Do you think that if it were enough to print banknotes for us all to be able to satisfy our needs, our tastes or our desires, the human race would have reached this stage without having had recourse to this means?
Part 3 of 4
For all who think that Modern Money Theory (MMT or Magic Money Theory) has anything modern in it, here we are. As soon as the middle of the 19th century, the idea was debated and smart people like Frédéric Bastiat had concluded that it was a pipe dream and that it was time to start thinking seriously about these things.
In this third part of “Damned Money!”, the author explains in a dozen pages what is money and what it is not. He also manages to give a short definition of it in saying: “This écu demonstrates that you have provided a service to society and, what is more, it makes its value apparent.” I really like this definition because it underlines a feature that is highly misunderstood but particularly important in times when money is dematerialised, namely that money that allows to buy a service to be produced in the future represents a service that has been produced in the past.
There are three ways to obtain money. The first is stealing (which is taking money that has been obtained in one of the next two ways), the second is in rendering a service (by selling one’s workforce – a salary – for instance) or by bank money creation. This last point is particularly misunderstood because the extension of a loan is characterised by a credit on the borrower’s account but the bankers do not advertise the debit that they are booking at the same time. The latter allows to assimilate the new money with the old, the future service with the past service. I apologized for going a bit too far anyway – the pamphlet’s topic is not (legitimate) money creation.