Thursday, September 20, 2007

Trading Money

One of the most significant deviations from a perfect economy is the buying and selling of money. This effectively breaks the definition of money as a representation of the value of tangible items; it becomes an item of value itself. As a result of this practice, money loses its utility in the functioning of a reality-based economy and the economy mutates into one that is mostly concerned with the trading of money (in the U.S., most if not all of the money currently in the U.S. economy is not backed up by anything real). Anyone who is part of such a system and doubts this should ponder the ubiquitous role of “interest” in personal finance; interest is purely a payment for money.

Before money became a commodity, its amount was tied to resources whose demand and supply were reasonably well known: precious metals. If it were to continue being used in an ideal world, a similar relationship would need to be established (though I would probably substitute energy for gold).

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