Money — What It Is and Why

With all the political tensions tugging our taxes and tax policies this way and that, all the economy professors building elaborate theories regarding why money does this or that, it seems to me that people have forgotten what money ACTUALLY IS. I mean, if they knew, they wouldn’t be DOING the God-awful things with it that they are. So for those who don’t know, I’m gonna do my best to unpack this.

Before you can understand what money is, you have to look at what life is like WITHOUT money. As you go through your daily life, you see things that you want — food, water, crafts, items, services. Without money, how do you get these things? By bartering — trading those things you DO have for the things that OTHER people have. When you “want” something, you’ve assigned a “value” to it. It has a “worth” based on your desire, just like something else might be worthLESS to you because you DON’T want it.

Of course, this dynamic works both ways, where someone sees something YOU have, and THEY assign a value to it. If they WANT what you have, then you have the opportunity to TRADE what you have for what they have. If, on the other hand, they see NO value in what you have (either for themselves, or to trade it for something they ACTUALLY want), it doesn’t matter how much you desire what they have — a trade is not going to happen.

Now that you both agree that you each have something that the other person wants, you decide together the DEGREE of value that the items have. Say, for example, that you have chicken eggs and he has a sling shot. How badly he wants your chicken eggs and how badly you want his sling shot will determine how your trade is going to go.

Example A: He is VERY hungry, and you don’t really “need” his sling shot. He may part with the sling shot for three eggs.

Example B: He has plenty of food, but you REALLY want his sling shot. He may hold out for two dozen eggs.

As the two people discuss the value of the items, eventually the two people may AGREE on a value for both. At this point, a trade can happen. You get the sling shot you wanted. He gets the eggs he wanted. Both of you got a FAIR value for the trade, because you both AGREED upon the value. If, at any time, you COULDN’T reach an agreement on value, you BOTH have the option to walk away at any time, keeping what you had to trade until you found something else you might want, and then the process starts all over again.

This is what life looks like without money. That’s all fine and dandy if you want a sling shot and he wants chicken eggs. But… what if he DOESN’T want chicken eggs? And what if he doesn’t think that he can trade those away for something that he DOES want? He finds NO VALUE in your chicken eggs. So how are you going to get that sling shot?

This is where money comes in. With money, you have a NEUTRAL item — something that both buyer and seller agrees has value, and something that both buyer and seller can use to get what they want. Of course, the money ITSELF has no value, which is why the prices of things at the store go up or down sometimes, but the dynamic remains the same — one of you has an item that the other values, and the buyer and seller AGREE upon a value between the item and the money being traded for it.

Example A: He needs the money and doesn’t need his sling shot. He may part with the sling shot for $5.

Example B: He has PLENTY of money and LIKES his sling shot. You may have to fork over $50 to get him to part with it.

Again, if the buyer and the seller cannot agree on a value, the trade doesn’t happen, and both people keep what they had until they find somebody else to trade for.

THIS, in a nutshell, is what money is, and why we use it the way we do. And this, in a nutshell, is why today’s misunderstanding and mishandling of money drives me CRAZY!

Let’s start with wages.

When you take a job, you do so to earn money — ya know, that neutral medium of trade we just discussed. That money is the resource that your employer has that you want. What do YOU have that your employer wants? You have time, skills, creativity, ingenuity, the ability to perform work. When you go to work, you are completing a business transaction — trading your time, effort, and creativity that your employer values, for a sum of money that YOU value. You have AGREED upon these values, and that’s how your wage is set.

Now say you earn $10 an hour — close to minimum wage. Your employer has a job open that it values at that amount, and you agree to fill that job for that amount. You and your employer agree upon the value, and BAM! You’re employed. While I agree that $10 per hour is dirt poor, as long as you and your employer agree upon this sum, the transaction is a fair one. Either one of you could leave the transaction at any time.

But what happens when the government steps in, and says that the employer MUST pay a higher wage for the tasks performed by that job? Essentially, the government is saying “I don’t care if you and your employee agree upon a value, you must assign a GREATER value to those tasks”. In other words, the government is saying “you must WANT the employee to work for you MORE”. Not only is it crazy to think that you can “force” someone to want something, it also takes away the voluntary nature of the transaction. The employer cannot just walk away from the transaction if they don’t like it.

And what about taxes?

Let’s say you’re still earning $10 an hour. That is the value that you and your employer agreed was equal to one hour of your time, effort, and creativity in a given task. So what happens when the government collects $10 in taxes? Ultimately, you are giving the government what that $10 represents — one hour of your life, and the effort you expended in trade for that money. This is where things start to get hairy.

What does it mean when the government collects that money without your approval or consent? It means that the government thinks it OWNS a certain part of you — that the government has a greater claim than you on however much of your life that you spent earning that money. Taxation CAN be fair and equitable, as long as the tax payer is given the option to determine his own involvement, to GIVE OR WITHHOLD CONSENT over his taxes. Without this consent, taxation is slavery, pure and simple. I mean, you can call it “theft” if you want to, but ultimately, the government is laying claim NOT just to what you have, but to the portion of your life that you gave to earn it.

What does it mean when the government collects that money unevenly — giving some people tax breaks and others a greater tax burden? It means that the government values some people’s money (and the amount of their lives that they spent earning it) DIFFERENTLY than it values other people’s money. Coming from a government that is supposed to recognize that “all men are created equal”, this is UNEQUAL representation.

What does it mean when the government DISTRIBUTES money unevenly — giving some people welfare and housing assistance and other benefits but giving others nothing? The exact same thing: unequal representation.

See, I understand that as members of society, there are certain responsibilities that we consent to, but our society is predicated on the GUARANTEE that we are all equal, that we all have equal value whether we “recognize” the value in another person or not… because of our individual authority to value OURSELVES. However much I may value you, I have the unfettered, absolute right to value myself more. You have the same right. Because of this, MY value and YOUR value are inherently the same. However much more I may value myself over you, I cannot claim that you are of lesser value than me… because I cannot change how YOU value you.

This is the single founding principle from which our society springs… and similarly, from which our MONEY springs. Because we are of equal value, our AUTHORITY is of equal value. Our property, our time, our services — our ability to assign value to these things is of equal value. As such, when government comes in and TINKERS with our authority to assign value — when government mandates a certain wage, or taxes people unequally, or distributes taxes unequally — government is ultimately BETRAYING the very equality that it was specifically designed to protect and foster.

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