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7. The circulation of money

Money that goes from hand to hand does what money actually should do: it enables transactions, investments and development. Money in circulation is money at its best. Money that doesn’t circulate, doesn’t contribute to the production of goods, to the development of the economy and neither does it encourage the development of human skills or creativity. Therefore it is good to give money an expiry date. But how do we do that?

 

In the first place we can be sure that we don’t need to worry about implementing the technical side of things; thanks to modern IT technology, that should be no real problem. It is more crucial to recognize that to have money retain its value, money at a given moment has to lose its value and then come up with a solution how we can give money an expiry date.

 

That can be as follows:

  • The money people receive in return for their work in the economy (i.e., for their contribution to the creation of value) is 'new' (young) money;
  • This new money carries, physical or virtual, an expiration date, it loses its value after, let’s say, 30 years;
  • When this money is used to buy a product, this money is immediately at the end of its cycle, it flows back into the economy and enables new production- in other words it enables a new process of value creation - which in turn leads to 'new' money;
  • When money is saved at a bank and subsequently lent by the bank, the loan will be repaid before the end of the expiration date of this money. After the loan is repaid the money can still be used to purchase products - and then flows back to the economy, and so ends its ‘life cycle’, enables new production and a new process of value creation;
  • When money has become ‘old’, when its expiration date approaches and it is not used for purchasing products or to be lent by the bank, then there's only one thing one can do with it (unless the owner of this money chooses to do nothing with it and keep it until it has lost its value), namely to spend it on things like education, art , science, religion, health care: on matters that do not represent a direct value, but which are of vital importance for stimulating development. Those working in these sectors who receive this money (money close to its expiry date), will spend it very quickly: they end the lifecycle of this money by spending it to purchase the products they need. And so, finally, this money flows back into the economy too, loses its value and creates new production, new value and new, young money.

 

This is the money cycle. And because of the expiration date, money remains in motion.


John  |  2014 04 28  |  Permalink  |  Share

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