The Principle Behind Money

The Principle Behind Money

I received a lot of comment from my parable on money systems. Many thought that any type of fiat money system was to be avoided like the plague and we needed to switch to gold as the only one that is reliable.

Allow me to comment on a statement made by a reader. He said,

“What I find to be an overly religious zeal is your assertion that you know it all and are an expert in everything on every subject.”

The problem is that I have never made such an assertion. No one in this group that I know of is a recognized expert on money. In fact, almost every post made here on every subject is posted by someone who is not an expert. If one is not a recognized expert then should he just keep his mouth shut and let experts only speak?

I think we all know the answer.

One major problem we have in society is that the common people often see things more correctly than do the experts. Many of the experts and professionals cannot produce fruits that demonstrate that they are any closer to the truth than the man on the street.

Consider this. The psychologists who are experts on mental health have one of the highest rates of suicide.

Doctors, experts on health, die earlier than the rest of us.

Preachers, experts on spirituality, are caught in many scandals that average people shun.

Lawyers, experts on the law, misuse the law and corrupt it in ways that common people see is morally wrong.

Expert politicians put in charge of our money spend with such abandon that many average people see as obvious insanity.

Why are these and other professionals seen as experts when they are wrong more often than the amateurs?

The reason is this. An expert is a person who is recognized as having many facts pushed inside his head on a certain subject. An expert can be wrong more often than not but still be recognized as an expert because of training that has filled his mind with data.

Now more important than being an expert is to see correctly and set yourself on the side wherein truth lies. To accomplish this one must see the principle behind the sought after truth and pursue this. If one can see the principle then he doesn’t need that many facts to know the truth for as they preset themselves the facts will support the principle.

Now if one can touch the soul and see the principle behind one or two things then it will not be long before he can see the principle behind any subject he wants to investigate. This will then make him more accurate in seeing the truth of any subject than the average expert in that subject. A master of principles can start with knowing very little but if he sees the principle then all the experts in the world will not be able to defeat his arguments.

Now rather than argue hard facts about money I thought I would present the principles behind it. I believe I did this quite accurately with the parable on money. The arguments against my views on money have not tackled the principles presented but instead give an onslaught of data that can be interpreted a number of different ways. This is why I like to get as close as possible to the principles involved as once a principle is seen by two people it will be difficult to disagree. Once two people learn the principle of addition they will normally both conclude that 2+2=4.

The question we must now ask to make sense of this discussion we have been having is this. What is the principle behind money that gives it its value? The answer, as related in the parable, is labor. The reason labor is the core principle is that everything money can buy is created by labor including labor itself. A new car, for instance, is the product of labor mining the steel, fabricating it, transporting it and selling it.

If you buy a Big Mac you are really buying the labor of the cattle rancher who raised the beef, the farmer who raised the wheat for the bun, the labor of the people who prepared it and many other items. The core principle of labor is involved in anything we buy.

Now many people say that money must be represented by a precious metal, most often gold. The reason that gold is so often associated with money is it is discovered and not created. Whereas the creation of a commodity has many stages of labor involved as well as many different laborers the possession of gold can be had in only one step. A person can go to a stream with a gold pan and just find it himself. As little as one step by one laborer is involved in this. Overall the search and mining for gold is very labor intensive making it closely associated with labor and thus often used as a source of money to procure labor and that produced by labor.

Because gold and precious metals are so close to the principle of labor they are often seen as a substitute for labor and thus a means to back up money that buys labor.

But what was illustrated in the parable is the difference between backing up money with gold and labor. Even though gold is as little as one labor step away from possession, it still requires labor to gather and store. On the other hand, labor does not have depend on the existence of gold or any other metal. If a group is willing to work then the labor is instantly available. One does not have to waste time in finding the gold first.

Does it make sense for a group with no gold to sit around and do nothing because they cannot create money backed by this metal? No, it does not. It makes absolutely no sense. The group in the parable did the logical thing. They created a money system not backed by gold for there was no gold for them. Critics would say that it was wrong for them to create a money system based on a fiat and would apparently be happier with them sitting around all day doing nothing.

As is often the case though the second group at first thought they were at a disadvantage because they had no gold, but they found the substitute closer to the true principle than the gold standard and thus finished their city much faster than the group who had the gold mine.

The Japanese exemplify the principle of labor. After World War II their country was devastated and they had comparatively little land and scarce resources. They did though have a great desire to labor and get paid for what their labor was worth. Today they have created a financial empire that is the envy of the world and they did this without the gold that Russia has, and without the oil that Saudi Arabia has and without the land that Mexico has. They excelled over these nations which had more advantages because they believed in the power of their own labor.

Because it is labor that creates wealth then labor is the optimum ingredient to back money. Unfortunately none of the money systems of the world have their currency based on labor. Instead, they are based on decrees from the various governments. If we had one based on labor and the labor backed money is released according to the amount of labor needed to create the desired products and services then the money will be stable. If law governs the release of money so it roughly equals the value of anticipated labor then the most viable money system is manifested.

Too many people miss the silver lining because they’re expecting gold. — Maurice Setter

Feb 25, 2008

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