Back To The Basics: What Is Money?
Since pundits are convinced we're headed for the next Great Depression, let's be optimists and fast-forward to post-depression boom times when America will return to the basics and once again learn about money. Join little Tommy and his crisp new $5 bill as they travel through America's financial system, circa 1947...
What Is Money? (1947) [YouTube via Get Rich Slowly]
(Photo: Ryan McFarland)
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1947? I'm guessing this was produced in response to America going off the Gold Standard.
If only my car could run on gallons of paint.... :(
After the bank takes the check the bank then takes the money and lends it to people who have bad credit. They then sell that bad credit to other people in packages. They then loan out this money.
"As long as people remain confident that our government is strong and secure, they will continue freely to accept and spend it's money without questing it value..."
Aw crap.
We need to go back to carrying around gold on our person.
This is a good little film. It reminds me of all those times I sat in class in elementary school, they brought out the film projector, and we watched little educational films.
But, what always gets me confused is, from where does the value of the money come in the first place? I know it used to be based on gold and silver, but I think that got scrapped when the wealthy started hording the money, and there wasn't enough to go around (since there's a limited amount of gold and silver). I could be wrong on that point, so don't hold me to it.
Really, though, is there really any sort of tangible thing that backs up the value of money, or is it all just a mass delusion? I find it confuzzling.
How much for that? 2 Dablooms? I'll take it!
@Thaddeus: That was the same exact thought I had in my head when I heard the narrator saying just that!
@alliebean: The value of money is based on the same logic that the value of gold was once based on.
Gold never came with a manual that said "1 oz equals 50 dollars." It was set largely by it's scarcity which other people determined.
You can think of today's money as a sort of synthetic gold. The government artificially sets a value and scarcity of the dollar, which gives the dollar its initial value.
(I think.)
@alliebean: Currently money has no intrinsic value, and it's value is set based on the supply and demand. This isn't a big change from the old gold standard, because gold is only valueble because of it's scarcity and perceived worth. But really, gold has no more intrinsic value than paper money, as it's rather hard to eat gold.
Gold certificates would actually work at least better than Federal Reserve notes. Consider that prior to 1913 and after the Civil War US dollars had real value.
Uhh.. Are you trying to answer your own question? The point of coins is that they are tangible and LIMITED as you point out. Commodities are a lot closer to real estate than public opinion is...
The idea that anything asigned to the unnecessary negative balance which occurs whenever two human beings exchange goods and services will ALWAYS be mass-delusion.
Knowing this, one must then conform to learning how the mass-delusion works, and controls the entire planet.
@xerent:
Except you can not PRINT gold...
You seem to get the way prices are set, but you have to acknowledge that there is no "scarcity" to a Federal Reserve Note.
Well, the Federal Reserve only prints a set amount of money, and keeps the scarcity stable that way.
It's also why counterfeiting is a much larger deal than getting something for nothing, because you're effectively decreasing the value of all the other money out there by printing your own.
It's also why we can't solve all our problems by printing another 700 billion dollars. All that will do is just make the existing money even more worthless.
(Again, this is just what I think. ^^;)
hmm, standard of value. I like that phrase. Imagine going into Best Buy thinking to yourself...is that really worth that much? I hate Best Buy!
ugh, forgot what i was gonna say that actually relates to this post.....stupid Best Buy....somehow, someway they are costing me money!
@xerent:
"Well, the Federal Reserve only prints a set amount of money, and keeps the scarcity stable that way."
You are correct, but you failed to acknowledge that the "set amount" you refer to is "whatever the Treasury requires", unless of course you believe that 700 Billion dollars(just to start) for the crooks in Washington, 3 Trillion for an illegal war based on lies, 50 trillion in "benefits" promised to generaltions of Americans who will see nothing, iced off with a cool trillion spent on maintaining our empire around the world, are all "set amounts" which benefit the value of the so-called dollar by keeping it "scarce".
One thing it doesn't touch on, is the difference between money (whether paper, gold or wampum) and wealth. Barter directly trades wealth, while money is merely the symbol of wealth. And the symbol isn't the same as what it represents. That's why people tend to fall back on barter during major disasters, wars, etc.
Errr... Gold as a medium of exchange has problems for the very reasons fiat currency does. In and of itself it is not very useful or valuable. If there were no longer any goods or services available for purchase, what could you do with your gold? Stare at it? And paper currency, what would that be worth if there were no longer any goods or services for which it could be redeemed? You could cover your thatched roof with it... use it as wallpaper... papier mache anyone?
Point is, if people cease to see gold as having value then it ceases to, which is true of fiat currency as well. It's much less likely that the opinions of the majority concerning the value of gold should change than that the opinions of the majority concerning the value of non-gold-backed paper money should change, but still... it can happen.
