Money’s golden connections

A recent email from Positive Money posed an interesting question:
“How is it that lack of money, the only resource that can be created at will, forms the main obstacle for addressing effectively society’s problems?”
If we presume that the resources they refer to are labour, land, energy and money, then it is delightfully true that only one of these is unlimited – and that’s money. And indeed only one of these has been completely invented by man – and that’s money.

How, when we’ve invented it, can we ever even think that there is no money – or even that there is not enough money? Who is limiting it and why?

Prevailing received wisdom seems still to be that money can be limited. And people don’t think of who is limiting it but what is limiting it. So the politician’s and banker’s most powerful weapon is actually there in the collective and individual minds of the electorate – all are still pretty much on the gold standard. Richard Nixon may have moved the world off the gold standard in 1971 but most people are still on it in their minds. And it is telling that the expression still forms part of the language as indicating the absolute best. For some purposes it could be – but it never can be for money.

When money is the preferred method of accounting for society’s resources then we don’t need to count by thinking it is irredeemably attached to a limited commodity.  At its most basic the world clearly has more resources than just gold. Gold makes good jewelry, is fine for filling teeth, is useful in electronics and sometimes compounded in medicine. But that’s about it, so why use it then to limit artificially both the quantity and allocation of your entire range of resources? It is not logical and certainly constrains an economy  – and that’s why we no longer do it.

A further disadvantage is that there is not much opportunity for river panning for gold these days so it is generally mined and refined using mercury or a cyanide compound – both pretty dangerous and dirty procedures. So you really would want to use it only for a beneficial purpose. It is crass stupidity to dig it up from one hole in the ground and refine it, only then to put it into another hole in the ground – probably thousands of miles away – under a bank.

So it needs to be properly recognised that money is society’s invention for the benefit of society and money’s use rests on confidence in its issuers. When people are told on the one hand that money makes the world go round and on the other that there isn’t enough of it that only helps to undermine that same confidence. Increasing private debt and increasing fraud are just two indications that money’s distribution is too limited.

Once we understand that money is created by society for the useful benefit of all its members we can arrive at the conclusion that its creation can be seen as a simple franchise scheme.

This seems to me rather a comforting suggestion and one that might be more understandable by the general public. The private banks are a bit like McDonalds franchisees and we are all partners in the franchisor. Indeed this is an additional reason to ask banks for extra tax – oh alright franchise fees – for having the right to produce almost all of our money.

To ensure the public and the banks get the message I think we should call it the seigniorage tax.

And please beware of anyone who flashes their gold.


  1. Andrew Dickie -

    I recall a great comment from Canon Peter Challen of the Christian Council for Monetary Justice – not sure if it was his own, or only quoted.

    “Saying there’s not enough money is like saying there aren’t enough inches!”

    In other words, just go and measure some more: you can’t run out!

  2. Peter May -

    As you say – and a good analogy.
    Inches are another human construct. And if the inches are tied to the length of a roll of cloth you can indeed run out – but only of cloth, not of inches.
    And if money were also tied to the value of the roll of cloth you could also run out but again only of cloth and not of money.
    That sort of comparison may be the most straightforward yet…

    The confusion seems to come down to money being at the same time a measure of value and a value judgement whereas inches are only a measure of length and we can all agree whether a roll of cloth is longer or shorter. But it is more difficult to decide how much it’s worth (it seems like the finest silk but it could be a shiny lookalike, yet the colour could be just what I’ve always wanted but you detest- and so on).
    I suppose money has the ‘how long is a piece of string?’ problem….

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