Ignoring history hurts everyone.
The Common Problem . . .
is that people keep thinking they have outsmarted human nature. In the financial sector particularly, the “experts” keep thinking they have found a solution to the limits taught by 5 millennia of painful experience. All economies are barter economies. Advanced ones simply have a commoditized, granular unit of exchange called money. Instead of exchanging product for product, they exchange value for value; by decoupling value from the product, money integrates time as an aspect of the economy. Where Marx went wrong was to view time as an independent store of value, the determining factor in the value of labor. Time can never have commercial value unless some other exchange of value is also in progress. Quality of work, innovation in new products or practices, the effects of the mind, are where value comes from. Debt, interest, investment, can only exist with an agreed unit of exchange. Resources in their natural state have a latent value, but they provide no direct impact on the economy. Transferring the future value of undeveloped resources requires an agreement about the nature of possession, as well as a unit of stored value. That’s why inflation is destructive to economies, because it reduces the stored value represented by each unit of money. Interest, rent, and equity returns are the return on time value, because they represent a deferred exchange of value. The use of money as a unit of exchange means people can exchange partial value of a product, temporary use rather than full transfer of ownership.
The Uncommon Solution . . .
When someone with letters after their name says they have overcome or are willing to ignore history, expect their “new and improved” idea to self destruct. Sooner or later, history and human nature combine to return everything to normal.
Copyright 2016 by J.D. Lewis
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