of labor. So - from that perspective - if the prices of 'stuff' doubles, it's not a problem, because your wage would have doubled as well. And so - technically - yes - the nominal value of money depreciates - but the real value remains the same: you can buy less with one dollar, but you can still buy the same amount with your wage.

So - this reveals a problem in our current economic system - and how it is deviating from how things should be done. Let's take again the example of a village where there are 10 people and there are 100 dollars in circulation. If the money supply suddenly increases to 200 dollars, suppliers will up their price because the demand increased. Now - this higher price has to also increase the wages of those who work for the suppliers - and when their wage increase, they will have no problem paying the higher price. The wage of the workers would go up simply because they will demand a higher wage through their labor unions because otherwise they cannot pay the higher prices. But instead - what's been happening: the suppliers keep the wages of the laborers the same or only give them a slight increase - and instead: just make a lot more profit. And have a look - that's exactly what's been happening in the world. Why? Because when laborers demand higher wages - what do the bosses say? Well - if you don't want to work for that wage - I let you go and I will find someone worse off than you and have them do the work. That is why we have so many companies that closed down in Europe and America that moved to China and the third world in general - because they could profit from people being worse off there than in their country, that were willing to work for much lower wages.

And this is why within Living Income Guaranteed - we suggest that prices be determined according to the value that was put into it - which includes your labor. And valuing labor means: your workers must have a wage that allows them a certain lifestyle. This should be enshrined in the Constitution as a Human Right - otherwise one creates cycles of abuse where some win and most lose. And so - if all prices in the economy go up because of an increase in the money supply - your wages will have to increase simultaneously - otherwise you're committing a crime against life.

Herein, then - it doesn't matter whether you have fiat currency or not - becaue the real value of the currency remains the same. In the video they explain how the difference between currency and money is that money is a store of value - its value remains the same over time - and with currency this is not part of the definition. So - with making this one adjustment to the economic system, so that it would function how it is intended to function - we would be able to say that our fiat currency is in fact money - because the real value of the currency remains the same over time.

Is it a solution to step away from fiat currency and go back to silver and gold? No! Why not? Exactly because the amount of gold and silver in the world is limited - it doesn't change. But what does change? The amount of people in your economy. So - if you take  again the village of 10 people with 10 gold bars and let's say each owns one gold bar, but now they all make babies and suddenly there are 20 villagers and still the same 10 gold bars - you obviously have a problem - because now each villagers (assuming an egalitarian society) only owns half a gold bar. And yes - the value of gold remains the same: you can still buy the same amount of stuff with one gold bar before there were babies as you can after there were babies - but not everyone has a gold bar anymore - so the standards of living goes down anyway as you can suddenly buy less stuff.

So - to have your money supply absolutely the same over time, regardless of a change in population, is also counterproductive. When it comes to money creation - it should be calculated according to two points:
- available resources
- population

Furthermore - which is quite fascinating - in the video the economists point to history and how throughout history every fiat currency reverted back to zero - and therefore we should use gold/silver instead. But they ignore the fact that throughout history people have always also gone back to fiat currency - simply because it is much more convenient to carry around paper or a plastic card with a chip than a bunch of gold bars. I mean - making gold/silver the currency would eventually lead to history repeating itself, just because it's not practical to transport gold for transactions.

Therefore - instead of telling people to invest in gold and silver because currency will become worthless - and then at least you have something to trade with - rather correct the problem with fiat currency so that it works for everyone.

We continue in the next blog with our discussion on money and currencies where we'll have a look at the nonsense of having currencies with different values.

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• Day 252: The Rich Be Cursed, The Rich Be Blessed
• Day 247: Only in a Broken System does Misery equal Profit
• Day 226: Living Income Guaranteed will Prevent Destruction of Homes
• Day 339: Why the CommonWealth was Never the Common Good

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Day 69: The Functions of Money – Part 3

I commit myself to expose that Money is only a tool – and that we’ve currently accepted and allowed ourselves to use this tool in a way which does Not Serve Life and is Not Best For All – where Money is the tool which gives you access to Resources while at the same time have made it a ‘luxury’ which is not available for everyone – and where one has to ‘earn their money’ and ‘earn their living’ in a system which is not set up to provide money for everyone – and within that ensuring that not all beings born on the planet will have a life of sustenance

