2. Conceptualizing Money

 

 

The Fountain of Money at the Heart of All Economics

 

This one is just a little conceptual aid, for those who might benefit from it. I think it can help to make sense of economic reality and aid in breaking down some unhelpful economic myths.

 

Now I'm sure you've heard people say "Money doesn't grow on trees!" Right? But what if I said there really are fountains of money, or you could think of them as magic money trees, at the heart of all our economies? And they've really always been there.

 

If you've read a little on this website already, you'll know that money really does just come into being when people (or in fact governments) need it, when they 'deficit spend' or go 'into debt'. In other words, without much work or effort or fuss, money really does just come into being, when it is called upon, as if from a magical money fountain or money tree.

 

The most important thing that must be stipulated about this system is that money comes into existence, most usually, on the condition that we return it. As you'll see, governments can or should be exceptions to that rule, but for everyone else, for ordinary people like you and me, money comes into being when we need it, on the condition that we make a legally binding promise to pay it back.

 

Money - and thus our theoretical magic fountain - is effectively infinite. There's no real upper limit to the amount of money that could be created. And that of course presents us with a problem. If money creation were allowed to go on uncontrolled, it would soon become extremely unfair and unstable. Money, then, must be carefully controlled. And insisting that most money created is returned again is an important part of how we control it.

 

We can be reasonably sure that money will always be like this. Money is not and surely cannot be some kind of physical 'thing', something inconvenient and expensive to ship about the planet each and every time a transaction is made - only to be shipped straight back again when the next transaction is made the other way. Money inevitably resolves to weightless, easily transferable numbers that can be sent and received all over the world with the minimum of fuss and expense. That's just an inevitable practical reality for money and was surely discovered by those working, thousands of years ago, at the very beginning of the story of money and finance.

 

The last thing I'd like to point out about this structure is that it should clearly be fair. The magic money fountain or money tree that exists at the heart of all our economies really should be democratic, it should be subject to democratic rights and rules that are fair to everyone. Every single unit of currency ever created should have been created according to fair rights and rules. Anything else just perpetuates the injustices of this already troubled world.

 

 

 

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