The Purpose of Money

In order to understand money we have to start from a point where there is no money. Money has been invented many times over by many different cultures seemingly independently. Before the rise of global empires money was local in the form of local currencies.

The purpose of money is supposed to be making trade easier in all kinds of ways. That’s the story you’ll hear in an economics 101 course. The true purpose of money however is this: convert wealth into money. Everything we value in our lives is wealth. When we have a lot of things we value we own a lot of wealth and are wealthy. The purpose of money is to convert wealth – food, water, shelter, music, health care – into money.

Once wealth is converted into money it opens the doors for all kinds of new ideas and behaviors. First of all, the economy can be measured in terms of money instead of in terms of harvest produce or doctor visits. Secondly, money can be invested in order to earn future gains which creates a form of capitalism. Thirdly, the purpose of every major organized industry that require vast amounts of capital shifts from its nominal purpose to making money. Fourthly, the state can collect taxes in the currency it recognizes making that currency the default currency. Fifthly, money can be lend for profit without much hassle (usury). Sixthly, excess amounts  of money can be brought to banks for protection and to earn a profit from lending your money to banks (usury). Seventhly, the state can sanction and control the creation of new currency. And eighthly and lastly, the government can collect future taxes in advance by issuing bonds (usury).

The simple existence of money allows wealth to be round up and concentrated with a few people in a way that could never be achieved without money while at the same time enslaving most people. Money regulates the acquisition of wealth. The state relies on the fact that none of its citizens are able to collect all the wealth they need and want without money. To acquire this wealth citizens need to generate an income – that is create and sell wealth other people want – and pay taxes on that income. Money is an ingenious system that connects everybody to everybody.

But money is also dangerous. The biggest problem with our currencies is that they are impersonal: a bank note or even a gold nugget can’t tell who were its previous owners or in which transactions they have participated. Because of this we don’t know or even care anymore how the wealth we acquire got created. This on a massive global scale leads to all kinds of excesses because virtually all transactions we engage in are by design impersonal. People want to earn money and want to acquire wealth. Since most transactions eliminate personal connections we don’t have a clue anymore what our footprint on this world might be or what kind of trail we leave behind.

Our societies were never supposed to remain as they are today. Today is just a snapshot on the road to a different kind of society. There’s no reason why our societies have changed constantly for 12,000 years and now suddenly should stop changing. Whether our societies will improve or get worse will depend to a larger extend on what kind of currencies we’ll be using. At the same time the design of our currencies reflect the needs we have in society.

We define the purpose of money. What we want to achieve has to be expressed in the design of our currencies. Otherwise we’ll never achieve anything in society. Because states play a vital role on how our currencies work they have an important interest in not letting society change too much. Through money the state controls its citizens and the state needs to keep that control in order to remain a state. The institution the state protects itself through the design of our currencies out of self-preservation.

The question that is never asked is: would we be better off with a different kind of state, possibly a world society? The question that gets asked a lot instead is: how do I make money? The state actually encourages us to have impersonal connections when making money which leads to selfish intentions. By ensuring we remain impersonal in our doings the state ensures we never ask ourselves the question it doesn’t want us to ask.

The obvious threats to the continued existence of the state are free and personal relationships that create wealth. These relationships are made possible through online communities where wealth is exchanged most of the time for free and where the relationships through which this wealth is exchanged are most of the time personal. The state has no response this these kind of interactions and slowly but surely we’re starting to ask the question: are the societies we live in the best for us, or can we do better? Whenever this question is asked it is the direct result of engaging in personal relationships that do not involve our current impersonal currencies. People that mainly engage in impersonal relationships in order to obtain wealth are too busy and worried to ask this kind of questions.

This is a dangerous time for states. The ponzi scheme of endless debt is being exposed for what it is and states are taking draconic measures to keep the illusion alive. In the meanwhile more and more people are finding their ways into online communities where wealth is exchanged for free and transactions are personal. Whenever and wherever our impersonal currencies are no longer used to exchange wealth the state loses control. And as it loses more and more control its existence comes under threat.

The purpose of our current currencies is to keep the nation-states we have alive but that is not the purpose of money. We the people define the purpose of money and someday soon we will. We just have to find the right reasons to do so.