Rethinking What We Call “Money”

a caveman doesn't know what is money
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In cavemen times, barter was the main form of exchange, but as humans evolved, so did our methods of trade, leading to a complex system of creating both wealth and poverty.

Money is the subject of countless adages. It makes the world go round. The lack of it is the root of all evil. Although it can’t buy happiness, we are better off with it than without it.

By definition, however, money is simply “a commonly accepted medium of exchange,” whether it takes the form of shells, salt, beads, coins, paper or electronic bits.

What gives money value is trust—a firm belief that something owed will be repaid. If you put in an hour of labor, you need to get something in exchange for your work, so you accept money in return—a form of debt.

At a restaurant, you exchange the money for food, and the debt has been repaid. Of course, now the restaurant holds the money/debt, which it will exchange for supplies or to pay its own workers, and so the money/debt continues to circulate endlessly.

Most people think governments create money and can print as much as they like. In fact, it’s the banking system that determines how much money is in circulation.

The term “banknote,” coined in 1695, is indicative of the central role of banking in issuing paper “payable to the bearer on demand without interest” as money.

Since then, bank money has evolved from hard currency (cash) to accounts in which intangible ledger entries (credits) are the basis of exchange. As much as 97% of what the world now calls “money” is no more than numbers stored within bank computers.

And every penny, farthing and centime of it still represents debt.

What’s more, interest required on bank loans ensures that there is always more debt owed to the banks than there is money in circulation to repay it. Banks can tighten up lending to keep money scarce, too. Scarcity of money drives business competition, just as it feeds unemployment, causing families to do whatever it takes to pay mortgages and bills.

Inevitably, someone must lose. Unable to repay their loans, a percentage of individuals and businesses will be forced to remove their debts through foreclosures, repossessions or an aptly named process called “bankruptcy.”

In his 2009 film, The Money Fix, director Alan Rosenblith explores society’s relationship with the almighty dollar, mark, yen and pound. He challenges individuals, communities and nations to rethink money and re-imagine economics.

Why not base monetary systems on abundance rather than debt? Mutual credit and commercial barter are among the possibilities he proposes.

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