What is Money? | Robert Wayne Atkins, P.E.

What is Money?
Copyright © October 2, 2023 by Robert Wayne Atkins, P.E.
All Rights Reserved.

Introduction
Money is not a new invention. Money has been used by people for thousands of years.

Money is necessary to facilitate the buying and selling of goods and services. If money didn't exist then we would have to trade something we have for something that someone else has. This would require us to invest a lot of our time trying to find someone who had what we want to acquire and who also wanted what we had to trade. Money simplifies the buying and selling of goods and services. Therefore money is a very, very useful commodity.

Originally money consisted of bronze, copper, silver, and gold. These metals had value as metals and therefore these metals could be used as money to buy and sell things. For example, Moses said the following about money in the Holy Bible:

Deuteronomy 14:24-26 (New International Version)
24 But if that place is too distant and you have been blessed by the LORD your God and cannot carry your tithe (because the place where the LORD will choose to put his Name is so far away), 25 then exchange your tithe for silver, and take the silver with you and go to the place the LORD your God will choose. 26 Use the silver to buy whatever you like: cattle, sheep, wine or other fermented drink, or anything you wish. Then you and your household shall eat there in the presence of the LORD your God and rejoice.

Money can be something other than a precious metal if that money can be converted into a specific amount of precious metal. For example, in the United States of America our coins were originally made of copper, nickel, silver, and gold. But the government stopped minting gold coins in the year 1933. And the government stopped minting silver coins in 1964. When I was a young teenager I could take a paper one dollar bill into any bank and ask the bank teller to give me a silver dollar and the bank teller would immediately give me a silver dollar for my one dollar bill. But the banks legally stopped doing this in 1964. However, after 1964 a foreign nation could still exchange their USA dollars for gold at the rate of $35.00 per troy ounce of gold. But President Nixon legally closed the gold window for the redemption of USA dollars in 1971.

Unfortunately our money in the USA is no longer made of silver or gold. And our paper money and our digital money is no longer backed by silver or gold at a fixed exchange rate.

The physical money in our wallets is made of paper. The coins in our pockets are made of scrap metal. Before banks started using computers, our money in the bank would appear as numbers on the ledger in the bank. After banks started using computers our money in the bank became digital numbers inside the memory of a computer owned by the bank.

This article will briefly discuss some of the problems with the worldwide use of paper money and with digital money in the early 21st century.

Discussion
In the United States of America the Federal Reserve has the authority to issue money. But the Federal Reserve is not part of the federal government. It was formed in the year 1913 by a very small group of extremely wealthy and powerful families. And those families were successful in convincing the leaders of the USA government to sanction the Federal Reserve as the Supreme Bank in the USA. And the Federal Reserve was given the power to authorize the minting of coins and the printing of paper money by submitting orders to the U.S. Mint and its four minting facilities.

When the Federal Reserve Bank was created in 1913, our coins were made of copper, nickel, silver, or gold. The left illustration below shows silver dimes, silver quarters, and a silver dollar. This put an upper limit on the amount of money that the Federal Reserve could create because the coins had to be made of copper, nickel, silver, or gold. And a paper one dollar bill was a "Silver Certificate" and it could be exchanged for a "Silver Dollar" at any bank by anyone at any time. Look at the middle illustration below and you will see "Silver Certificate" on the top center of the dollar bill.


Old Silver Coins	Silver Certificate	Federal Reserve Note

As previously mentioned above, 1933 was the last year that gold coins were minted for use as money. And 1964 was the last year that silver coins were minted for use as money. And our one dollar bills became a "Federal Reserve Note" or an IOU that is not backed by anything. "Federal Reserve Note" appears on the top of the right illustration above. This means that the one dollar bill was issued by the Federal Reserve, and it is an IOU of the Federal Reserve. The Federal Reserve System, or the Federal Reserve, or the Fed, are all synonyms for the same organization. The Fed controls the issuing of money and the prime interest rate. And the Fed is not part of the federal government of the USA.

In 1971 the United States stopped redeeming its money for gold at $35.00 per troy ounce. This gave the Federal Reserve unlimited authority to create money backed by nothing and that money was made using scrap metal, or paper, or it was an electronic digit in a computer.

