Money and Energy Book by Aaron Wayne Wissner is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Money and Energy Book
Purpose
The purpose of this book is to clarify for myself and others what money is, what energy is, and how the two are related to one another.
Specifically, it concerns me that most people, including myself, don't understand what is going on with money or energy, which leads them to make decisions which are destructive to themselves, their families, and Earth.
One example is the confusion over the stock market collapse of 2008 and how money and energy played a role in this. Common knowledge attributes most or all of the blame to banks and bad mortgages, but this fails to take into account the serious issue civilization was facing in increasing our worldwide oil extraction rate, or how this caused oil prices to rise which diverted a significant percentage of everyday spending towards oil and away from other consumer products.
By understanding money, energy, and their interrelationship, I expect readers to come to the conclusion that the entire money system, as it currently exists, exploits and perhaps enslaves everyone, and is instrumental to the destruction of Earth; that energy is what gives money value, and thus as the energy supply, and most especially the oil supply, continues to decline on a global per capita basis, that the current money system will be distorted in such a way that it will fail to function and will collapse; and that this is an opportunity for everyone to see the system revealed for what it is, and then to create a new money-energy system that works to free everyone and restore Earth.
(Note: Below are fragments, notes and ideas in preparation for the first draft of the book.)
You Create Money
You create money anytime you "borrow" money. When you "take out a loan", you are making money. Home mortgages, auto loans, and credit cards purchases are examples of how individuals create money.
Imagine you make a $20 purchase at a gas station. You make this purchase with a credit card. Where does the money come from? It comes from your promise to destroy that $20 at a later date, or face various penalties, known as interest charges and late fees.
The $20 did not exist before you made the purchase. It was your swiping the card and, perhaps, signing a credit card slip that created the money. Now, for you to cause that money to vanish, you simply send $20 to the credit card company.
Making Money with Your Friends
Imagine you and a few friends are lost in space and stranded on a distant planet. You have no money. Your space ship was lost in the depths of the planet's ocean. You and your friends are lucky to have survived.
For a time, you share everything. People stock the pantry with various collected foods. Everyone pitches in to do their part.
After a number of years, the number of people increases, and it is noticed that some people do very little to provide of the community. These are the free loaders. In order to get food, they will have to do some work, and a supervisor will give them slips of paper that can be turned in at food pantry.
Why You Want Money
You want money because you can't take care of yourself without it.
You need money to purchase food, and to pay for the preparation, or tools to prepare, the food to eat.
You need money to purchase water: for drinking, cleaning, and for food preparation or growing.
You need money to purchase shelter: for sleep, warmth and protection from nature.
You may also want money to purchase an enormous assortment of other things, from clothing to sex.
If you went back 1,000 generations (or less), you would find that all of your ancestors had the same needs, but that they, as part of their community, were able to provide for their own needs.
For thousands of years, humans survived on Earth without money. If a person needed something they did not have, then they were either given it by someone else (gift economy) or they made a trade of something they had (barter economy). These two sorts of economies still exist, gift economies primarily in families, and barter economies such as on Craig's List on the Internet.
At this time and earlier, there was not need for money: all needs were met in other ways.
Money Traps
People who are part of this civilization are trapped by money.
Imagine a person that want to live without money, perhaps because they recognize how in our current global economy, all use of money leads to destruction.
First, they would have to decide where to move, because in the USA at least, there is money that must be paid every year just to keep their homes, known as property tax. It appears that in most states, after three to five years of failure to pay, that the government can sell the house without the permission of the owner, even if the owner never stepped foot off their "property". (See Allodial Ownership)
Second, even if the person was able to figure a way to stay in one place without paying any money, for tax or other items, there would still be the more important issue of food. Very few people in this global economy know how to collect and/or grow, and then store, enough food for them to keep themselves alive.
Third, even with a place to live and food taken care of, there are other things that most people wish to have such as health care, which at its most basic, is simply addressing illness and assisting the healing in traumas.
