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Where Does Money Come From?
Get prepared for a jolt should you not already understand.
Every day innumerable millions of trades are eased with cash. Why do we need money? How can it get into circulation? Who sets it there? Who creates cash? And on what basis? Is it the government? If not, why not? Who's it? And how do they understand how much to print? What will happen if they add too much or too little to the market?
Three chapters of my novel the best way to Profit from the Coming Great Depression are given to these questions. The majority of people are shocked when they initially learn about our fractional reserve money system, which has sewn within it the seeds of its own destruction.
Firstly, we want cash as the barter system is too unwieldy. If you're a construction contractor and I'm a potato farmer, and I would like you to build me a house, how am I going to pay you? Just how many potatoes can you as well as your own family eat before they go rotten?
Certainly we want something that represents both houses and potatoes. But notice that that doesn't make money a resource in itself. It's simply a vehicle for transferring the worth of resources from one individual to another. There are natural resources, both under the earth and above it, and there are human resources work and mind. Place these together and guy can make. But although cash could be utilized to value and transfer these resources, cash isn't a resource itself. People who control cash actually need the resources that cash represents.
Centuries ago things like gold and silver were used as cash, before we'd notes and coins like today. Remember the old western films where highwaymen would hold up the stage coach and individuals would need to hand over each of their valuables? Why, on earth, would individuals take their gold and silver with them? Because most people had nowhere else to place it.
This created an opening for the goldsmiths, who were the forerunners to our modern day bankers. The constructed big, safe vaults and allowed individuals to deposit their precious metals in these safes. In return the gave folks receipts verifying the quantity of gold held on their behalf. In time folks started trading with the receipts rather than the gold. Now these receipts are called banknotes.
But that is not all the goldsmiths did. In time even paid interest to those who'd deposited gold in their own vaults (e.g. 3%), but then lent the gold outside to others (in the shape of more receipts) at say 6%. That is how they covered their prices.
In time the goldsmiths noticed that nobody ever came back to collect their gold, and not all being reliable, started to lend out more in new receipts than was represented by the gold within their vaults. In time there was ten times as much cash in circulation as there was gold in the vaults.
Where Does Money Come From?
Get prepared for a jolt should you not already understand.
Every day innumerable millions of trades are eased with cash. Why do we need money? How can it get into circulation? Who sets it there? Who creates cash? And on what basis? Is it the government? If not, why not? Who's it? And how do they understand how much to print? What will happen if they add too much or too little to the market?
Three chapters of my novel the best way to Profit from the Coming Great Depression are given to these questions. The majority of people are shocked when they initially learn about our fractional reserve money system, which has sewn within it the seeds of its own destruction.
Firstly, we want cash as the barter system is too unwieldy. If you're a construction contractor and I'm a potato farmer, and I would like you to build me a house, how am I going to pay you? Just how many potatoes can you as well as your own family eat before they go rotten?
Certainly we want something that represents both houses and potatoes. But notice that that doesn't make money a resource in itself. It's simply a vehicle for transferring the worth of resources from one individual to another. There are natural resources, both under the earth and above it, and there are human resources work and mind. Place these together and guy can make. But although cash could be utilized to value and transfer these resources, cash isn't a resource itself. People who control cash actually need the resources that cash represents.
Centuries ago things like gold and silver were used as cash, before we'd notes and coins like today. Remember the old western films where highwaymen would hold up the stage coach and individuals would need to hand over each of their valuables? Why, on earth, would individuals take their gold and silver with them? Because most people had nowhere else to place it.
This created an opening for the goldsmiths, who were the forerunners to our modern day bankers. The constructed big, safe vaults and allowed individuals to deposit their precious metals in these safes. In return the gave folks receipts verifying the quantity of gold held on their behalf. In time folks started trading with the receipts rather than the gold. Now these receipts are called banknotes.
But that is not all the goldsmiths did. In time even paid interest to those who'd deposited gold in their own vaults (e.g. 3%), but then lent the gold outside to others (in the shape of more receipts) at say 6%. That is how they covered their prices.
In time the goldsmiths noticed that nobody ever came back to collect their gold, and not all being reliable, started to lend out more in new receipts than was represented by the gold within their vaults. In time there was ten times as much cash in circulation as there was gold in the vaults.
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