However, one ounce silver eagles have been minted from 1986 until 2023 but their price depends on the market price of silver. One ounce gold eagles have also been minted from 1986 until 2023 but their price depends on the market price of gold. These coins are not used as money to buy and sell things. They are purchased by people who want to own some silver or some gold as an alternative to having money in the bank, or in the stock market, or in a digital currency. If you are considering buying some silver coins or some gold coins then please do not be shocked when you discover that the actual market price of the silver and gold is significantly more than the "official" price of silver and gold. You may also discover that there are no coins currently available for sale at your local coin shop and that your name will be added to a long list of the names of people who are interested in buying silver or gold coins. (Note: Any price can be quoted for an item but if you can't buy that item at that price then the price is not real. This is similar to the official "inflation" statistics that are reported in the USA but most of us know that the real inflation in the USA is at least double the official "inflation" rate. As an example, on October 2, 2023 the "official spot price of silver" is $21.39 per troy ounce but the "average" price of twelve different one troy ounce USA silver eagles on ebay is $35.54 and this is 66.2% more than the official spot price of silver. On October 2, 2023 the "official spot price of gold" is $1,839.00 per troy ounce but the "average" price of twelve different one ounce USA gold eagles on ebay is $2,442.00 per ounce and this is 32.8% more than the official spot price of gold. However, buying gold or silver over the internet is not recommended because there are currently a lot of "certified" counterfeit gold and silver coins and bars being sold. A coin shop will place the gold coin or silver coin on a special device and that device will indicate whether or not the coin is real.)

Since 1971 the Federal Reserve has been creating money out of nothing. The Federal Reserve does not have to do any work to create money out of nothing. But the money that is created is loaned to the government and the government has to pay that loan back with interest. The money the government uses to pay its debt is money that the government collects as taxes.

Who pays the taxes? Taxes are paid by the people and the businesses in the USA that actually make something of value, or they provide a service of value. The people and the businesses actually work for the money they earn. This includes farmers, hair stylists, factory workers, truck drivers, doctors, dentists, construction workers, and everyone else that does some type of real work. The money that they receive in payment for their hard work is the money that was created out of nothing. But it is their work (such as a dentist), and it is the products that they make (such as furniture), and it is the food that they grow (such as rice), that gives that money its value. And the government taxes that money and then the government uses some of that hard earned money to pay the "interest" on the money that the government borrowed even though that borrowed money was created out of nothing and it is guaranteed by nothing.

Therefore the money that we currently use in the USA is of three types even though it is all the same money:

Money Created Out of Nothing and Guaranteed by Nothing: This is the money created by the Federal Reserve and the entire banking system. It includes printed money and digital money.
Money Earned by People and by Businesses: People and businesses produce things of value or they provide a valuable service. They are paid with the money that was originally created out of nothing. But when the people add their labor to the money that was created out of nothing, then the money has some value as a medium of exchange between people and businesses.
Money Paid in Taxes to the Government: Some of the money that is honestly earned by people is taken away from them in the form of taxes. Those taxes can be used for anything the government desires, including paying the interest on the government's debt on money that was created out of nothing.

At least once a year the federal government complains that it has run out of money and that they can't pay their bills. Our elected politicians discuss this problem for days and this problem receives a lot of publicity in the news media. But all of the complaining is just for show because the politicians know that they have no option but to increase the size of the federal debt and to borrow more money from the Federal Reserve. And the Federal Reserve and the banking system is always willing to loan the government more money for two reasons:

The Federal Reserve System creates the new money out of nothing and loans it to the government. The Federal Reserve System does not have to do any work to produce the new money and it doesn't cost them anything to create the new money. They simply put some more digital money into the government's bank account for the government to spend.
It is in the best interests of the Federal Reserve System to keep this "Ponzi Scheme" going indefinitely. It doesn't cost them anything and they continue to receive back money that was earned by the hard labor of the citizens and businesses in the USA.

Unfortunately, like all Ponzi schemes, this one cannot be continued indefinitely for three reasons:

The Federal Debt: The interest on the federal debt is more than the government can pay. And that debt, and the interest on that debt, is increasing every year. When a person or a business can't pay their debts then they must declare bankruptcy because no institution will continue to loan them money. The reason is because the institution knows the money will never be repaid. But the Federal Reserve System doesn't care because the money it creates doesn't cost them anything. However the problem with creating money out of nothing is that the Federal Reserve is pumping a tremendous amount of money into the economy of the USA but there is no corresponding increase in the number of products made or services delivered. This means hyper-inflation will soon make it impossible for a normal person to buy what they need to survive.
USA Dollars Held by Foreign Nations: In the mid-1970s foreign nations were forced to use USA dollars to pay for the oil they needed. This created a huge demand for dollars because every nation needs oil, diesel fuel, and gasoline. But in March of 2022 when our leaders told Russia that they could no longer use USA dollars to settle their debts, Russia began laughing up its sleeve. They immediately began requiring Rubles or gold for their oil, and for their gas, and for their food. And now Saudi Arabia in no longer requiring USA dollars to buy their oil. Saudi Arabia will now accept payment in the currencies of Russia, China, India, and other financially solvent nations. Therefore foreign nations no longer need the USA dollars in their bank accounts. If you were one of those nations, what would you buy with your USA dollars before those dollars became worthless? Would you buy real estate and businesses and corporations inside the USA with your USA dollars? What will all of these extra dollars eventually do to the price of goods and services in the USA?
USA Dollar Bonds Held by Foreign Nations: Foreign nations no longer need their USA Dollar Bonds. If they decide to sell those bonds then this will flood the USA with dollars that are not backed by labor. If this happens then what impact do you suspect it will have on the price of EVERYTHING that is sold in the USA?

