Why you Must Understand What Money is NOW!
We all believe that money means something
We think the fact it is backed by a government that there is an underlying value which each dollar or pound represents.
Truth is, money isn’t worth the paper it is printed on
Incredibly, whether you choose to believe it or not, it hasn’t been worth anything for nearly 50 years.
In 1971, President Nixon of the United States canceled the Gold Standard, which it had been moving away from since 1933. In short, what this meant was that the value of the dollar was no longer tied to the value of gold.
Previously, there was a commodity which underpinned the price of a dollar. Nixon enacted policy which led to the unilateral cancellation of the direct international convertibility of the United States dollar. The implication of this was not only profound for the dollar, but it was also for almost every other currency in the world. Consider that each is measured against the dollar, with its value often derived from it, and you being to understand that all the money in the world was now not worth the paper it is written on either.
With countries holding such large volumes of US treasury bonds they are reliant on the continued success of the USA. If the dollar sneezes, the world not only catches a cold, it has the potential to cripple the majority of the worlds financial systems. The United States is an Empire in all but name, just look at the regions where it has a military basis, and the world the world relies on them they need them to keep the charade of money going. If the States fails the whole world does, and the house of cards falls down.
If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem
The United States owes the World $17 Trillion, that’s the world’s problem rational
This is the system by which the majority of the world operates. It is the practice whereby a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its deposit liabilities.
Central reserves and Banks are what determine the amount of money in the world, not economic activity. They might hold $1 trillion in reserves, but they enable $10 trillion of economic activity — 10X the reserves they hold. With the money that is underpinned by nothing, by a banking system that has no means of repaying the money lent/spent, What happens if people stop borrowing or believing in the value of money?
Reserves are held as currency in the bank, or as balances in the bank’s accounts at the central bank. All this means is that the world in which we live is underpinned by a massive amount of debt. Prosperity, the measure of people being lifted out of poverty into the middle class, has been achieved on the back of massive borrowing. A rise in wealth can only be achieved in one way — the expansion of available capital for growth. We need more money.
What is Money?
A theological construct is critical to enabling the exchange of economic value. That is all. Think of it as a universal ledger where the money is the entries.
There was once an island in the Pacific Ocean called Yap. They existed a few thousand years ago and like us they had money to purchase the goods and services they needed. The only difference is that they didn’t have paper money with government symbols written on them, they had large stone rocks which they mined. The money worked through ledgers which recorded who owned which, and how much of, each stone. If you needed to buy bread, you did so through the exchange of a fraction of a rock. Other people did the same thing for shoes, and this is how the economy operated.
One day, a family set off to mine their stone, sailing a boat across the sea. The boat sank during their return and the stone fell to the bottom of the sea. The family survived, as did the deck hands, and once they got home they and their witnesses told everyone how big it was and it entered into circulation. For hundreds of years, this family exchanged parts of the stone on the collective belief of everyone that is existed at the bottom of the sea somewhere and it was the size that other people said it was. It still had a perceived value.