May 1, 2013

"Let it Be" Money

Money is a curious thing. It is a medium of exchange that represents some store of value. However nearly all money that we know of today does not represent any actual commodity on earth. Nearly all governments operate under a fiat money system. The word fiat is of Latin origin and literally “let it be done”.  Printed government notes do not represent any ownership of anything but are merely accepted as money. The value of printed money is based on the “belief that those who print it will continue to have the power to do so”. It is strange to think that a piece of paper is money and valuable simply because we believe that it is worth something.
            One wonders what the world would be like if tomorrow everyone in the United States stopped believing in the dollar. After all it is just a piece of paper. What if tomorrow everyone decided that we would judge wealth by the amount of water one possesses. This would be intriguing because water is an actual commodity that people will perish without. It would certainly be interesting to watch utility companies turn into banks and issue out notes that corresponded to the amount of water that an individual had stored at the facility. But of course that wouldn’t not work because the rain from the sky would inflate the system and then government force would prohibit the drilling, harvesting or other collection of rain, well water, or other forms of natural precipitation. Unfortunately we don’t know what good money is or could be because government has a monopoly on the coining of money. “To put it into the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will not ever again give us good money” (Hayek). Regardless of what is good money it is certainly interesting to think of a world without money just as it is to continue living in this world where we are told that a piece of paper has value just because it does.

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