richardbenson wrote:
why does everyone trade with money? yes i know its used by everyone, but why? it has no value exept eveyone wants it. the governemt has a monopoly on it? how much of it is in actual cirrculation? did you know congress has no lawful obligation to pay you social security?
Because money is efficient. Barter economies really suck because they rely on a double incidence of wants to allow for trades, a monetary system allows for efficient transactions. You are right that our money has no value, that is somewhat because it was imposed by fiat, older monetary systems were based upon the use of valuable goods like rare metals or cows because those possessions were so useful that they would be easily acceptable as a way to show wealth.
The government has a monopoly on money for a few reasons: 1) it allows the government to inflate the currency which is valuable when more cash is needed in a flash, this is why the governments often print off a lot of money in wartime conditions 2) to allow for monetary stability which has been the reason for central banking in most nations, a stable control of the money supply fights unnecessary inflation and can help keep market fluctuations down by controlling the interest rates. Certain theorists consider the government control of the money supply unnecessary and harmful but most consider it a necessity for economic stability in a modern economy.
A lot of money is in circulation. The amount of physical cash in our economy M0 is 800 billion, however, more money exists due to various investment aspects of the economy which increase the amount of money to some extent.
Congress will still provide social security, if old people don't get their social security then congress is going out. There is a reason why vocal opposition to the social security programs doesn't exist in mainstream politics. US social security was not well designed and has major problems so it will need a fix at some point.
Last edited by Awesomelyglorious on 06 May 2007, 3:59 pm, edited 1 time in total.