Issues and answers: Money

Issues and answers: Part 9

Written by: Lee Sonogan


“If money is the bond binding me to human life, binding society to me, connecting me with nature and man, is not money the bond of all bonds? Can it not dissolve and bind all ties? Is it not, therefore, also the universal agent of separation?”
― Karl Marx, Economic & Philosophic Manuscripts of 1844/The Communist Manifesto

The dollar bills y’all! We began in small villages trading things to get through the day to survive. Then certain objects become more desirable to some, such as gold, silver, diamonds and other rare materials. I bet in those days you would try to sell your treasure to the highest bidder just to get something to eat. Now currency, debt, wages, cash and money dominate in the present. The effects are mild to serious to the average person and the social environment itself. In this article I will inform you in how money affects the world and how it can be not a perfect method. Plus alternative thoughts on the subject.

Starting with the bible, it showed an association between ‘money’ and ‘evil’ that might have been introduced through Christianity. For one, Timothy (6:6-10) says, “For the love of money is a root of all kinds of evil,”. The Quran, by contrast, seems far less critical. It preaches that wealth is a blessing and that the enjoyment of wealth is acceptable as long as it is spent in the right way; on family, friends and religious causes.

Materialism, defined as valuing money more than other things, often leads people to be less happy; and this is the conclusion across most studies. Consumers have much less money to spend. They are burdened by the cost of mortgages, credit cards, personal loans and more. The goods and services are more expensive. The cost of borrowing by producers, manufacturers, transporters, and retailers all has to be added to the price of the final product. There is a surplus of goods and services because the population can’t afford to buy up all the goods and services being produced. This in turn creates cut-throat competition.

Businesses try to cut prices and costs to grab a share of this limited purchasing power in the economy, as shown by wages being held down as much as possible and shedding of jobs. Retailers importing cheap products from abroad where wages are much lower. Production of cheaper goods that don’t last as long. Protection of the environment a low priority. Mergers and take-overs,  corporations get bigger and bigger, driven to search out new markets. Big companies are shifting production to poorer countries which have cheap non-unionised labour and poor safety and environmental laws or demanding large government subsidies. Also gaining tax-free incentives as the price for setting up new production or not relocating abroad.

Do not forget about inflation. This is guaranteed because producers constantly have to borrow more, and must add the cost of that increased borrowing to the price of the goods produced. Why is it that when the bankers put up interest rates, this is supposed to reduce inflation? It’s just that there’s a delay in industry putting up prices. Initially, industry is forced to hold or even reduce its prices with its profits down, or even sustain losses, in a desperate bid to sell its products in an economy where the money available for spending has been reduced, because of higher interest payments being made to the banks. Inflation may be held in check or even reduced temporarily, but eventually industry must put its prices up in order to recover these higher costs.

This most readily happens when interest rates come down, more people borrow, and money supply and consumer spending increases. Inflation then races ahead. The fact that in a debt based economy,  levels of borrowing/money creation have to keep on rising, and there by adding to the overall burden of interest payments, guarantees that inflation that will be present as long as we have an economy based on an increasing burden of debt.

Money can cause negative effects on the international trade. Instead of international trade being based on reciprocal mutually beneficial arrangements where nations supply each others’ genuine needs and wants, the whole thing becomes a cut-throat competition to grab market share in order to stay alive in a debt based economy. Exporting is good for a nation’s economy because when exported goods are paid for, this brings money into the exporting nation’s economy free of debt. The money to pay for them was borrowed from banks in the importing nation. That money is lost to the importing nation’s economy, but the debt that created that money still has to be repaid by the importer out of the remaining money in the importing nation’s economy.

Another study suggested that merely thinking about money could lead to unethical behavior. Researchers from Harvard and the University of Utah found that study participants were more likely to lie or behave immorally after being exposed to money related words. Greed has spoiled minds of too many and in looks like there is no ending of it. Even in such ethic areas like Medicine there are aims for profit.

While money itself doesn’t cause addiction or substance abuse, wealth has been linked with a higher susceptibility to addiction problems. A number of studies have found that affluent children are more vulnerable to substance abuse issues, potentially because of high pressure to achieve and isolation from parents.

Past studies show that money has the effect of making people less social. On the other hand, the notion of money can make people feel stronger, and help them from the negative effects of social rejection and physical pain.

War means enormous increases in national debt and enormous profits for the banks. Massive government borrowing and money creation by banks is required to fund a war effort. Financiers and bankers have covertly funded both sides in both World Wars and many other conflicts before and since. Having profited from war leaving nations with massive debts, the banks then fund reconstruction.