I commit myself to expose that how we currently use money is a scam, as money is a made up idea / creation of humans which is supposed to very closely linked to the ‘scarcity of resources’ – while the money which we currently use actually in no way represents the capacity of Earth or is managed in anyway whatsoever with the wellbeing of the planet and its people / animals / nature in mind – and so is just a fraud

I commit myself to expose that money backed up by gold or silver or money backed up by nothing is the same thing – as one is merely backing up one symbol representing ‘money’ with another symbol representing ‘money’ – where both are physical substances/manifestations to which we humans have attached a ‘special value’, where it is only valuable because everyone agrees that it is valuable – but that doesn’t make it valuable in fact – because as long as money is backed up by anything which has got no relation to Life and Sustainability we are just going to recreate the same system over and over again – as the money system will have no practical relationship with Life on Earth

I commit myself to expose that Money is not the Root of all Evil, and that a ‘moneyless’ society is not the Solution to the Problem, as Money is not the Problem but we Humans are – and thus we have to change the human as the human nature as our accepted and allowed value system where we value wants over needs and are okay with half of the members of our species living a life of misery if it means that some of us can do whatever the hell we want

I commit myself to expose that any money economy which uses money as a tool which gives people access to resources in order to sustain themselves, and then does not allow the system to work in a way so that all have access to the necessary money to get the resources they need – is evil – and those who accept and allow the system are equally evil – and such a system ought to be put to an end as it does not have the Best Interest of All Life at heart, but only the best interest of a few as those who have Money and such a discriminatory system is UNACCEPTABLE

I commit myself to show that Money works based on agreement, and that this agreement can be changed – and thus I commit myself to show that Money can be used in a different way as in the Equal Money System where all have access to money so all can have access to the resources they need – because Money is backed up by Life, and thus all get money by virtue of being Life and not because they had to go and “earn” it and prove that they are worthwhile to be kept a life by a Capitalist System that does not give a Shit about Life and who Lives and Who Dies as long as the creators of the Game and the Main players get their way

I commit myself to educate those who are willing to hear on how the Economic System and the Money System works, so all can realise what a SCAM it is, and that all the difficult and sophisticated sounding words and constructs are mostly just Band Aids for a System which is Doomed to Fail and within that educate / show that we can have a sustainable economy as the Equal Money System, which is PRO-LIFE and the first economic system which will distribute and manage resources responsibly while at the same time making sure that all constituents of the Earth are taking care off and that no-one is left behind -- which is what Economics was supposed to be about ALL ALONG

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Day 68: The Functions of Money - Part 2

I forgive myself that I have accepted and allowed myself to have created a money economy, where money has no practical relation to the physical reality and sustainability – as money can simply be printed or made up out of anything without anyone regulating whether the amount of money in circulation actually represents the capacity of the Earth – as all our economic system currently cares about is the ‘pursuit of happiness’ -- but this ‘pursuit of happiness’ is only available for a few, where a few will have access to the majority of the resources while everyone else is being deprived – where an elite is living a lifestyle of abundance which is unsustainable with no regard for present and future implication / consequence

I forgive myself that I haven’t accepted and allowed myself to see and realise that the belief that money is only worth something when it is ‘backed up’ by ‘gold’ or ‘silver’ – is in fact false , as gold and silver are just material substances, like paper – which we’ve assigned particular values to, and so within backing up ‘paper money’ with ‘precious metal money’ is the same as backing up money with money – where we’re backing up one symbol representing money with another symbol representing money – which is the same as not backing up your money with anything

I forgive myself that I haven’t accepted and allowed myself to see and realise that even if money was backed up by gold or silver – that this would make no change whatsoever to the current situation in the world and the enormous inequality gap we are faced with – as the problem is not the money but us humans and our distorted value system, as we only value our limited self-interest and care only about our ‘personal pursuit of happiness’, without ever considering the happiness and wellbeing of the whole, as the whole of society and all living beings involved – and thus as long as we do not sort out our values it doesn’t matter whether our money is backed up or not – we’ll still be on a straight track to our own self-destruction as our value system is unsustainable and as far removed from physical reality as can be

