DISQUS

johnmerryman · 1 year ago

Money is a medium of exchange and store of value. These work at cross purposes because as a medium of exchange, money functions as a public utility, while as a store of value, it is a form of private property. It is as private property that most people think of it, due to its historical origin as an accounting of assets, yet the reality is that modern monetary systems are fundamentally a medium of exchange and only as a function of that are they a store of value, as they have no real backing other than faith in the issuing institution and must be invested for the system to function and maintain value.

The monetary system, with its broad connectivity, is similar to a road system. You own your car, house, business, etc., but not the roads connecting them. That the money in your pocket is interchangeable with what is in others pockets is what makes it a function of exchange. Money is not private property, since you cannot print what you want, as the government retains copyrights, but effectively leases it out to the private banking system. Its value is based entirely on public faith in the institution issuing it, so the taxpayer is ultimately responsible for guaranteeing its value. The result being private gains and public responsibility.

The problem with capitalism is that it has created a large surplus of capital. This encouraged ever more lax lending standards as a way to absorb savings and sustain further growth of the money supply. The effort to privatize Social Security is a good example of the disconnect between rhetoric and reality, since there is no place to invest this amount of additional personal savings and would only be a boon to the brokers given the responsibility for handling it. We invest in our old age by investing in our parents old age, so that our children might continue the practice. It is a clear example of investing in the larger community as a viable form of savings. Wealth is a convective cycle of rising assets and precipitating benefits. Stopping this process only creates large storm clouds of marginally productive wealth hanging over a parched economy, much like we have now.

Currency did originate as a store of wealth, because it started as a accounting of specific assets, but political power also started as a projection of individual influence and evolved into monarchism before the inherent instability and corruption drove society to devise methods for making political power a public trust. It has come time to make economic power a public trust as well. Money lubricates the economy, rather than fuels it. Ideas, labor and resources are the real economic fuel.

If money were thought of as a public utility, it would have definite psychological effects. People might be less inclined to define their security in terms of the size of their bank account and start leaving natural wealth undisturbed and investing more effort in their communities and environment, rather than draining value out to put in a bank.

An effective financial system should have a currency loaned directly by the government, with the additional currency to pay these loans put into circulation by government payment for infrastructure. This would incorporate the banking system as a function of government at all levels. Small banking systems to serve at the county and town level, medium sized ones at the state and local level and larger national institutions. These would feed their profits directly back into the levels of the community which produced them and the various communities would be in competition to provide the best environment for people and business with these funds.

There are many aspects of the public sector which function quite well, from legislatures, courts, police, education, military, roads, etc. if they are managed effectively. It is not coincidence that private enterprise only insists on privatizing those aspects of community services which they can derive a direct and substantial profit from. Nobody thinks lots of regulatory detail will improve the situation, since the details are massaged best by those with an interest in them, so rather then trying to re-regulate the entire economy and society, just start with nationalizing a banking system that will have to be bailed out anyway. Government might be slower than the private sector, but that might be more healthy, since its perspective is longer term.

As it is now, government debt is the basis of our economy, which serves to transfer wealth from taxpayers to bondholders. Do we really want our government foreclosed on?

Ron · 1 year ago

The Indian economy is smaller than that of Spain,a medium Western country,and about a third of that of China (and a twentieth of the US!),why do you call India an "economic titan"?

rajkiran · 1 year ago

Yes you are right that India lags behind Spain but I guess the author is talking in terms of PPP about China and India which in the top five and are booming with growth and also have huge foreign reserves in dollar terms.

http://en.wikipedia.org/wiki/List_of_countries_...)