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When Money Became Dysfunctional – Part 3.

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"Money is like an iron ring we've put through our noses. We've forgotten that we designed it, and it's now leading us around. I think it's time to figure out where we want to go -- in my opinion toward sustainability and community -- and then design a money system that gets us there." - Bernard Lietaer –

In part one the three financial laws were given. To recap, the first law of money is multiplication. The second law of money is retention. The third law is diligence. In the parable of the talents (see Matthew 25:14-30) the two of three servants were faithful because they multiplied their seeds while retaining the original seed and then simultaneously multiplying the seeds again. This third stage is the stage of investment. Only by actively managing your personnel financial affairs successfully (active budgeting and expense tracking) can you be in a position to accomplish all three laws. However, because money no longer serves the purpose for which it was created, following financial laws alone would not be sufficient to survive the inevitable pending collapse of the money system. To explain, let us say two investors see the warning signs of the future collapse of the money system and decided to act upon these signs to preserve their so called wealth. The fact that both recognise the same warning signs is a good start. However how they prepare will differ greatly. Investor A decided to invest in capital assets that enable him to produce 80% of his basic needs such as food, water, and energy. Investor B decided to invest in real estate rental apartments and in paper assets such as stocks and bonds. When the money system collapses or there is hyperinflation, which investor do you think will weather the storm better?
Henry Kissinger once said: "Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world." Theodore Roosevelt once said: "Control of money was outsourced by almost all governments to private elite bankers. Issue of currency should be lodged with the government and be protected from domination by Wall Street. We are opposed to...provisions [which] would place our currency and credit system in private hands." But I think Napoleon Bonaparte said it best: "When a government is dependent upon bankers for money, they [the bankers] and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." – Napoleon Bonaparte, Emperor of France, 1815 -
Money is being created out of thin air, being misallocated, being kept artificially scarce for many, and its creation [and redemption] bares no relationship with the amount of finite natural resources of the planet, the same resources that are needed to create material wealth in the first place. Interest in turn, which does not exist in the economy outright, is owed back to bankers who gave up nothing of their own to deserve it. This interest, because it does not exist in the economy outright as only the principle is created during the loan creation process, forces cancerous growth as new money must in turn be created out of thin air again to cover all the interest that is owed which again in turn repeats the cycle of money creation out of thin air. And if you have more money chasing the same amount of material wealth, the only result is higher prices.
"The existing private banking system imposes artificial scarcity on the public. Private banks do this by withholding loans to small businesses, moving money out of the communities that do business with the banks, and being beholden to shareholders rather than local customers. Monopolies of any resources create artificial scarcity. In the case of money, that scarcity results in inequality that hinders common folks' purchasing and investment power. Simply put, money is limited by bankers as if it were a precious metal, when it's more like a simple metric, like inches — something we can never run out of." - Artificial Scarcity and Public Banking, PBI Newsletter, April 2013 -
Right now people need to protect their wealth. Sadly if your wealth is money then you are in trouble. The value of money changes every day. Furthermore, money wealth can be wiped out depending on what so called legal institutions do and the unregulated Forex Market as mentioned in part 2. True wealth however cannot be wiped out so easily like money/financial wealth can. But what is wealth really? Wealth provides a type of safety net of protection against an unforeseen decline in one's living standard in the event of job loss. So in theory one can determine how wealthy they are by asking the following question: How long, in months, can I live on what I have put aside without having a job for income? A good rule of thumb is to take your assets value and divide by your average monthly expenses for maintaining your living standards. A huge caveat however is that depending on what your assets are their values can fluctuate upwards and downwards and also the cost of living. This in turn can affect the outcome of the formula and thus drastically change your wealth in months. This is why I like Adam Smith's concept of wealth.
Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual produce of the land and labour of the society". This "produce" is, at its simplest, that which satisfies human needs and wants of utility. Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money. If you had a magic machine that could on command make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldn't need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn't matter how much money you had. Wealth is what you want, not money. Adapted from: http://www.paulgraham.com/wealth.html
In closing, Money, in its current form as the medium of exchange, has not lived up to its potential as a liberator. Barter trade was alleviated by the use of an agreed upon medium – money-. But now money is getting in the way and it is now also considered cumbersome. "When the division of labor has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labor can supply.– Adam Smith, Wealth Of Nations, p. 29. "A person can do nothing better than to eat and drink and find satisfaction in their own toil. This too, I see, is from the hand of God - Ecclesiastes 2:24.

Emilio Kalmera

Last Updated ( Tuesday, 30 April 2013 01:53 )