MONEY OR YOUR LIFE. Chapter Three.
THE TRUE PURPOSE OF MONEY.
Let us start our cold, hard logic about money by looking at the actual and real purpose of money. By getting that purpose clearly into view we can then move forward into a good position from which to devise an accurate, precise and useable definition of the stuff we call money.
In the simple life of a small self contained community a barter system of trading is perfectly adequate and there is no need to introduce money.
But if the community expands and grows and life becomes more complicated, then a barter system reaches its limits of usefulness and a means of exchange has to be introduced.
For a means of exchange to fulfil its purpose it must possess certain attributes.
So let us bear in mind the purpose of a means of exchange. It is there to represent the goods which are being exchanged. To act as proxy for them.
Trade is the exchange of goods. Our lives are enriched by goods being made available to us by the process of exchange.
We cannot grow tea in England so if we enjoy a cup of tea an exchange must occur.
Therefore we swap some coal for some tea. But the chap growing the tea doesn't want coal, but he does want some oil. So we need to swap coal for oil so that we have oil to swap for tea. But the oil man doesn't want coal, he wants to pump water. That's fine, we can produce a pump using coal to smelt the iron to build the pump.
And so we get our cup of tea. And in the process of getting our cup of tea a great deal of activity has taken place, all of which we call trade and which comes to be the life blood of our civilisation.
The more activity of this description which takes place the better off everybody is. This is the process by which wealth is created. Don't look, at this point in the book, as to how that wealth should be distributed - that comes later.
But do bear in mind that wealth has to be created in order to be distributed and that wealth is created by trade. And trade depends upon a means of exchange when a barter system will no longer serve. And also bear in mind that trade is the exchange of goods.
When you are in your car on a cold, wet, windy night with the heater on, the radio on, the headlights and screen wipers making visibility safe for speeds in excess of seventy miles an hour, spare a thought for those involved in the creation of such a miracle of enterprise.
But do not forget to include all those who were involved in building the highway, who made such incredible luxury so commonplace as to be unremarkable.
For very many of us the motor car is a great blessing and makes a major contribution to the quality of our life.
And so does our ability to travel by rail, by sea or by air, depend upon the enterprise of our fellow human beings creating wealth by engineering improvements in the quality of our lives.
These are the fruits of trade, fruits which required vast quantities of money to bring into existence.
Much more money than existed in the days of the penny farthing and the mud tracks along which the stage coach lurched.
Now we can see very clearly one of the attributes required of money.
There has to be enough of it and more is needed all the time as the quality of life improves.
The quality of life in a complex society comes to depend upon the ease with which exchange can occur. As the need for goods becomes saturated, we rely more and more upon an exchange of services to enrich our lives.
Thus there is an ever increasing volume of exchange of goods and services in a healthy and prosperous economy. All this requires an ample supply of money as a means of exchange so that trade is never impeded by a shortage of money.
Therefore there must be an unlimited ability to create money even though the process of creating money requires very exact control.
It is the necessity of having complete confidence in the value of money which makes the control of its creation so absolutely vital.
So there is the other major attribute which is required of money.
There must be a foolproof yardstick by which to measure the value of money. Guesswork is no good.
A yardstick which is a limited resource is no good. Nor is a yardstick the creation of which cannot be precisely controlled.
If you can see these simple facts clearly, you can see at once that gold does not have these attributes.
You will also observe that in the existing monetary system there is no yardstick at all, and we measure the value of one sort of money against another sort of money. We use a piece of elastic as a tape measure.
And in this manner we set the stage for the fraudster to exploit our ignorance of what money actually is and to foist upon us a form of money which isn't.
Although we are never allowed to forget the mistakes which Governments can make in printing money which represents nothing, we are allowed to forget the scenes of chaos in the Stock Exchange when the computer whizz kids, fooling about with the value of our money, lost us, the tax payers, untold billions in a matter of hours. All we are allowed to know is that it was a black day for Britain. Black being the traditional colour of screens used to hide the truth.