Since the beginnings of the government, the government created money and used it to assess taxes. Yet, asside from the taxation issue, the government does not create money. Neither do the banks. We create money by asigning them value, by deciding how much is our time worth, by desiding what our goods are worth. Not anyone individually, but through the market mechanism together we decide what the money is worth.
Money supply is a function of two variables, quantity of money and speed of money.
Quantity of money is largely determined by what value we attribute to it, thus if government prints more money, but we choose to value it less, the money devalues and there is no change in the real quantity of money.
On the other hand, the speed of money has to do with how easy it is for us to transact business. The more secure we feel, the fewer barriers to trade, the more we will trade, thus increasing the velocity of money flow. Again, the government has no control over it, and banks are frankly going to get bypassed by other lending approaches unless they lend at the same velocity as the rest of the market.
So, in light of that, we need to do things that make it easier and safer to transact business to increase velocity of money. And we need to increase the worth of the underlying goods and services that are being traded to increase the quantity of money.
The FED has no control over either of these issues, thus, anything they do is smoke and mirrors that keeps us from reality.
2 responses so far ↓
1 TurboBorland // Jan 3, 2009 at 8:41 am
Money is the worst thing we have done to society. It’s underlying attempt at converting a trade service to something else was brilliant. However, since national banks started taking control and giving out “loans” to certain people for IOU slips of paper, we have fallen. We have debt that can never be payed off even if everyone gave all of our money to do so (interest). Money is constantly being made and for each dollar made the value decreases. This causing you to need more and more crippling and constantly changing the values of goods.
Since no one is willing to stand up to these banks and no one could in the past, not even the president (thanks so much for the efforts Andrew Jackson), they are free to reign havoc on our current system. Why had we not heeded the warnings when our forefathers foretold of what would happen if the national bank system took power?
We need to create a whole new system, one that doesn’t solely involve the hands of the national banking system (ie all money either flows from national banks, who could set interest rates to payment plans to whatever they feel like, or is produced illegally). Honestly, I wish more money would get counterfeited because then we could have more money in our system without it’s value going down. Let’s re-evaluate greenbacks and how to combine them with the best system we ever had, service trade.
2 Oleg // Jan 4, 2009 at 11:02 am
Tylor, you missed the point of my article. Money is not evil, it is a mental construct that can be used to represent anything we choose to represent with it. The money banks create mean nothing because banks themselves are a mental construct. The money that matters is the money we create by trusting one another that our money is worth something.
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