The Role of Money in America's Economy

By: Ed Bagley
Submitted: 2007-01-17 16:25:28
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My favorite quote about money comes from the British novelist W. Somerset Maugham: Money is like a sixth sense without which we cannot make a complete use of the other five.

There are probably millions of wage earners who wish they could use their five basic senses to see, hear, smell, taste and touch life without any concern for the necessity of financing their life, but money is a stern taskmaster who keeps their noses to the grindstone.

Even the struggling artist who abhors capitalism and the money chase must find the money to purchase his canvas and oils so he may lose himself in his craft.

Art certainly offers appeal as an activity that is more creative, inspiring and noble than the pure pursuit of making money, but the true capitalist or investor can paint with joy on a much larger canvas when he knows and understands that money has no actual value in the marketplace, or real meaning in the greater scheme of life.

Money is but a tool that does the bidding of its master. Money is neither good nor evil. In any drug transaction, money is not the evil element. In the payment of wages for time spend working in honest labor, money is not our savior.

We can make money the right way or the wrong way. We can spend money productively or unproductively. We can help people or hurt people in our use of money.

Money has no actual value other than the value we attach to it. The barter system would still be practiced today if the participants did not agree to set a value on a piece of printed paper that represented the value of the goods and services they had to offer.

When the users of money lose faith in their currency, its value drops sharply, causing inflation. When the productivity of a country stalls, its currency on the world market plunges, again causing inflation.

Money has no actual meaning other than the meaning we attach to it. Our rational mind tells us that a surplus of money can not buy us love, respect, admiration or health, yet we know that an abundance of money can buy us opportunities, financial freedom, better health care, better housing, better nutrition and a more convenient lifestyle.

Here starts the connection between rendering service and making money.

We know that nothing in our material world can come from nowhere or go nowhere, nor can it be free as there is a price to be paid. Our government can render us service through its employees, but our government is never a source of goods. Everything produced is produced by the people and everything that a government gives to its people it must first take from its people.

The only money that government has to spend is money taxed or borrowed from people’s earnings. Earnings come from productivity. All productivity is based on natural resources, human energy and tools. Tools are the only factor among the three factors that is limitless. The primary tool that is used to create productivity is money.

Businesses and organizations need to understand that you know what drives their existence; it is not giving service, it is taking in revenue to support what they are doing. Service is simply a

by-product of making money.

Do not let businesses or public service organizations fool you into thinking that they exist to help or serve people; helping or serving people is merely a by-product of generating enough revenue to be in a position to do so.

There are some people in government providing services who would have you believe that their primary mission in life is to render service, but if they believe this, they do not understand much about our economy and its role in their survival.

The primary role of any business or governmental unit, large or small, is to find and keep a revenue source. Without a budget to create programs and hire the people (employees) to deliver the programs (services), there would be no services delivered. When budgets are cut, programs and the employees to deliver them are reduced, and departments get reorganized.

Clearly, the world turns on a dollar bill. I am not judging what causes our economy to work (greed is its greatest motivator), but I am suggesting we need to be street smart about how our money system works.

Here is another sobering thought: Our entire economy and all of its employees are created by less than 5% of our population, and not a single one of the 5% work for government, or any other public service organization.

That is because nothing happens in our economy until a product or service is sold to satisfy a want or need, and less than 5% of the income generators in our economy are professional sales people.

Non-profit corporations and governmental units have no profits to tax as any earnings generated by them must be reinvested. There would be no earnings to tax unless business created the profits to be taxed, and created the jobs that also created taxes from the wages earned by the workers.

Seen this way, true capitalists and investors understand business is as much about art as it is about science. The great business people and giants of industry in our country are not really the bean counters and tech heads, they are the masters who paint on an economic canvas much more than that of the solitary artist.

The solitary artist creates an oil painting on a canvas. The creative business person takes the canvas to market and creates more opportunities for the artist to ply his craft.

H. L. Mencken was fond of saying "never underestimate the stupidity of the American people". I do not belong to that group and neither should you; that is why it is important that you understand the money game even if people around you do not.

Understanding the money game does not make us better or smarter people than others, it does make us more aware and savvy when opportunity knocks on our door.

Copyright © 2006 Ed Bagley

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