Money as trust

One of money's main functions day-to-day, for most of us, is about trust. If I give you a (genuine) £10 note, you accept it becuse you trust someone else will accept it on the same basis. It means we don't have to barter, nor have complex contractual aggreements for each transaction.

This trust was (still is, largely) also extended to current accounts at banks, because, for most purposes, the £s in the bank were as good as £s as notes and coins.

This was a pretty good system, because membership of the trust network is phenomenally widespread and pretty much everything could be bought and sold. It also provides a benchmark pricing system. It givesyou and me an idea of how much I should charge you / how much you should pay me to (say) mow your lawn.

But the banks have betrayed this trust by creating money out of thin air. OK, most people have some protection against the results of the banks' gambling losses, but the ever increasing amount of money that exists is far outstripping the increase in the value of goods and services - ie is there is inflation in the long term.

What can we do? For trust to return we need a network of trust, with a currency that is protected from being created out of thin air by members of the trust network for their own gain. Such networks exist, but they are not widespread, possibly because developing trust starts small, perhaps with friends and neighbours. Technology also enables a form of bartering.On line, we can set up a deal where I mow your lawn and you fix my bike. Provided both sides of the bargain are kept within a reasonable time that should work, but it is easy to see how it is not much better than bartering as was hundreds of years ago.

The money created by banks is demoninated in the same units as notes and coins and exchangeable 1:1. Theferore as each unit of bank money devalues, so does the value of notes and coins.

Any new, trustworthy currency might do well to distance itself from existing currencies for fear that the same counterfeiting stunt may be pulled again. Whatever happens, the supply of money should only be increased if the economy needs it, and not so that banks can benefit from it. Bamks should only be alowed to deal in money that exists. They should not be able to create it.

Positive Money says that a commitee independent of Government should decide when to create more £ and how much. Government would decide (have policies) on what money could/should be spent on. This seems a lot better, but I still have concerns that government will find ways of spending to ensure that the party of government will be voted in next time around.