Beyond the essentials, people desire electronic devices and machinery such at refrigerators, washing machines, and DVD players; vehicles such as cars, trucks, quad runners, and bicycles; pleasures such as reading, smoking, alcohol, personal care items, home furnishings and cleaning; security for the future in the form of retirement savings, insurance, and last but not least, children and a family.
In our global culture, all of these things take a great deal of money.
The Purpose of Money
Money allows a trade to be made were the seller accepts something that is commonly seen as valuable and easily tradable, in exchange for some products.
Physical Forms of Money
Many things have served as money including sea shells, metals, cigarettes, pieces of paper, electronic data, salt, grain, domesticated animals, ochre, boards, furs, stones with holes, coffee, alcohol, cotton, tobacco, and beads.
An Overly Abundant Item will Not Be Money
Notice that all of these items could be found in abundance in certain areas. A characteristic of money is that if any one can get lots of it, then it can not serve as money. For example, along Lake Michigan or in a dessert, sand would not serve as money.
Imagine that you are the seller. You have some apples that you are willing to sell. If you are standing in the middle of an apple orchard in a public park, then the price you can sell the apples for will be very low. If you carefully picked and have boxed the apples, you may expect that a person in a hurry may pay you for that service, as well as the box itself.
On the other hand, imagine you are in the middle of a hurricane battered city, in a place where all the rich have congregated to escape the deluge, but it is going on 24 hours, and no food have arrived, and there you are with your box of apples. You may now expect that, due to both the apples' rarity in this local, and the desire of the people to eat, that you may well the apples for a much, much higher price.
If we consider whether the apples would serve as money, we can see that in the public orchard, they would probably not. Within the battered city, it would depend on whether anything else was needed, water or warmth perhaps, as well as the hunger level and the amount of cash that people had on hand.
The U.S.A. and the private Federal Reserve System
The Federal Reserve System (or Fed) is a corporation owned by banks. The purpose is to ensure that the banking system can continue to make profits.
The Federal reserve is given by the U.S. government the ability to create money. To create dollar bills, it sends an order to the US Treasury, which has the bills printed. It then pays the Treasury with electronic money for the printing costs. Then, it takes the dollar bills (actually Federal Reserve Notes) and purchases Treasury Bonds from the Treasury. So, now the Fed owns US Treasury Bonds, and the US Government owns some Federal Reserve Notes which can be spent.
Essentially, what the Federal Reserve does is say, "Hey, I can see you need some money, how about I give you some, and we'll write down on our books that you owe it back to us, how does that sound?" Thus, the amount of money can simply grow and grow and grow.
In 2008-2009, the Federal Reserve purchased mortgage backed securities from the banks. In essence, the Fed created electronic money, which ended up deposited in the accounts of the banks that sold the MBS's. Recall that MBS's are not necessarily worth anything if the homes they are based on are in foreclosure or have lost much of their value.
Mortgages
A mortgage is the act of money creation. Two parties agrees that money is created, or a promise, and it is written down on pages of legal documents. The two parties then create the money, by writing it into the accounting books of the bank (credit union, etc.).
Imagine the person wants to create 100,000 so that they may purchase a house. After the bank confirms that the party's income is sufficient to pay a monthly penalty (known as interest), two amounts are written into the books of the bank. As a liability (money not owned) to the person in some account, and as an asset (money owned). The amounts are identical, 100,000 each.
At this point, the money has not yet been issued, since it has not been used to purchase anything. At the moment the person purchased the house, and the money is transferred from the person's account to the home owner's account, the money really comes into existence.
Let's look at this again. Prior to the mortgage, the money did not exist at all, anywhere. There was, though, the potential for money to be created. Most essentially, the person had to determine how much money to create, and whether they would be able to destroy that money.
Put another way, the person made a promise to society that in exchange for taking possession of the house, that they would provide service (in the future) to the society in equal measure. As the days rolled forward, and they provided service to the society, this was recorded as a transfer of money to them from others (most likely, their employers).
The role of the bank is as the only "person" that can agree, on behalf of society, that the money creator will eventually destroy the money.
Money destruction takes place as the bank is sent the "principle" on the mortgage. As each principle payment comes in, the bank's assets remain the same. The principle payment, say an amount of 1000, becomes a cash asset, whereas the mortgage paper is now worth 400 less.
