Joined: 09 Nov 2008
Location: Croydon Surrey U.K.
|Posted: Sat Oct 10, 2015 10:11 am Post subject: The Money Bubble
|The Money Bubble
Money is usually defined as “a means of exchange” but it is more accurately defined as “a means of completing an exchange”. The implication behind the ownership of money is that real wealth has been supplied, which then justifies the receipt of real wealth to complete the exchange. Money is just a token representing that claim.
Money in circulation and justly held will always be earnings for real wealth supplied or to be supplied. When money is created by banks, including central banks, it is their responsibility to make sure that there is an agreement for the recipient to create wealth and to use the earnings from it to repay the loan. Only in this way can the use of the money to claim wealth be justified. Very large sums of money are now being created without this requirement and as a result the obligation to produce wealth remains outstanding as debt.
Debt can only be repaid by creating wealth and devoting the proceeds to the reduction of debt. If the original claimant does not produce it somebody else must. If nobody is willing and able to use their earnings for the purpose, the debt is bad and an equivalent sum of money is valueless. Those who lose are unlikely to be those who enjoyed the initial claims on wealth when the money was created and put into circulation. The loss would be due to the failure of banks, particularly central banks, to create money responsibly.
The failure is often justified by arguing that there is a lack of demand (claims on wealth) in the economy caused by a shortage of money. The real problem is that money representing genuine claims has been unjustly transferred to others. It can be shown that the original cause of the unjust transfer of claims on wealth is the private appropriation of the rent of land with its consequent effects on the economy. It can also be shown that in a just economy there is a natural fund available to meet the needs of those who cannot provide for themselves.
The irresponsible creation of money and the private appropriation of the rent of land are linked and must be tackled together to solve our economic problems.
Otherwise the money bubble will continue to inflate with the inevitable consequence.