The national debt is insane. The British national debt now stands around 400 billion — the annual interest on that debt is around 25-30 billion. The government can only pay it by taxing the population as a whole, so we pay! National debt is up from 26 billion in 1960 and 90 billion in 1980. Successive governments have borrowed this money into existence over the years.

Instead of creating it themselves and spending it into the economy on public services and projects, boosting the economy and providing jobs, they get banks to create it for them and then borrow it at interest. And we pay it back in our taxes!

It all started in 1694 when King William needed money to fight a war against France. He borrowed 1.2 million from a group of London bankers and goldsmiths. In return for the loan, they were incorporated by royal charter as the “Bank of England” which became the government’s banker. Interest at 8% was payable on the loan and taxes were imposed on a whole range of goods to pay the interest. This marked the birth of national debt. Ever since then, the world over, governments have borrowed money from banks and taxed the population to pay the interest.

When governments borrow money, in return they issue to the lender, exchequer or treasury bonds, otherwise known as government stocks or securities. These are basically IOU’s. Promises by government to repay the loan by a particular date, and to pay interest. They are taken up by banks, but also by individuals with money to spare, including wealthy ones in the banking fraternity and, in more recent years, pension and other investment funds.

When government securities are taken up by banks, this is money creation, out of nothing, at the stroke of a pen. Banks are creating money as loans, out of nothing, by lending it into existence to the government in very much the same way as they do to individuals and companies. The government now has new money in the form of loans to spend on its requirements, such as public services. If this money were not borrowed into existence in this way, there would be less economic activity as a result.

Under this system national debt is money issued to the government and, as such, has become a vital part of the total money supply of any modern nation. The government constantly tells us that “there isn’t enough money,”, because it knows that the cost of borrowing money this way has to be passed on to the taxpayer. Instead, it sells off state assets and now gets the private sector to fund public services instead.

There is a constant increase in national debt. In the same way that under the present system, industry and individuals must keep borrowing more and more to enable interest payments to be kept up on their existing loans, so government must constantly borrow more and more to keep up interest payments on its existing loans. Furthermore, when a particular government stock is due for repayment, the government simply borrows more by issuing new government stocks and it’s we who pay for it in our taxes.

There are alternatives to phasing out the national debt. Government could stop borrowing money at interest, and start creating it itself by spending it,  debt free into the economy on public projects and services, at the same time creating jobs and stimulating the economy. It already does this to a limited extent. The amount it receives from banks when it sells cash to them is added to the public purse and is available for spending on public services and projects.

For a start we could, at least, fund the interest payments on the National Debt by government created debt-free money, instead of by taxation.  Seeking to redistribute what money there is by taxing the rich to pay for services for the less well off does nothing to solve the problem of the overall shortage of money in the economy caused by the debt based money supply.

The nation’s economy is our economy. We create the real wealth through our ingenuity, enterprise and hard work. The current banking system operates as a massive drain on that public wealth as well as concentrating power and control in the hands of a tiny, private minority. Money is the means of facilitating the exchange of goods and services. There is nothing wrong with creating it out of nothing, because this is the only way to provide the means of exchange.

A new report issued by the Swiss bank Credit Suisse finds that global wealth inequality continues to worsen and has reached a new milestone, with the top 1 percent owning more of the world’s assets than the bottom 99 percent combined. Of the estimated $250 trillion in global assets, the top 1 percent owned almost exactly 50 percent, while the bottom 50 percent of humanity owned collectively less than 1 percent. The richest 10 percent owned 87.7 percent of the world’s wealth, leaving 12.3 percent for the bottom 90 percent of the population.

People with money get to enjoy greater choices, on how they spend their time and resources. They spend more time doing things that they want to do, less time on drudgery. Wealthier countries also have cleaner water, better infrastructure, less disease, and as a result of less disease, people have higher IQs. Wanting money seems to make life worse but having money seems to make life better. The way we spend our money needs to be changed or a new system all together..

Some studies have shown that people attain longer-term satisfaction when they splurge on experiences, rather than on accumulating possessions. Other studies have shown that people derive greater joys when they spend on others, rather than on themselves.

If you have gotten up to this paragraph, you can see I personally do not like money. Can the world survive without money? Can we not ultimately incorporate the humanitarian principles of a fair distribution of wealth that underlies socialism with the dynamic benefits of a free enterprise economy that lies at the heart our current system? Why do we continue to use money? Because systems of the past and the main system today, capitalism. The only system that most people in the world know. In the next part I will talk about history, governments, politics and the systems that exist across the world.

“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”
― Franklin D. Roosevelt










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