What is real money?

 

Real money is a medium of exchange that has no inherent liability tied to it.  A liability infers a future performance requirement.  A liability is a debt.  A debt must be paid.  Money is global in nature since exchange occurs beyond the borders of a country.  As a basis to exchange goods and services, there is an inherent need to stabilize the value of money. 

When debt is attached to money, the money is only as good as the balance sheet (assets) of the borrower.  For instance, if the money is a "note", the ability of the borrower to satisfy the debt determines the value of the note.  As a borrower’s assets decline or his ability to repay the note declines, the note itself is devalued.

If you have assets of $1,000,000 and you have issued notes valued at that amount, you have established value.  However if you issue more notes thus doubling the notes without increasing your assets by a similar value, you have "devalued" your notes.  They are worth half of their original value.  That is inflation.

Increases in the prices of goods and services are not inflation, they are a symptom of inflation.  A headache is not the illness, the headache is a symptom of an illness.  Often we focus on the symptoms and not the cure.  If you have persistent headaches, it is not due to a lack of Tylenol.  Something is causing those headaches.  Once you deal with the source of the problem, the symptoms go away.

Inflation robs from the middle and lower classes of a country.  As inflation devalues money, the savings and income loses value.  People must work harder and longer to stay afloat.  Wealthy people generally have access to investments that outperform inflation.  Poor people don’t.  Inflation tends to remove the middle class of a country.  The result is a two class system: the elite and the poor.  Throughout history this fact has been proven over and over.  Each generation of money changers assumes they are smarter than the previous generation.  That is not the case.  A "note" based currency ultimately fails.  It exploits the common man.  This type of currency can be manipulated by those in control.  This defies the Biblical principle of "equal weights and measures".

The Bible speaks of gold and silver as having inherent value and is used as "money".  These metals have no inherent liability attached to them.  Man cannot manipulate their value.  They satisfy the characteristics of real money.  Both parties of a transaction can be satisfied that they are working with fair and equitable value.

Any economic system that separates itself from real money as the medium of exchange will ultimately fail.  The money changers can control and manipulate the values for a period of time until a tipping point occurs.  That tipping point may come suddenly.  We will wake up one day and say "enough is enough".  At that time, the mystery of Babylon will be revealed.

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