In the USA after the American Civil War nobody would accept Confederate paper money because they knew it was worthless. But they would still accept silver and gold coins. In Germany after World War II nobody would accept the German Mark because they knew it was worthless. When I was young I heard stories about how a person had to push a wheelbarrow of German Marks to a market in order to buy one small 2-inch round piece of bread about the size of a hamburger bun. The paper money in the wheelbarrow was used to feed the fire to keep the bread oven hot. This same sad story happened in the 21st century in Zimbabwe in Africa. Nobody wants any Zimbabwe paper money today because it is worthless. The reason it is worthless is because it was created out of nothing and it is guaranteed by nothing. A Zimbabwe dollar is just a piece of paper and nothing more.

The money that we currently use in the USA will continue to have value as long as it is accepted by people and businesses and other nations. However, as time passes it may take a lot, lot more of that money to buy the same exact amount of groceries that your family consumes each week. And if foreign nations decide they no longer wish to sell the things they make to the USA for dollars because they have lost all faith in the dollar as money, then where will the stores in the USA get the majority of the things that they currently sell to us (such as clothing and shoes and kitchen appliances)?

Unfortunately most people in the USA believe that the USA dollar will never become worthless. I pray that you are not one of those people.

Conclusion
If you were to invest your summer working in your own garden, and if you were able to grow 500 ears of corn, and if somebody were to offer you a piece of paper in exchange for some of your corn, would you accept the piece of paper? If you wanted to sell some of your corn would you insist on being paid with silver or gold coins? Or perhaps you might be willing to trade some of your corn for something else that your family currently needed such as fresh eggs or fresh butter.

As I have mentioned in some of my other articles, now is the time to prepare for the future.

When the USA dollar crashes all USA banks will take a "temporary bank holiday." Nobody will be able to deposit or withdraw money from any type of bank account, and all credit cards and all debit cards will stop working. But the news media will assure everyone that their money is safe, and that the banks will reopen soon. But before the banks can reopen, the banks need just a little time to correct the "temporary problems" that have been caused by the enemies of the USA. Days will turn into weeks, and weeks will turn into months. How long can your family survive with what you currently have inside your home?

When the USA dollar crashes it will have a domino effect on every bank in every nation that is closely aligned with the USA banks, including the banks in England, Europe, Central America, and South America. Most African banks are already toast. Some Asian banks will also fail. And all digital currencies will also collapse.

Whatever you own when the "USA dollar becomes worthless" will probably be all that your family will have for many, many years.

If it is possible then at the current time you should only spend a portion of your money on the things that your family needs right now to stay alive. And you should spend some portion of your money on things that would make life possible for your family after the "dollar crashes." This would include the following:

Buy a decent variety of reasonably priced canned foods that have a long-shelf life, and that are high in calories and nutrition, and that do not need to be refrigerated or frozen. These canned foods can be purchased at your local grocery store. Also buy some white rice in 10 pound or 20 pound bags. Put this food aside and save it until the dollar crashes and you can't buy any more food.
Decide on how you will provide clean safe water for your family to drink when your current source of water is no longer working. Contaminated water will quickly kill everyone in your family and each member of your family will die a painful agonizing death.
Acquire a self-defense weapon, and a reasonable supply of ammunition for that weapon, so that you can protect your family from people who want to harm your family members and who want to take whatever your family has.
Improve your family's relationship with God by reading the Holy Bible with your family every day. For example, God Almighty gives us the following warning in the Holy Bible:
Ezekiel 14:13 (New King James Version)
13 "when a land sins against Me by persistent unfaithfulness, I will stretch out My hand against it; I will cut off its supply of bread, send famine on it, and cut off man and beast from it."

Please take some type of positive action today to buy and store the things your family will need in the future to stay alive.
Some additional information about food and water is on my website at this link.
Some additional information about firearms is on my website at this link.

May God Bless,
Grandpappy.

Grandpappy's e-mail address is: RobertWayneAtkins@hotmail.com