And for every problem having gold-backed currency solves, it creates two. I doubt that America and, indeed, the world, would have reached its current level of prosperity and technological innovation had it not been for fiat currency. Fiat currency, despite its problems, is such that it allows a much larger number of loans to be taken out, which can be used to create business, public works, fund scientific research. If the amount of money in the money supply were fixed because all of our currency were backed by gold, then loans could only be taken out if the banks had the money to loan. The amount that they'd be able to loan out to any one individual would be quite limited and thus there would be a great deal less activity economic and otherwise within the country. The other problem is that banks make interest loans and therefore banks would be calling for an amount of money greater than the amount existing in the total money supply and thus no one would be able to fully pay back their loans and in the end the banks would have all the money and economic activity would cease.
I am so tired of all the Ron Paul gold fiends... I... I... just don't know what to say. Gold is the solution to absolutely nothing. Sure fiat currency opens us up to depression and bubbles of various sorts, but it always us to make progress of all sorts much more quickly.
The real solution is to have the government print its own money and make loans to the people at zero interest.
A few other points they should have covered:
- Securitization
- Tier 1 Capital Ratios
- Deleveraging...
@humphrmi:
Oh.. you mean INFLATION. That's covered at the end when the price of the radio went up in a short time because paper money is a bullshit lie.
@B:
More likely in response to the American public's short attention span finally refocusing off of the Great Depression and still reeming from the war.
The current quandary was not only foreseen, but is was inevitable.
* Fed was lending money at a net-negative interest rate to the banks ( after inflation )
* There was a ready market that was prime for speculation and bubble economics ( housing )
* Regulations were loosened or enforcement of sane standards was gone at all levels in the food chain.
This was going to blow up sooner or later and everyone could see the problems, but nobody wanted to stop the free ponies while they were being given away. Greed was the motivating factor and everyone in the market believed they were passing the buck to the next person. In the end, the "next person" ends up being the taxpayer.
As an added bonus, Americans as a whole are overspent to begin with and have little or no cushion to take a small downturn let alone a long recession.
You know that the funny thing is, that $5 according to the inflation calculator would be $45.95 in 2007 dollars (let along 2008 dollars or what 9 dollars will be worth)
Somehow prices don't seem so bad. $300 for a radio (and having to make payments on it) and it doesn't take $46 to fill my tank unless I ran it so much my fuel pump hated me so things aren't that bad.
Granted in 47 we were just two years after WW2 so things hadn't fully picked up yet.
By the way, +1 for being the same narrator as 'What to Do on a Date?'. Would Kay enjoy a bike trip? Or a weenie roast?
"what would that be worth if there were no longer any goods or services for which it could be redeemed?"
You mean money would have no value if there wasn't anything to buy with it? LOL! Where do you come up with this shit? I would call that circular logic if it wasn't so retarded. I suppose the day when there are no goods and services to exchange comes along we will probably have to give up on money..LOL!
The idea that progress is a direct result of fiat currency is laughable. The most progress is made free from regulation and the influence of an elitists' personal greed and ambition. Necessity is the mother of invention, not Glutony. Fiat currency allows you to make progress just fast enough so that you have no actual foundation to relay upon when your bullshit system collapses in on you. Our own country's history is clear evidence of this. Check the price of gold, and the value of the so-called dollar, over time, and then compare it to the size of government.
Fiat currency is not how you get the job done right, it's how you get the job done, BEFORE the Russians.
If the first half of your post wasn't amusing enough, you had to prove that you can't hate Ron Paul without being a total shill for the "print first, ask questions later" mentality.
History is obviously not your forte, but no worries, we are entering the age of the banker as we speak. Let's see how much "progress" is made over the next 10 to 15 years. I'm sure WaMu is thinking that recent wave of PROSPERITY we have been experiencing was well worth it! LOL!
People were taken after the gold standard in the US in 1931. After 1931 US currency was no longer exchangeable for gold.
The US closed the 'gold window' between it an other countries in 1971.
@Thassodar: You're right. Sadly, this is better than most anything I have watched in any business ed course at my school (well, besides Tommy Boy, which isn't really an educational movie anyway).
Why couldn't I see Tom Servo, Crow and Gypsie's heads?
all money does is buy conveniences.
Woah, paint, bookends and even radios were tax free back then!
Money, like everything, is only worth how much someone is willing to pay for it. The same applies to homes, ironically.
Oh my god, how much better off would people be if they were forced to watch this. I never had a video like this in any of my schooling, not even economics in high school! This is a fantastic film, and I personally hate black and white films.
If only there weren't as much corruption in the corporate world. I doubt our trust in the government is anywhere as high as it was when this film was released.