Steve KelseyMoney is a token of transferable value agreed by a society. Society agrees that this money is the only token of transferable value allowable and agrees sanctions that protect this agreement.
Money is issued by the functions authorised by the society, primarily the government and franchised issuers like banks, on behalf of and for the people in a society.
A society is able to buy any resource or service that accepts that societies money without limit. A society cannot run out of money, it can always issue more to meet its needs.
To ensure the unit of value is stable the volume of money available needs to be managed so that it never exceeds the availability of resources or services.
To control the amount of money in circulation the society uses another function, taxation, to remove currency from circulation when this is required.
The people in well managed society arrange the functioning of their society by democratic means, voting for manifestos for change to policies as the people in a society sees fit.
People aim to efficiently optimise their well-being, and a well managed society will have the same objective. Therefore a society will aim to maximise the wellbeing that can be delivered by developing its own resources and services to their practical limit.
- A well managed society can afford to spend to ensure full employment at an hourly rate that provides a dignified life for all members of society.
- A government function is to maintain this optimal state.
- A government is given direction by society by changing mandates on a regular basis, e.g. society agrees that environmental issues need to be resolved and the government forms policies to meet the new directive, purchasing the resources and skills needed as required.
The practical limit on the resources and services of a society may be exceeded by utilising the resources and services of third parties if the third party is prepared to accept the unit of transferable value offered by the society as payment. The cost of these externalities is defined by the rate of exchange between different societies money, plus the profit motive of the provider.
Where there is a sole suppler, the seller will control the price. Where multiple suppliers are available the market will set the price. The value the purchasing society places on the external resource determines what it is prepared to pay.
The money for the purchase of externalities is provided by the government ‘spending’ it into existence. The third party accepts the buyers money if it can be used to purchase resources or services from the buyer, or another third party. The value of well managed societies money is related to the scale and quality of the resources and services the societies money can buy.
The unit of value of a large advanced society will have greater value that that of a small and underdeveloped society. The large and advanced society is ‘backed’ by a greater number of people with more disposable income which provides less risk of default.
Purchase of services and resources from a third party diverts money that could be spent within the society to the benefit of its members. It therefore follows that a well managed society will seek to limit the use of third party resources and services to those unavailable to the society and that are essential to achieve the societies desired goal. This may take the form of natural resources that are unavailable locally- e.g. minerals or metals, or skills not available at that time.
Where this is unavoidable, a well managed society will always seek to maximise the the amount of resources and services its money can purchase from a third party.
A well managed society will seek the efficient servicing of its peoples needs and will minimise the diversion of or rationing of resources and services from its people. As money is a unit of value representing resources or services, it follows that a well managed society will limit the diversion of money away from the people in society.
Wealth
Wealth is the application of intelligence to matter.
Mud has no intrinsic value, but form mud into a brick and you can build Uruk, Nineveh, Babylon. The bricks value comes from the intelligence added to the earth by human action. The mud is given a precise geometry and is dried to increase its compressive strength. It’s form and dimensions are standardise to increase functionality. Specialised geometries are introduced to enable particular functions. The mud, through the application of intelligence, has been transformed into a unit of civilisational wealth
The more intelligence we can add to base matter the greater its value. The more widely we can distribute intelligence applied to base matter the greater wealth a civilisation has. The measure of a civilisations wealth is the amount of intelligence it has applied to base matter and how widely this is distributed.
It follows that, for any well managed society, any activity that increases the intelligence embodied in matter has high value.
It follows that any activity that inhibits the accumulation of intelligence or the application of intelligence to base matter or rations the distribution of enhanced matter, reduces a civilisations wealth.
Activities that increase civilisational wealth include
- the means of increasing knowledge
- the means of preserving and communicating knowledge.
- the means of embodying intelligence in base matter
- the means of distributing embodied intelligence widely.
Activities secondary to the generation of civilisational wealth are any services that enable these means of generation and distribution.
A well managed society will ensure that prioritisation will be given to all activities that enhance the generation of civilisational wealth.
A well managed society will ensure that activities that inhibit the building of civilisational wealth are prohibited.
Money V Wealth
Civilisational wealth has an intrinsic value. Money does not. A society with abundant civilisational wealth is rich. Its people live lives that are well provided for. A society with little civilisational wealth but an abundance of money is poor. Money does not determine a societies wealth.
In a well managed society money holds value in proportion to the civilisational wealth is can create or procure and no more. If a society issues more money than the civilisational wealth it can create or procure, the value of its money is diluted. The value of civilisational wealth is a constant, the value of money is relative.
