Feb 252018
 


Money doesn’t grow on trees! Now any child knows that. It’s apples, pears and other fruit that grow on trees.
Money comes out of bank accounts and ATM’s or from shops which ask you if you want to take cash out.

Yes, but who puts it there in the first place? And who decides how much to make and where exactly to put it?

That’s what we want to know, especially when we hear that there isn’t enough money to go around, to fund all the social, health and educational needs of society.

Under-employment and insufficient sales growth tell us that it’s not that there aren’t enough people to do things and it’s not that there isn’t enough stuff to buy. What we have now is over-capacity, and not enough money!

And money is supposed to facilitate exchange, be the go-between between goods and services. So what’s going on and where do we find that place where the money is made?

Well the answer is deceptively simple, money is just made up! It does not need to be produced like any other commodity; it doesn’t require any resources at all, just a simple decision as it turns out, and a few keystrokes! (see diagram A below for full details)

So we should really be relieved that a paucity of money is easily remedied, just make or decide more. We know they can do that as a lot of it is going on (it’s called printing money quantitative easing*).

Then there’s just the question of who gets it. Well, poor people need it more than rich people, how else can they access an entitlement to a decent standard of living?

But (I hear you say) won’t more money just push up prices? Yes, if there are not enough goods and services to go around, but at the moment there is too much to go around.

But what about having to earn an income, what happens to the maxim:
– a decent wage for a hard day’s work!

Diagram A

Maybe that will need to be sacrificed and replaced by:
– a decent living in a decent society.

 

 

 

* Printing money is generally considered taboo by most economists. Quantitative easing is a means of creating money but only for banks and financial institutions. It’s like the central bank lending them the printing press or a bigger “make money” key.