Column by Paul Hein.
Exclusive to STR
Many years ago, when I was young and foolish enough to believe that the truth mattered, I would lecture interested groups about our money, or, rather, what passes for money today.
In the question and answer period following my remarks, one of the attendees would invariably raise the question: What does it matter what we use for money? The other attendee, waving a dollar bill, would cackle his disbelief of my assertion that we had no actual money, claiming he could get stuff for his piece of paper, thus, it must be money.
It became tiresome responding to these questions, especially since my answers convinced no one. What difference does it make what we use for money? Not much difference at all, except that it should be SOMEthing! Precious metals, for instance, are infinitely more practical to use as money than shells or salt, but the latter are certainly superior to using NOthing for money!
Can you get stuff for your scrip? Sure you can. Even if the person accepting it realizes that he has no claim at all of anything from the issuer of the “note,” he knows that he can pass it and obtain somebody else’s goods or services. That’s good enough for him, at least for the moment. If he thought about it, he’d have to admit that if, instead of passing it, he saved it, to be spent a decade or so in the future, he’d get far less for it then than he’d get for it today. Sadly, where “money” is concerned, there is very little thinking!
Perhaps what I should have told my skeptical audiences about is time travel. For example, let us suppose that Warren Buffet were transported back to the year 1900. Would he still be rich--probably the richest person on earth? No? Why not? Let’s see. He would still have his checkbook. Couldn’t he use it to write a check for anything he wanted to buy? Not unless the check were on a bank in existence then, with Buffet’s account on its books. How likely is that? How about his credit cards? Any merchant offered such a device would laugh at the idea that it could pay for anything. So Mr. Buffet might have recourse to good old fashioned cash. But the Federal Reserve Bank did not exist then. Of course, that bank’s “notes” are as irredeemable today as they would have been in 1900, but the fact that the bank didn’t actually exist then would make that fact more obvious. No one would accept Buffet’s FRNs. (Today no one would accept them either, except that the counterfeiters who produce them also have the self-bestowed authority to declare them “legal” to tender, while any non-redeemable notes the rest of us might try to pass would end up in our arrest and incarceration.)
So how would the world’s richest man exist? I guess he could sell his watch, or a ring, if he wore one. He would find that a medium of exchange had to be some THING, not a promise never to be honored, or a bank account payable only in such promises.
The fact that such “money” is not just a promise, but a false promise coming into existence as a loan, means that our modern “money” is an enormous bubble, and that, sooner or later (probably sooner), those holding “money” will find themselves with large numbers in a checkbook, or lots of elaborately engraved bits of paper, that will buy them nothing.
Then, if I could locate the couple of geezers that disbelieved my warnings, I’d be able to tell them “I told you so.”
But they probably wouldn’t believe that, either.
