Re: What Money Is Being Used To Buy Our Debt
They don't understand what money really is, when it is backed by nothing more than the full faith and credit of the US govt. You place faith in the value of money because it is made of paper, not a precious metal. We all agree that paper money has intrinsic value and upon this our monetary system rests. In the same way that a carpenter places his faith that an inch in bumfuck america is the same as the inch in poonjab new york. We agree that an inch there is exactly the same as an inch here. This common agreement is what money rests upon.
Originally Posted by goober
The confusion arises when you try to equate paper money not backed by gold or silver with money that is backed by rare metals. They are different animals. To back money with rare metals is an old idea that is not needed in a modern civilization, because it has a downside and can inhibit growth, and is only needed when chaos rules over order.
When you use gold or silver or another rare substance to back money, that is still done by consensus of the society that agrees to use it. Money, the measure of wealth is always by consensus, and it doesn't matter what is used to back that money, whether it be a rare resource or just a common consensus of other things, like the faith in the gov't that issues the currency.
What is money really? It is a way to store personal wealth because it is too difficult to store grain, trading goods, and so on, so money is pure convenience. You cannot eat a dollar bill, but you can eat what that bill will buy, or what you can exchange it for. It is also a way to use a symbol for the value that represents something else which makes trading so much easier. It is easier to carry money in a wallet than to truck around a ton of wheat as you seek to trade your surplus in wheat for something else you can use.
And so Goob is correct. It is a consensual mass hallucination, in which we all agree to the hallucination for the betterment of society. If society breaks down completely and money is no longer seen as something that you can depend upon exchanging for the necessities of existence, your grain you have stored will eventualy spoil, rendering you worthless. Money does not spoil.
The value of money is dependent upon a consensus, and since you cannot eat money, or store real wealth(grain, veggies, goods, and so on) money becomes a way in which to store wealth conveniently, for those that have a lot of it. Money is highly advantageous to those humans who have great surpluses and must hoard that, while serving the poorer folks much less. For the poor money is just a convenient manner in which to buy what it takes to exist and is much easier than barter. The rich are much more concerned about money because they have so much of it, and their identities, their self worth depends upon how high that pile of cash is.
To limit the supply of money to the amount of gold a nation holds is primitive thinking. We have moved beyond this sort of primitive thinking, placing faith in something other than a rare metal. So money is always based upon a consensus, in the same way we all agree that an inch is an inch no matter where you are located. If we want to make an inch longer or shorter, all we have to do is to all agree upon it.
The trouble arises when we confuse money with real wealth, with real wealth being land, food, goods and so on. How we decide to represent that real wealth by using a symbol for it, like paper money is nothing more than a common agreement. Money isn't real wealth, it is a mass hallucination we all agree to as being reality, for convenience. Money is a convenience. Yet we treat it like real, actual wealth. And that is a sort of hallucination.
There will come a day when money will be nothing more than a series of 0s and 1s stored electronically in computers. Hell, its almost that way now. I never carry cash, a debit card represents my cash in a few banks. All it takes for us is to have this thing called faith in our gov't created money that is now in many cases not even a green 20 dollar bill.
When one party or the other tries to destroy that consensual faith, they are playing with fire and apparently don't have enough sense to understand what they are doing. They are acting like money is based upon rare metals when it no longer is. Yet even gold has great value based upon consensus, that is we choose to place value upon it. It just always boils down to consensus whether its gold or the full faith and credit of a gov't that only uses this to back the currency, to give it value.
"Like every other good thing in this world, leisure and culture have to be paid for. Fortunately, however, it is not the leisured and the cultured who have to pay." Aldous Huxley.