Mo' money, mo' money, mo' money!

Mo’ money, mo’ problems.  You know what I’m talkin’ about, Stanley, right?  - Michael Scott, “The Office”

Earlier, I wrote a note about the misconception that the measure of economic activity is somehow a corresponding measure of wealth.  But I think we also have a misconception of what money itself is.

The classic definitions of money are a medium of exchange and a store of wealth.  This means that if I have money, I don’t have to barter.  If I have money, I don’t have to worry about wolves carrying off my livestock.  I can still do the things I needed to do before, only now it has become a little easier, as I don’t have to carry around sheep with me in order to get wheat to make bread.

One of the caveats to this whole thing is that the value aspect of money is based solely on trust.  That is, if I trust that what you are giving me is something I can give to someone else, then I will accept it.  The widespread use and general trustworthyness of the Federal Reserve Note is what has made it the de facto currency of the day.  Back a few decades ago, each green sheet was backed by a certain amount of gold in some vault somewhere.  If you were so inclined, you could go in to that vault and get yourself some gold.  Then, instead of buying your next car or groceries with greenbacks, you could plunk down cold, hard, gold.

Once people agreed that there would be something of value to back the green paper, they trusted it.  As that trust spread, there became less and less demand for proof that there was something back there, and eventually we even eliminated the gold standard for money.  This means that the Federal Reserve just makes more money by, well, just making it.  They print it – and we accept it, just like that.

Now, plenty of people have written about the perils of eliminating the gold standard.  Dozens of books on Amazon are available, probably just as many more in your local library.  I’m too lazy to make another link, so you’ll have to do your own research.  But what the Dollar, or the gold coin, does for us is it allows us to do something else.

But what?  What else would we need to do that would maintain our lives?

• Buy a car?  Nope.  Cars are not necessary for keeping us alive.
• Save for a rainy day?  Nope.  Savings is not necessary for keeping us alive.
• Buy new clothes?  Nope.  Buying new clothes blah, blah, blah.
• Loan money to a friend?
• Loan money to an enemy?
• Donate to charity?

Nope, none of those.  The only thing that will keep us alive – as individuals and as a society – is if you purchase food for yourself with your money.  Think about it.

If you don’t have clothes, you can still survive.  You’ll be a little cold, maybe a little wet at times, but you will still survive.

If you don’t have a house, you can still survive.  Again, you may have to walk a way to get to a more mild climate in which you can survive without a house, but you can do it.

If you don’t have a new stereo, or a new TV, or a savings account, you can still survive.  It might not be the most entertaining, or the most secure, but it’s there.

But if you don’t have food, no matter what else you have, you die.  Period.  End of story.  Kaput. Therefore, the only real value money has for us is a way for the individuals in society to get food.

(I am also including water in the category of food.  But for the future, instead of writing “food and water” each time, I’ll just write “food”.)

And that’s what I think we have been missing all this time.  Our economics has been focused on “wealth”, measured in terms of currency.  Dollars, yen, share prices, 401(k) balances.  But our real wealth, our only true wealth, is actually measured in terms of our Calories.  We create wealth not by fancy watermarked- and embedded-thread printed pages, but by growing more corn, more beets, more cabbage.  We create wealth by spending our time not on writing fancy blogs, but by catching fish or spearing deer.  We create wealth by creating food, and we destroy it simply by existing.  By breathing in and breathing out.

Unfortunately for this post, it’s late and time to go to bed.  So much more I’ve been thinking about, and needing to get down on the computer.  Keep in touch, folks.  It’s going to get interesting from here.