Money is not wealth itself but a marker for real things. As long as one can exchange their money for real things then money has value. Because money is used in basically every transaction, individuals believe that the money itself has value when it is simply a facilitator of exchanges.
Tuesday, April 17, 2012, 9:28 am
A Broken Narrative
Recently I was asked by a high school teacher if I had any ideas about why students today seem so apathetic when it comes to engaging with the world around them. I waggishly responded, "Probably because they're smart."
In my opinion, we're asking our young adults to step into a story that doesn't make any sense.
Sure, we can grow the earth's population to 9 billion (and probably will), and sure, we can extract our natural gas and oil resources as fast as possible, and sure, we can continue to pile on official debts at a staggering pace -- but why are we doing all this? Even more troubling, what do we say to our youth when they ask what role they should play in this story -- a story with a plot line they didn't get to write?
So far, the narrative we're asking them to step into sounds a lot like this: Study hard, go to college, maybe graduate school. And when you get out, not only will you be indebted to your education loans and your mortgage, but you'll be asked to help pay back trillions and trillions of debt to cover the decisions of those who came before you. All while operating within a crumbling, substandard infrastructure. Oh, and by the way, the government and corporate sector appear to have no real interest in your long-term future; you're on your own there.
Yeah, I happen to think apathy is a perfectly sane response to that story. Thanks, but no thanks.
To understand how our national narrative evolved (or, more accurately, devolved) to become so unappealing, we have to take an honest look at money.
Money Is Not Wealth
Money is just a marker for real things. As long as you can exchange your money for real things, your money represents value. Because we tend to conduct all of our most meaningful transactions using money, our perspective can become warped to the point that we think it is the money itself that has value.
The economy is measured in these units, these markers, which we call "money." But money is not the same thing as the economy. Far from it. And money has no value on its own, but only in relation to the things we can exchange it for.
The economy consists of real needs and wants being fulfilled. On one end of the spectrum, we have the basics like food, water, shelter, medical care, and other necessities. On the other end of the spectrum, we have 15-minute neck massages at the airport. Everything else lies in between
Money, on the other hand, is simply a facilitator of exchanges.
When we reduce the economy to its simplest form, it really consists of a growing number of people trying to meet their needs and wants. More people (~80 million more each year) simply translate into increasingly greater demand for the earth's limited and ever-limiting resources.
Since our human desire to consume is virtually limitless, a key role of money is to provide the scarcity necessary to divvy up a limited amount of goods and services among the population. There has to be a balance between money and the things that humans can produce and distribute, or else prices get out of whack.
So now let's imagine a world where real things are in limited (and limiting) supply, and then compare this idea to our money supply in order to get a sense of where things are headed.
This is a chart of Money of Zero Maturity (MZM), which is the largest and most comprehensive accounting of money in the Federal Reserve system and has been ever since M3 was abandoned.
To see entire article CLICK HERE