US Money Chapter 4 – Money Systems


Money Systems 4.27 What System? (2)

Our current money system is a choice. It’s not set in stone. We can choose a different money system that supports a prosperous, low-tax, high leisure, caring and creative society. To choose wisely we must understand the …

Money Systems 4.28 Commodity money (2)

Observe well these rules: It is a very common mistake to say that money is a commodity…Bullion is valued by its weight…money is valued by its stamp. – John Locke, An Essay on Money & Bullion, 17181 Commodity money is…

Money Systems 4.29 IOU: present-value money – receipt or representative money (2)

We have discussed tangible commodity money, now let’s consider money that represents a commodity or real asset with an IOU (keep in mind we are using the traditional but misleading frame for defining money systems by the…

Money Systems 4.30 IOU: future-value money – debt or credit money (2)

An IOU can also be a promise of value that will be created and produced in the future. It’s a subtle, but important difference when it comes to money systems, and the common frame of commodity, commodity-backed and fiat …

Money Systems 4.31 Fiat money: money by decree (2)

Fiat is a Latin word meaning let it be done. It is generally used to mean a decree by an authority. The term fiat money means some authority decreed a certain type of money to be valid currency. By definition, money is …

Money Systems 4.32 Fractional reserve money creation (2)

Keep in mind there have been no 100% commodity money systems in primary, widespread use for at least 700 years – if ever. And, keep in mind how easy and how prevalent it has been to think money is a commodity, when it ha…

Money Systems 4.33 Making a deal with the devil – grand bargain: a national central bank and privately created legal tender (2)

The Banker Imagine you are very good at juggling IOUs from others with IOUs you issue. You are a person of stature, and exude trustworthiness; your IOUs serve as money in the community because people trust you will be go…

Money Systems 4.34 Bank money creation: anchored by reserves (2)

Yet few people not versed in banking ever dream that their money ‘in the bank’ is not in the bank; and few people versed in banking ever dream that the money which is not there ought to be there, or that it is practical…

Money Systems 4.35 Bank money creation: anchored by bank’s capital (2)

In a privately run reserve money creation system, the pressure to expand the money supply is like the force of water carving out a canyon. Overtime, the canyon gets deeper and wider. First, the reserve requirements are w…

Money Systems 4.36 Bank money creation: no anchor (2)

The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending. — Martin Wolf, Financial Times, November 9, 201016 There is a natural immature human incl…

Money Systems 4.37 Sovereign > commonwealth money (2)

The term sovereign money is used to refer to three different kinds of money systems. This means the term must be explained if it’s going to be used. What is a sovereign entity? The word sovereign comes from super and re…

Money Systems 4.38 Complementary money (2)

A healthy ferment around money systems exists on the edges of society and in small communities. People unhappy with the outcomes of the prevailing money system seek better options. Currencies that are complements, supple…

Money Systems 4.39 Experiments – interesting times (2)

A widespread awareness that something is deeply wrong with our financial and economic systems is pushing creativity. A variety of online virtual monies are popping up. They are called crypto- currencies because the money…

About the US Money Chapter 4 – Money Systems category (1)