To help visualize this, imagine that all of the money in the world is created with this one mortgage. The 100,000 is created, and (ignoring "interest" for now) each month 1000 is earned by the money creator from the only other that has money, the original home seller. The home seller transfers 1000 to the money creator, which is then transferred to the bank.
Exchange
For money to exist, there must be exchange or trade.
Exchange is simply that something is given, and something is expected in return. If something is given, and nothing is expected back, then no exchange has happened.
For exchange to happen, first there must be the idea of property, possession or ownership which is itself an agreement between people that some one(s) have exclusive control over something. (Also, see concepts of permission, consent, stealing, and theft.)
One can imagine that the idea of ownership began with the development of scrapers, hand axes, clothing, sewing needles, fishing hooks, pottery, domesticated animals, sculpture, or other prehistoric items that were very rare and required a degree of skill, effort, or luck to obtain. One can also imagine the concept of owning a place, perhaps a cave, or a hunting range, as an initial ownership concept. Items like these would most likely always exist in a human society.
So, imagine one has a warm coat. It is quite cold outside. What would entice the person with the coat to give it away? A threat of violence? Sympathy for a cold family member? How
Example of Exchange
Imagine, for example, a "cave man" in winter who "owns" a very warm fur coat.
Cave man thinks, "I am wearing it."
Later, cave man notices, "You are wearing it."
Cave man then thinks, "I want to be wearing it."
What are all the choices if cave man is to get it?
The response will depend upon what the person who "has" it thinks of the object in question. The "owner" may:
Money & Energy
Energy is the most valuable property (after food) because it allows everything else to be done.
Money provides the means to exchange energy for anything else.
Both energy and money are essential for today's global economy.
Auto Loans
In the summer of 2009, the US government approved a program dubbed "Cash for Clunkers" a.k.a. C.A.R.S. The program paid $3,500 or $4,500 to new car dealers in the USA who sold vehicles to people who traded in their used car that got "poor" fuel economy. The "rebate" was to be passed through to the buyer of the new car, and the trade in car was required to be destroyed. In the first weeks of the program, hundreds of thousands of such deals were made.
Many of those people who purchased new cars via this government program increased their debt load significantly. In most cases, the price to buy the cars, even after the rebate, would have been between $10,000 and $30,000. Those who were unable to obtain financing were most likely already at or near their personal debt limits. Those "rich" individuals who could have bought the new car for cash seem relatively unlikely to have old cars worth $4,500 or less that they would have been trading in. This leaves the middle group, those that could afford to add personal debt, and who had been holding on to an older car, perhaps a second or third car that was used as a backup or for a younger family member.
This new debt burden, the creation of an auto loan, is indeed the creation of money, and a new source of interest penalty revenue for the financing companies. At the same time, this new monthly auto loan payment had the impact of reducing those families ability to make future purchases, and the program as a whole had the impact of shifting spending that would have otherwise went elsewhere, into the new automobile market.
Bonds
War savings bonds are a way to put off consumer purchases and reduce the side of the productive consumer economy, to free up productive capacity for the war effort.
Bonds are basically like saying, "I don't know what do with this money, so why don't I give it to you to spend, and then in 20 years, you give it back to me with interest, and maybe then I'll know what to do with it."
In the same way, the U.S. debt represents that we have delayed the purchasing or consumption of others, so that we could consume now, what they might have consumed.
Warren Buffett
Money is a claim check on future production (or labor). -- IOUSA (extras)
What is Money
http://sites.google.com/site/livingwithoutmoney/Home/what-money-is---what-money-is-not
http://zerocurrency.blogspot.com/
What is Money?
http://en.wikipedia.org/wiki/Money
http://www.investopedia.com/articles/basics/03/061303.asp
http://economics.about.com/cs/studentresources/f/money.htm
http://www.the-privateer.com/gold-b.html
Notes
Big Three Expectations of Civilization: 1. Food, 2. Energy, 3. Money
Money and Energy Book by Aaron Wayne Wissner is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.