M any years ago, before the invention of modern money or capitalism, people still had wealth – although limited. And they still had ways of keeping track of it. The principle of “fair trade” seems to be in our DNA. If you give something to your neighbor, you don’t expect him to hit you over the head. You expect him to give you something back. And if you give him a whole cow and he gives you half of a rabbit, some instinct tells you it isn’t “fair.” Small communities could keep track of who owed what to whom. But as civilization evolved, a new kind of money was needed. In a group of related people in an isolated valley, you could remember that your cousin should give you something roughly equal in value to the wild pig you gave him... and that you should offer your son or daughter to the family from which you had gotten your wife... and so on. But as the group grew bigger, people needed a way
And to put them together in any sensible way, you need to know what each of them costs. Getting your rubber from Malaysia will be a lot more efficient than trying to get it from Finnish suppliers; the price, expressed in units of money, will tell you that immediately. an economy to a halt. The placeholder loses its place. You just don’t know what anything costs. And from one minute to the next, your place in line changes. Another important feature of modern money is that transactions are final. I give you a chicken... you give me a small gold coin. Done deal. I don’t have to worry about what happens to you in the future. I’ve got my coin. I have no further claim against you. You’ve got no claim against me. Yes, there is always a chance that gold might lose value... that it might not hold its place in line very well. It is not a great concern, though. Prices go up and down. But according to The Golden Constant by Roy William Jastram, the value of gold That’s one reason high levels of inflation bring
to settle transactions without having to trust the people they were doing business with or remember who owed what to whom. When Aristotle described “money” he had our modern money in mind – something that is not wealth but acts as a placeholder for wealth. It is information; it tells you how much real wealth you can command. For the last 5,000 years, the best money has been gold (and to a lesser extent, silver). Gold is very useful as money. With it, you can do business with complete strangers. It can be used to stand in for almost any amount of wealth. Later, paper money – representing units of gold or silver – made commerce even easier. Without this modern money, an advanced economy wouldn’t be possible. Real money permits an elaboration of the division of labor, and it provides the whole system with the information it needs to operate. You can’t build an automobile, for example, without an extensive network of inputs – labor, steel, batteries, glass, rubber – from all over the world.
American Consequences | 29
Made with FlippingBook flipbook maker