I forgive myself that I have accepted and allowed myself to blame money as ‘the root of all evil’ – without seeing and realising that money is merely a tool, a concept to facilitate exchange and the allocation of resources – and the only real Evil is us humans, as we are responsible for the Equation through which money flows, which currently is seated within Inequality as the current Money Equation favours those who Have over those who Have Not – and so the suffering in the world as poverty, starvation and war is not the result of Money, as Money is merely a tool – but at the fault of those who wield the tool, which is us humans – and so the root of all Evil is us Humans as irresponsible wielders of a powerful tool, as Money is currently the tool which decides who lives and who dies

I forgive myself that I have accepted and allowed myself to have created an economic reality which relies on money and where people rely on Money to survive, but where we’ve accepted and allowed money to be Unreliable through manifestations such as Inflation, where those who know less about money and how money works are at a disadvantage where their personal access to resources will decrease overtime if they rely on money only simply because they are unaware of how the system works

I forgive myself that I haven’t accepted and allowed myself to see and realise that money as it is now is not a ‘fixed reality’ – as money is based on agreement and this agreement can change, where we collectively can decide to have a money economy based on Life and Sustainability where money again is just a tool used to facilitate exchange and the allocation of resources but which flows through an Equality Equation ensuring that All are taking care of, as All are Equally Valuable as Life – and so the Equal Money System do not prefer one Life form or being over another – and will cater for everyone, ensuring a Life of Comfort and Freedom for ALL in Fact, Now and in the Future

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Day 67: The Functions of Money

Money as a Medium of Exchange

In a barter economy, one can only trade goods for other goods. If you want/require something like for instances clothes, and you only have wheat yourself which you cultivate, you need to find someone who can supply you with clothes and at the same time demands wheat.
For a trade to take place, a double coincidence of wants needs to be in place. Trading goods for goods can be limiting as one might have to first trade wheat with someone who has carrots, trade the carrots with someone else for spinach, and then go back to the person with the clothes because spinach is something he/she's willing to trade for clothes.

This type of inefficiency led people in even early primitive communities to come up with some form of money (for instance obsidian) to facilitate the exchange of goods. The advantage of a monetary economy is that the requirement of the double coincidence of wants falls away. As long as the wheat farmer can find someone who wants to buy his wheat, he can buy clothes with the money received for the wheat.
Money then serves as an intermediary to facilitate the process of exchange, making it more efficient.

Money from this perspective is anything that is generally accepted as payment for goods or services or that is accepted in settlement of debt.

What makes money "special" is that it is accepted as payment because people believe that it will be accepted as payment by other people. In England in the 12th century for instance, they came up with 'tally sticks' as a medium of exchange, which was basically a piece /stick of wood with notches in it. The use and exchange of money is thus completely dependent on its acceptance and belief of people as it being 'money' and it being 'valid'/'valuable' -- and so is completely based upon agreement.

Money does not have to be 'backed up' by anything such as gold or silver -- as again gold and silver are simply materials which we've decided to give value -- but that doesn't make them valuable in fact. Backing up money with 'gold' or 'silver' is then simply 'backing up money with another form of money' and does not make the money more 'real' / 'valuable' / 'better'.

Money as a Unit of Account

A unit of account is an agreed measure for expressing the prices of goods and services. In a money economy the prices of goods and services are expressed in monetary terms and so money also functions as a unit of account. The accounting function of money is secondary to that of the function as a medium of exchange.

Also note that money can lose its usefulness as a unit of account when going through a period of inflation, as when prices increase but your income/savings stay the same = you get less for the same amount of money.

Money as a Store of Value

Money also functions as a store of value. The most common form of holding wealth is money, as it is something which you can easily exchange for something else at any point in time.

There are other forms of storing value, such as property, stocks, shares etc. Of all the different forms of stores of value, money is the most 'liquid' one (since its easily exchangeable).

Holding / storing wealth in the form of money over long periods overtime also has very definitive disadvantages. Overtime, inflation progresses and your money will slowly but surely lose some of its value overtime (and will diminish a lot in periods of hyperinflation). In short, during inflation your money does not retain its value.
 n the long run, one is better off storing one's wealth in the form of property, Art, precious metals, etc. As prices increases, the prices of your Art pieces will also increase, and so will retain its value better than money in its simple form.

Money's function as a store of value also implies that it can be used as a standard of deferred payment. This practically means that money also works as the measure of value for future payments.

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