“Coinage is imprinted gold or silver, by which the prices of things bought and sold are reckoned…. It is therefore a measure of values. A measure, however, must always preserve a fixed and constant standard. Otherwise, public order is necessarily disturbed, with buyers and sellers being cheated in many ways, just as if the yard, bushel, or pound did not maintain an invariable magnitude.” ~Nicholas Copernicus, “Treatise on Debasement,” 1517 “
Humans are by nature capitalists, says Nathan Lewes, the author of Gold: The Once And Future Money, because of their need to invest time and effort for greater productive. However, there is also risk involved, because there is no certainty. Problems may occur in the production, such as finding supplies or technological problems in creating the item. The end result may not actually work. Each tool is a capital investment, whether that be a rock to break open a clam or a semiconductor factory.
Using the family as an example, Lewis shows that not only are humans by nature capitalists, they are cooperative. The division of labor, specialization and trade improves productivity even more. They must create tools and learn skills (capital investments), specialize and trade, work together (equity investments), and make agreements or contracts, or promises with others (bonds).
This is true for the most primitive family unit as it is true for modern day society. As humans deal with others who are less closely related, their agreements or transactions become more formal. The two parties can no longer resort to family or tribal relationships for building trust but must find another form to base their trust for the transaction.
As people turn to one commodity as a medium of exchange, money is slowly created over time. Governments are not needed for its creation. No one invented money, it is a natural process throughout the world.
All kinds of goods have been used as money: miniaturized tools in China and miniaturized swords in Roman Britain, cowry shells, slabs of salt, beaded belts (wampum), giant stone wheels, tobacco, and so on. This creativity has continued into modern times, such as after World War II when the Germans used cigarettes as money.
Will we soon be in a similar situation when the dollar collapses? Will we return to gold as money?
Money’s Gift
Money simplifies transactions, allowing an economy to develop and become more complex. In a barter system of 1000 goods, there would be 499,500 exchange rates, but with money only 1000 prices. The future may turn to electronic credits, but money’s role would remain the same as a measure of value.
Money allows for more than trade. It also allows for the creation of credits and debts measured in monetary units. With money, investors pool their wealth together in joint stock companies to finance endeavors of a greater scale and complexity than could have been done without the “organizing principal of money.” Though there are elements of competition, the monetary market economy allows for greater cooperation than earlier eras.
As time went by, specialization and trade increased. People who had earlier raised and grew their own food needed to trade their goods and services for their daily needs. “The circle of cooperation expanded,” as did productivity. Today, society has become more complex, specialized, and productive. However, there is a danger. If the system collapses, today’s citizens could not return to self sufficiency. Unemployment is a relative recent phenomena.
Before, a person could always return to growing his own food. Now we are more dependent on a smooth functioning of the money economy than ever before. The production of a simple cup of coffee is highly complex now. The production of one cup of coffee takes place around the world.
What is Money?
Because money provides for the complexity, productivity and size of our society, it is worth knowing what it really is. Modern money hardly exists. In small transactions we use paper bills and coins. The paper has no value, and today’s coins are mere tokens containing no precious metal. In larger transactions, bank checks are used, but still they are merely pieces of paper. Finally, the transactions on an institutional scale are completely electronic, bits of information on a computer. Money is information.
The System
Not a single person knows how that cup of coffee was produced. The complexity of the production is too great, and unplanned. This is why the Soviet system failed, and even the Soviets had to use money to organize their economy. There is no choice but a money economy. Either it works poorly or well.
Because money is information, people want it to be as stable and uncorrupted. Scientists and engineers must work with stable measurements. It is no different with money. The monetary information is a measurement of value.
There have always been those who desire to change the value of money, because it helps one group at the expense of the whole community. Those who want the change move toward a controlling power to profit and share their profit with the controlling powers. In other words, government is the prime culprit. However, the government relies on the consent of the governed. Even in a totalitarian system, if the people as a whole do not cooperate, the government will fall.
The call for sound money is growing around the world, not paper money that can be manipulated, but money that retains its value and is stable.
Based on GOLD: The Once and Future Money by Nathan Lewis
Born in Oklahoma, Raised in Texas, Studied in Mexico and Spain, Taught Spanish in Thailand, Living in Hawai’i, Orthodox Christian, Libertarian, World Traveler, Writer, Sovereign Individual, Sangria Drinker, A Psychologically Unemployable Vagabond you can read about at Libertas.ws.
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