What Money Really Is

gBeing fantasy free I can tell fact from fiction. Mainstream academics cannot because they are saturated with fantasies and comforting beliefs. Typically an explanation by an Ivy League economist is generated out of a need to say something.

Money is not what they claim it is. Governments don’t actually create money. Money that is claimed to be created by a government is really no different than counterfeit money and it is used for the same purpose. In a real sense, money is not actually created by anyone. Money emerges when work is performed and goods need to be exchanged. Work is what creates value and without value, money is not necessary. A government creates no value and thus cannot create money. Counterfeit money is brought into existence as a way to get value without working. As long as governments create counterfeit money, there will be economic disasters like the one we are beginning to experience in the United States.

Here is what money really is. The right amount of money for an economy is never an exact amount because one of the variables that determines the right amount is not constant. Very simply, money represents what is received for work (output) plus borrowed money in amounts that can reasonably be expected to be repaid. There is always uncertainty as to whether or not money can be repaid. That cannot be helped but it is the best we can do. Money created by governments cannot be repaid and never will be repaid, That by itself is not that bad but the result is an eventual economic disaster. Work determines who gets real money. Political power determines who gets the counterfeit money and it all spends the same. When governments create money, it is used to extract wealth and income out of the general population. The people at the bottom eventually become too impoverished to support the people at the top, That is when the economy, social order and political system break down, not necessarily in that order.

Why don’t mainstream economists realize this? It is hard to be an honest economist and hold a job, Economists support the world view of the people who pay them. No one is going to pay an economist to discourage government from creating money. Economics as it is taught in universities really isn’t economics at all. It is accounting. Numbers are given meaning but the only meaning they really have is rooted in the incentive that gives rise to the number. Incentives are interactive. Change one incentive and all related incentives change also. Variables which are treated as constants are not constants at all but change also when the variable that is deemed to be independent changes.

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