MONEY: Medium Of Exchange Or Debt?
Money Need Not Be Debt
http://www.financialreform.info/f_r_money_medium_of_exchange.pdf
In his iconoclastic survey of contemporary global events Tragedy And Hope, the distinguished
historian Professor Quigley writes that "money and goods are not the same thing but are, on the
contrary, exactly opposite things. Most confusion in economic thinking arises from failure to
recognize this fact. Goods are wealth which you have, while money is a claim on wealth which you
do not have. Thus goods are an asset; money is a debt. If goods are wealth; money is not-wealth, or
negative wealth, or even anti-wealth... They always behave in opposite ways, just as they usually
move in opposite directions." (1)
The concept of not-wealth or negative wealth is silly, and is just the sort of twaddle we have come
to expect from mainstream economists and from the often well-meaning politicians who parrot
their pratflings Be that as it may, this is the prevailing view of money and has been since the
establishment of central banking systems, which in Britain began in 1694 with the misnamed Bank
of England. I say misnamed because the Bank of England was - and remains, in spite of its nominal
nationalisation - a private bank.
Prevailing view or not, this silly concept of money is demonstrably false, because although money
and debt have gone hand in hand since time immemorial and debt in fact predates money, (2) the
concept of money as debt presupposes the ridiculous notion that wealth cannot be created except as
a debt.
Not all economists and researchers accept this fallacy. When the current writer interviewed author
Eustace Mullins in 1993 he hit the nail bang on the head: "whenever you have a Central Bank you'll
have a National Debt; that's what a Central Bank's created for. When the Bank of England started
operation in 1694, you started to have a National Debt soon after that, and then there was war
finance, they financed wars and built up a healthy debt to the Bank, and you've been [struggling]
under that load ever since." (3)
Money is, or should be, a medium of exchange and a store of value, and nothing else.
The only valid purpose of the financial system should be to distribute the goods and services the
community creates and can supply, both now and in the future. (4)
If one accepts this axiom, then all other financial truths must flow from it, and all financial
fallacies must be exposed.
Money is too often used for other, sinister, and at times outright nefarious, purposes. It is used for
example as a method of social control. The taxation system in particular is used to regulate and
even to punish people for what our masters consider to be anti-social behaviour; there is an element
of this in the duties on alcohol and tobacco.
What Is Inflation?
There are many fallacies connected with the concept of money; one of these is that of inflation.
There are basically three ways the government can raise money: it can borrow the money; it can tax
it; or it can create it, either by printing notes, by minting coins or simply by writing down credit as a
book entry. (5)
The government is forever needingto raise money to pay for all manner of public services,
whether desirable or not. How should it raise money? Which of the three ways mentioned above is
the most efficient, and is it always so?
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