How can we measure civilisational wealth? A measure of civilisational wealth is the amount of intelligence embedded in base matter multiplied by the number of instances distributed.
A smartphone has a high degree of intelligence added and is distributed in the millions. The high degree of intelligence added provides a rich capability that enhances individuals abilities and enjoyment and can be accessed by a large number of people. To do so the smart phone is served by an infrastructure that has equally high levels of civilisational wealth.
Pharmaceuticals are examples of products of high civilisational wealth. The science behind modern pharmaceuticals is the product of the accumulation of decades of research and development and pharmaceutical manufacture and distribution is dependent on systems produced by tens of millions of hours of informed effort.
Civilisational wealth is cumulative. Both the smartphone and the pharmaceutical are built on layers of civilisational wealth and inherit all that value. The smartphone could not exist without the invention of the integrated chip. The integrated chip could not exist without the invention of semiconductors. Semiconductors could not exist without the discovery electronics. Electronics could not exist without the discovery of resistance, capacitance, current and voltage, discoveries reaching back over two hundred years.
Without the pre-existence of civilisational wealth money has zero value. A brief review of the origins of money will make this clear.
Money has been reinvented many times but the earliest known use of a form of money comes from the Sumerian civilisation of circa 6000 years ago. The Sumerians developed a set of simple clay tokens.Each token represented a good of some kind, a sheep, a sheaf of corn, a bowl of rice. A notable feature of the simple token is the one to one relationship of the token with the good it represented.
The use of tokens was accompanied by the development of recording transactions inscribed into clay tablets by scribes. A worker would be given a clay tablet with their reward for labour inscribed, e.g. three boys of rice and a jar of oil etc. The worker would receive the clay tokens and the scribe would record the receipt in on a clay ledger.
As the Sumerian civilisation developed this token system become more abstract. The pictograms of sheep and bowls of rice became simplified and used to represent a value rather than a specific good. This made the system of tokens more flexible and is essentially money as we know it today, a unit of value that can be exchanged for civilisational wealth.
Sumerian civilisation went on to develop a sophisticated system of money, backed by silver and including methods of ensuring authenticity using the seals of prominent people, e.g. the king, the use of which was backed by sanctions for counterfeiting.
This process of abstraction and authorisation allowed money to be used flexibly and with confidence. Money in its physical form is itself a product of adding intelligence to matter, however, money has an additional property in that it also represents adding intelligence to matter. It is a form of potential civilisational wealth to be redeemed at some future point for actual civilisational wealth that already exists or is to be created.
It is this quality that gives money its apparent value, but it is important to stress that this value is inherited from actual civilisational wealth and is not intrinsic to money itself.
Commensurate with the development of money the Sumerian society developed forms of accounting and banking. Methods of recording the use of money and methods of storing the value they represent in an abstracted form helped Sumerians develop their civilisation.
Along with banking came the principle of debt and credit and the principle of interest. Scribes recorded of the use of other peoples tokens in order to develop additional civilisational wealth and the repayment on these tokens with an added amount to make such a loan worth while. This arrangement was inscribed onto clay tablets as proof of the agreement.
As a lender you are giving away the potential to use tokens to develop or purchase civilisational wealth for your own use for the promise that your potential will be returned in an increased form. This makes it interesting for you to do so. As a borrower you would only accept a loan on the basis you can use the money to develop civilisational wealth over and above the amount of money you have borrowed, including the interest. In this way both parties in the transaction benefit.
This is a powerful device that encourages the development of civilisational wealth to the benefit of all.
The abstraction of money is a powerful intellectual tool that has many benefits. However, it has a distancing effect from reality that can distort a societies understanding of value. When a society values money more than civilisational wealth, that society will no longer be well managed.
As one example take the meme implanted in our society by Mllton Friedman, the father of monetarist theory.
“The social responsibility of business is to increase its profits”.
Milton Friedman
The result of the adoption of this meme, which has dominated the past third to forty years of our global civilisation has reduced the optimisation of civilisational wealth in developed societies.
Another consequence of this meme is that large quantities of money have been sequestered from the economy and concentrated in the hands of a small number of people which has reduced investment in the generation of civilisational wealth and slowed the flow of money through society.
It is self evident that the social responsibility of a business is to increase civilisational wealth but the current focus on making money rather than civilisational wealth forces extreme distortions onto society by embracing a constant search for more efficient ways to make money.