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Money Explained in Practical Terms

Updated on June 10, 2015

Money, Money, Money

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Practical Economic Education

A Cure for Financial Illiteracy

Most Americans don't truly understand money--its acquisition, disposition, or function. In fact, even the people who should understand it cling to harmful false beliefs about money--including those who control our banks, teach our future economists, and advise our government officials and political candidates. Steve Forbes' objective with this book is to educate all of us with the truth about money.

What is Money, Really?

Money is supposed to be a unit of measurement, like inches, meters, grams, or amps. Unfortunately, the fiat "money" in use today does not measure very well because the value of a dollar has no constant, objective, standard measurement. Fiat money is backed by nothing except the "good faith and credit" of the issuing government. This means the government can inflate the currency at will.

If you want to know why the economy is so messy, just think of what would happen to other systems if the measurements they used changed daily. Could you design an electrical system if the value of an amp changed periodically? How could a pharmacist dispense the correct dosage of a medication if the value of a gram was changed daily or based on a majority vote of pharmacists each week? Yet every day, people are making economic decisions about retirement, starting a business, or buying a house without any assurance of what value their money will have next week or ten years from now.

How Does Monetary Policy Hurt People?

In a nutshell, Forbes maintains that debasing a currency debases a society. Weimar Germany after World War II is a perfect example of a society in chaos because of hyperinflation. Lenin knew that the best way to overturn a society was to make its currency worthless. Keynes also made that observation, although that apparently did not inform Keynes' own policy recommendations. The United States embraced Keynes' policies of government interference and "stimulation" through most of the past century and it appears Lenin really knew what he was talking about.

Stable money, e.g. a gold standard, facilitates commerce because people know what money is worth and have confidence it will not be made worthless by their government. When a dollar is worth a set amount, people can freely trade value for value without having to guess about inflation rates or worry about which political party will appoint the new Federal Reserve Chair. Unstable money turns every transaction into a gamble--and those without political power generally lose the most.


A Pearl of Wisdom from Steve Forbes

Money is a tool that facilitates transactions but does not create them. ~Steve Forbes

Bust the Myths about Millionaires

The Millionaire Next Door: The Surprising Secrets of America's Wealthy
The Millionaire Next Door: The Surprising Secrets of America's Wealthy

The people who look rich aren't always the ones who really are rich. Real millionaires are not generally given to conspicuous consumption. Read the truth about them.

 

Can Things Get Better?

Steve Forbes offers hope for the future. He suggests several different options for creating a stable dollar once more. For each option he gives his honest assessment of the strengths and weaknesses of that approach. He answers the questions of the skeptics, just in case they actually care to read this excellent book. (I doubt they will, as socialists and crony capitalists rarely question themselves, believing they hold all the answers already.)

I wish I shared his hope and optimism, but I am naturally pessimistic when it comes to humans--especially those kinds of humans who aspire to hold political power over other humans. I fear the constitutional restraints on political power are so eroded that we are destined for decline, just like other great civilizations that lost their moral fortitude and became dependent on an overbearing government. For my children's sake, I hope I'm wrong and Forbes is justified in his optimism.

I received an advance electronic review copy of this book through NetGalley in exchange for my honest review.

Economics for Those of Us without a Ph.D.

Basic Economics: A Common Sense Guide to the Economy
Basic Economics: A Common Sense Guide to the Economy

Thomas Sowell is a Ph.D., but he makes economics eccessible even for the non-mathematical person. He includes math in an appendix for those like me who want to see it.

 

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