Saturday, 8 January 2011

Money Musing #1

"Money ranks with wheel and fire among ancient inventions without which the modern world could not have come into being. But it is much more mysterious. It is a unit of account that changes size like a rubber yardstick; a store of value that can swell or shrink over time; a medium of exchange that often never leaves the bank; an interest-bearing debt and a non-interest-bearing debt; a commodity (like gold) and a non-commodity token (paper money); easily transferable into real assets by individuals yet not at all transferable into real assets by the community; counterfeiters are sent to jail for making it, but the private banking system can create it out of nothing and lend it at interest; some economists think it merely a veil behind which real factors determine economic life, others consider it among the most important determinants; some think its quantity should be determined by a fixed rule, others that it should be manipulated by public authorities; and in addition, some people even claim that it inspires love that is the root of all evil. At least it is a rich source of bewilderment and danger. Probably in today's world more people are hurt by out-of-control money than by out-of-control wheels and fire."

-Herman E. Daly (Money, debt and wealth, in Ecological Economics and the Ecology of Economics)

This quote is quite dense but I like it because economist Herman E. Daly brings out the many dimensions to money. The final sentence is an example of the sort of observation that leads to the questions that are keeping me busy: Why is money out of control and can we design a monetary system such that money can be controlled?

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