By Joe Bongiovanni
Let’s begin our study of money with this question—because everywhere, inquiring minds want to know—what is money?
What serves as money isn’t derived from either a natural or a man-made material of any kind, and its study is virtually absent from our entire education system. Like Political Economy and Civics.
The most commonly heard response throws a ‘curveball’ into considering our question. ‘Money ain’t real.’ they say. ‘Banks create money out of thin air.’ (fingers snap).
Hard to argue. This response is more valid than not, though hardly instructional. A better understanding is gained by knowing that money itself is indeed not ‘physical’, but socially-derived. Yes, We the People created it—by law. $US money is our ‘national’ agreement, our societal construct. It provides our nation the ability to exchange goods and services among wealth producers and consumers. What we call ‘money’ today is termed among money-scientists and historians as our ‘national circulating medium of exchange’. The ‘power of money’ ($US) is to impart real “purchasing power” to its holder, be it in the form of paper ($) notes or merely private bank account ‘credit’ balances—legally denominated in ($US).
Understanding money’s ‘social’ origin harkens us back to a new starting point for understanding money—that all money is, and must be, created out of nothing….or thin air. Otherwise we won’t have it to purchase our food and shelter.
So, if we agree, more questions might arise—“Who then should, create and issue the nation’s money? Why so? And how so?” Why is it that the private banks issue all our money today(?). Why does the government have to borrow its own money?
But, first, what does history teach us about what money is?
Money, according to Nobelist Dr. Frederick Soddy (The Role of Money, Routledge Publishing; 1934) first provides the (capital) means for wealth production, via debts. Later, fingers-crossed, money—via incomes—is available to pay those debts and to spread the national wealth. The role of money in the national economy, per Soddy, is to distribute the national wealth. For better, or worse.
In The Lost Science of Money (The American Monetary Institute Charitable Trust (2002))—author Stephen Zarlenga presents some considered, historic notions on ‘what money is, in the final Chapter (24). Zarlenga reviews the learned opinions on money by Aristotle, Plato, Paulus, Berkeley, Locke, Franklin, by American monetary historian Alexander Del Mar, and by German Chartalist author Georg F. Knapp,
Then, Zarlenga opines on the topic—“We accept these concepts and add: Money’s essence (apart from whatever is used to signify it), is an abstract social power embodied in law as an unconditional means of payment.”
This, then informs us on what is the essence of what we call money; the means of payment. An abstract, agreed-upon social construct with many special qualities—legalized by society under our national Money Statutes. That’s what our money ‘is’.
I hope this small collection of thoughts on money, along with my own ‘work-in-progress’ opinions can provide a semblance of understanding of what money is, today. From here maybe we can discuss the existing social, legal and political framework of our national money System. Hopefully a discussion of alternatives might arise. Or, perhaps not.