Category: Economics, Finance, and Political Economy

YOUR BASIC LESSON ON MONEY (CURRENCY) AND 99% OF EVERYTHING YOU EVER NEED TO KNOW

—“Could you please explain what you mean by “the problem of hard currency”?”—Niklas Wagner

0) Money Proper means Commodity Money (a commodity used for monetary purposes in exchange. It must be light and of limited volume, and indexed (with a measurement), and either scarce by it’s limited existence in the natural world or very difficult to replicate and therefore artificially scarce.

1) A money substitute is anything used in place of money proper. Currency is one of the many types of money substitutes. Currency began as ‘Notes’, which were literally tickets that could be redeemed for money proper.

2) Hard currency means a currency(money substitute) backed by, and redeemable for, commodity money (gold, silver, etc).

3) Soft currency means unbacked by or redeemable for, commodity money (gold, silver, etc), or only partly backed by commodity money, or interests in real property (liens).

5) Shares are a tradable commodity backed only by market demand for them – but granting (fictitious) rights in case of liquidity (bankruptcy or sale).

4) Fiat money is a share in the economy (government really), that is used as a soft currency substitute, that like shares, when printed, decreases the value (purchasing power) of other existing shares. In theory we would produce the same amount of new fiat money as we increased value in the country overall.

THEREFORE

Hard currency runs short whenever economic velocity increases, and so it appreciates, but it appreciates without contribution to production. Interest on lending to business and industry contributes to production. So appreciation on currency is a form of free riding (rent seeking), where interest in production is not. Fiat currency that prohibits currency appreciation but does not create purchasing power depreciation, prevents free riding on currency appreciation but preserves interest returns that contribute to production. This is, in large part, why the government targets interest rates to judge the money supply. However, they also try to target unemployment. this is the mistake. We can push money from consumers to the banking system for free instead of charging consumers and profiting the banking system.

—More by William L. Benge—

The Road to Commonwealth, Insurer of Last Resort.

1. We know that gold and other forms of money were not always controlled by secular authorities as (or, in the manner in which) they presently are.

2. Since we hold (successfully argue for) that government must (and does) satisfy utility as insurer of last resort, we are forced by the same to acknowledge the legitimacy of what is NATIONAL fiat currency and what is fair finance for domestics. This is not strained reasoning, simply more nuanced.