Thursday, December 25, 2008

Smoke & Mirrors

When I look at this Dilbert, I realized this one, in a very indirect but telling way, shows how profound the disconnect is when people try to explain just what money is and how it's used in today's world. Like the disjointed conversation in this Dilbert, the cognitive dissonance on this fascinating subject resembles the one on obscenity whereby the definition never seems to fit but the old "I know it when I see it." rant applies whenever a politician tries to invoke censorship to gain more political power by "protecting the innocent" from this most dreadful plague on society. As per obscenity, the slipperiness of definition applies to money as well because what it is (and how it's used) depends on the party or parties who interact with this most mysterious of items.

"Money is anything which is accepted as a medium of exchange and it can be classified into the following terms:
  1. Barter (Pre-Money)
  2. Commodity Money (medium of exchange/food/metal et. al. )
    'Metal is a storehouse and a measure of value.'
  3. Receipt Money (forerunner of checks - a written receipt that enables the owner of deposited coins in a vault to withdraw the coins at any time.)
  4. Fiat Money (paper money decreed legal tender, not backed by gold or silver. 'US money is fiat money')
  5. Fractional paper money which is backed by up to only a portion of the face amount. (see fractional investment banking to learn more.)
    LAW: Fractional money will always degenerate into fiat money. It is but fiat money in transition."
To learn more, read The Creature from Jekyll Island or view the author's interview below.

To get more information about $, type Fed in the BRT search box and hit Search. The end result will amaze you.

Addendum: "While technically and legally the Federal Reserve note is an obligation of the United States Government, in reality it is an obligation, the sole actual responsibility for which rests on the reserve banks...The government could only be called upon to take them up after the reserve banks had failed." - Paul Warburg (A Founding father of the Fed)

In other words: The Federal Resrve notes constitute privately issued money with the taxpayers standing by to cover the potential losses of the banks which issue it.

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