Furthest Right

The Three Valid Purposes Of Money


Most people out there will tell you that money sucks – when other people have it. A Gab.Ai user named Duke Norfolk who I chatted with this morning reminded me of how badly most people misunderstand money.

Unfortunately most people never understand the real underlying truth about the cause. Talk of monetary policy and the Deep State just goes right over their heads as their eyes glaze over. Instead it’s all emphasis on symptoms: stagnating income, rising educ/healthcare costs, etc.

Money, quite bluntly, is a tool. Take a decent course in money and banking and you will learn that it does three jobs.

  1. Medium of Exchange. As a medium of exchange, money allows producers and consumers to avoid the transactions costs associated with barter or forced redistribution. This allows people to find what they need when they need it and to easily pay for what they want or to accumulate wealth.

  2. Unit of Account. A rich and powerful Alpha Male made the following comment about money:

    Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.

    Denominate all securities, all bank accounts and all prices in one currency, and you have comparability. It solves the information problem, as long as you believe in the prices and valuations. A universally accepted currency improves the quality of decision-making across the board.

  3. Store of Value. A well-designed money is supposed to hold its value. You put your wealth in dollar-denominated account, and you can get it out ten years later and still have as much money. Oh wait… uses the officially reported CPI and claims that a person who stuck $10,000 in a bank in 2006 now has $12,018.55 in purchasing power. I’m amused. They are claiming an adjusted rate of return of r=1.86%. Not good, but also probably not accurate. This is in comparison to an annual inflation rate of 2% a year, which would imply a nominal rate of return of 3.86%.

Yet it is entirely possible that most consumers don’t experience anything like 2% CPI. John Williams of Shadowstats calculates CPI based on how it was previously done in 1990. This gives an approximate rate of inflation as 5%. This gives us something on the order of r=-1.14%. This “allows” you to put $10,000 in a bank in 2006 and retrieve $8,685 in 2016.

If you haven’t been bemused quite yet, let’s examine what happens if we use the 1980 formulation to estimate CPI from 2006 to 2016. We get a CPI of approximately 10%, for a real rate of return = -6.14 %. Bank $10,000 in 2006, and you get a stored value = $5,306. And all of this is before we calculate state and federal taxes on the 3.86% interest.

Just what sort of Dickensian bank takes in $10,000 in deposits and then allows you maybe $5,300 back? An Amerikan one. The dollar is not fulfilling all three fundamental purposes that a currency really should. This is why we hear the whispered talk of a dollar collapse. I don’t see it going down in a day. Why should it? It goes down a little at a time every day.

The dollar, like most of the rest of our once great culture, is getting sucked into the soft apocalypse. This debasement of our money to pay for a deficit we could never manage under normal circumstances only taxes you a little at a time. Then you wonder why in the heck your salary and your savings can’t afford to buy you anything much at decent value.

Once you understand what money is supposed to actually do, you understand how Amerika’s chosen money only partially fulfills the job order. Like everything else in Amerika it is a substitute for the real thing designed to force you into servitude, and it’s getting worse. It will do so until we all wake up one day and wonder what in the heck happened. That’s the incidious danger of a soft apocalypse.

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