The question that Ayn Rand posed in one of her writings was: If money is the root of all evil, then what is the root of money? Evil? Surely not.
In a nutshell she postulates that it derives from the effort of production. Work has a value attached to it. The creation of something through work
establishes a wealth credit. Held in value, items or wealth credits can be exchanged for other goods, a market is established between producers.
Honest work is the root of all wealth.
On Professor Fetkes' web page
www.professorfekete.com... there are numerous essays that provoke the reader to question prior beliefs
about money. The first, at the bottom of the list, is Ayns'.
Basically, she explains, in "A Hymn to Money", that for transactions to be successful there has to be an exchange of value for value. Effort for
effort. As the complexity of transactions grew from diverse wants and needs, it became obvious that the direct bartering system was inefficient. A new
medium of exchange was needed, a system of payment-in-full, based on value for value, that would facilitate the flow of goods between parties. The new
medium had to be universally recognisable, (cross boarder recognition and acceptance) limited to supply via effort or wealth creation, seen to hold
standards such as consistancy of quality or fineness, portabililty, durability and hold its value over time. That last requirement meant that your
labour could be stored (savings) for future transactions with other parties, without loss of purchasing power. It needed to convey to each
participant a trust in each other's promise of good faith, in delivery of quality goods for payment-in-full on competion of the transaction. In
other words, the effort for producing goods and services has to be compensated with an item of equal value.
To be seen as payment in full, a medium of fair exchange must not carry a risk of liability to the seller. i.e. the seller should not be left at a
loss in event of the buyer defaulting.
Gold and silver were the answer.
Because there is a huge effort required in the production of PM's, there is a "wealth credit" or "Effort Credit" attached to them. Because uf
their rareness and their ability to fulfill the criteria of money, they were universally accepted. Effectively, once in your hands, they are nobody's
liability to you. No promise to pay, Payment-in-Full.
They simply cannot be denied their importance in the context of the history of money. That wholesale investors have been holding them for thousands of
years speaks volumnes.
Because NO modern country fully backs their currency with gold or any other tangible item (Don't be fooled by the claim on this blog that the Swiss
back their currency with it, that ceased just a few years ago), there is a breakdown in every criteria of what constitutes sound money. These modern
curriencies lose purchasing power over time through overly easy supply at little cost to the issuer. Their over-issuance destroys saved labour's
purchasing power and therefore destroy personal wealth. Ask any pensioner who has saved their labour in paper currencies.
The government sponsered private banks (or is it the other way around) have created a system of payment whereby when you sell your goods you must
accept the paper currency of the day, as payment-in-full, for goods and services. The bewildered seller is left holding a printed cheque, a note of
debt, a debt instrument. Eventually the market becomes flooded with these un-backed promises of credit, resulting in the market participants' faith
in money to convey value for value, destroyed. Look again at the above criteria of what constitutes fair and sound money and ask yourself if there is
any modern currency that fulfills any of the required criteria.
When everyone is holding promises to pay in exchange for our labour, we are all left holding the bag. The question is; " What's in the bag!?"
Answer ......IOU's.
Demand Payment-in-Full.