The common definitions of money focus on currency characteristics that gloss over what gives money value. Monetary value is the security that an individual imagines. Money need not be tangible nor easily exchanged, it just needs to be trusted as secure in future purchasing power. Money is personal faith and confidence that others will desire the security that ownership offers. We live in an era of trust where currency is fiat that needs no elemental value nor scarcity to be trusted as money, our money enjoys a luxury of convenience having all the wealth that such efficiency inspires. This post presents the ignored truth for why a Federal Reserve Note (FRN, also called the US Dollar) has monetary value.
The FRN “debt note” began as a share of the wealth that is trusted to be taken slowly through debt obligations; however, debts had grown too excessive for trust. The FRN still has true monetary value, but for security reasons that are commonly ignored. The inherent value of a fiat currency like the FRN is the force of manipulation that backs it. Respected fiat currencies have the security of knowing that a central bank will inspire whatever force is necessary to manipulate perceived value toward stable equilibrium. The value of the FRN was never from trust in God, but today is trust that buying power is secure from significant fluctuation. The techniques used to manipulate perceived value of a fiat currency are legion; it only begins with everything known of the Federal Reserve and Treasury ESF.
People do not care that the quantity of dollars was eased to fund wealth accumulation through government debt. People are generally more concerned when a stock drops in price than when a stock drop was avoided using printed money. The wealth accumulated by a central bank can conveniently be said to be wealth that escaped destruction, but that wealth is also a tool for increasing market influence. The perceived security of every dollar alternative is manipulated in order to maintain the perception that the dollar is secure in buying power. The theft of wealth is too pervasive to get attention, it is like a weak poison mixed with the water that a fish was born into; life (and economic activity) just falls short without obvious explanation. It is a command economy that operates from the shadows, distorting markets while not attracting attention. Companies that expand intervention do well while true industry suffers losses.
Monetary inflation already exists, but the quantity of dollars does not cause price inflation as long as the dollars remain book entries out of circulation. Banks were recapitalized with fiat reserves following the 2008 banking crisis. Those dollars take different forms and leak into markets as necessary for market stability, securities are counted as bank reserves. ZeroHedge reported on June 29th that 30 banks have begun a “buyback frenzy” of bank shares to meet capital requirements for Fed approval. This collusion is market exuberance to boost capital to fain solvency, but greater concern should be with what is called a bank “bail-in”. Bank deposits can be paid with bank securities in the event of bank failure. Obviously a stage has been set for monetary inflation to become price inflation. The ongoing market exuberance is from rational and calculated manipulation.
Physical gold and silver are examples of money that have value from their fundamental attributes of security. One fundamental truth is that he who holds the gold owns the gold, there is no inherent counterparty risk with the physical metal. Counterparty risk is however introduced by promises made in an exchange for convenience. Physical gold is inconvenient for trade because it is too valuable for small denominations and because it can’t quickly be used directly for online purchases. Gold requires counterparty risk to be practical, and counterparty risk offsets the inherent security value of gold. Risk is mitigated with distribution and review rather than consolidation and secrecy, and so gold first failed as money when government became the trusted counterparty. The perceived value of gold is also diminished due to the exchange of highly leveraged potential claims for gold, a game that continues until demand finds that physical delivery is impossible.
Good money is defined more by security than anything else. Bitcoin is about inviolable security of ownership and disposition. Code provides distributed and unbiased enforcement of the “rule of law” that ensures all bitcoin is equally secure. Bitcoin allows for convenient exchange with undeniable security that has no counterparty risk. Bitcoin is physically secure in ways that gold is not. Like gold, bitcoin can take physical form as a securely printed and guaranteed-unique record of a private key (a Casascius coin for example), but that introduces risk of physical theft much like gold. Bitcoin is better money than both gold and silver, but to understand that you had to first know the obscured truth that money has value through the security that it offers. The Bitcoin network has proven secure but be aware the computer or phone that you spend it with may not be. Money is a perception of security and so expect that a perception of flaws will be used to assail bitcoin value.
There are risks with all forms of money. The US Dollar has been trusted money for many years, it is secure by superior force. The dollar is increasingly just accounting entries that can be frozen or reversed, so consider the security implications of that. Consider the hidden value of dollars by knowing how many already exist possibly one millisecond from of circulation. Consider what “debt note” really means and who pays for the security that the note promises.
The dollar had incrementally transformed into money that has value by your perceived security and not for your true security. Soon a global crypto-currency will be promoted as money for how effectively it can deny the purchase or sale of goods (Rev 13:17) and remove tax accounting burdens, it is then that you should recall this uncommonly blunt explanation for why money really has value. God respects wealth grown through service by individuals to others; however, if looking to God for trust in money then consider that torment comes to those who prefer to serve money that is valued through force and monetary inflation (Rev 14:9-11).
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