27 July 2020

Money Isn’t Worth A Thing.

It’s useful, of course, as a certificate of one’s efforts and convertible as a means of procurement of the fruits of someone else’s efforts.

Actually, I need to rephrase my opening line:

Money is worth less. Ah, yes, that’s it. Money is worth less. It’s common knowledge, actually. We call it inflation, and the thing about inflation is, if it is calculated on a yearly basis, let’s say the 6% we have here in South Africa, that means 0,0000002% inflation per second.

It’s important to understand inflation. When going to the grocery store and seeing the price of bread has gone up by 6%, most people unfortunately, foolishly draw the conclusion that bread is 6% more expensive. But this is not the case. Bread is bread and the same value in calories that fed the belly of a Sumerian peasant, 5 000 years ago, is feeding you now. When the price of bread goes up, what it really means is that the value of the paper money with which you pay for the bread has gone down by 6%. Yes, there are market fluctuations and those are special events, each with their own set of circumstances. I’m not talking about that, I’m talking about inflation – the actual, constant devaluing of money (read: the increase in the quantity of money and credit).

And that’s why money is worth less. From the moment you hold that rand in your hand, it’s losing value at a rate of 0,0000002% per second, and counting, as every second on the clock tick-tick-ticks away.

The thing is, you earned that rand doing something. The value of what you have been doing doesn’t decrease. The demand for your labour is there, and if what you were doing with that moment when you converted the value of what you had done to a rand was something like building a house, the value of what you had done is actually increasing, as the global human population increases every second with more humans all needing somewhere to live and increasing demand, and therefore the value of your handiwork. But you wouldn’t say it if you looked at the worthless entity you converted your labour to, which is a rand.

And if only the threat to the value of your time and effort was only inflation, but sadly, it isn’t. Since it’s a rand you’re holding there, its relative international value is decreasing at an even faster rate than what inflation suggests. Go trade that rand for a dollar and see why.

So what do you do with this money? Of course you need it, because it’s hard to get paid in potatoes and a lamb chop for the building that you did on someone’s house today. Besides, that customer is probably not a farmer. That is, after all, the purpose of money – to convert and to store value.

Money is indeed a wonderful converter of value, and has enabled human ingenuity, entrepreneurship and imagination to flourish and take flight and soar to the great heights modern civilization has enabled for humanity.

But as a storage facility of value, paper money has a deplorable record, like storing water in a cloth. This has been especially true since 15 August 1971. That was the day U.S. president Richard Nixon surprised the world in his televised declaration that the USA was breaking one of the most important Bretton-Woods agreements by decoupling the dollar from the value of gold. The Bretton-Woods agreement was supported by over 700 delegates from more than 40 countries towards the end of the 2nd World War, with the aim of stabilising the war ravaged world economy, of which a fundamental aspect was that the US dollar would be the world reference currency on the condition that its value was directly linked to and backed by the value of gold.

The moment the US dollar separated itself from the value of gold, it became a fiat currency.

The word ‘fiat’ means ‘an authoritative decree, sanction, or order’. In practical terms, it means the ‘value’ of that currency is what the government decides it would be. And the government promises to stick to that decision. Naturally, other governments were quick to follow suit, because what’s the sense in having your money backed by something real, like gold, when the biggest economy on the planet can simply print trillions in paper money based on promises?

It is a fact of life that the more there is of anything, the less perceived value it has. Here in South Africa we have a lot of sand, so much sand in fact, that if you arrived at the grocer with a handful of sand, they wouldn’t accept it as a means of payment for anything they have in the store, because it has so little value, because there’s so much of it. All things are subject to this rule. Even money. And this is the problem with money, the more of it there is, the less worth it has.

But governments print money, lots of it, by decree, by sanction or by order. And all they have to do is to give you a promise of its value.

As a creative artist, I am keenly aware of the infinite scope of promises. You see, a promise is really a uniquely human feat of imagination. Firstly, a promise creates, out of thin air, a situation which is currently not a reality. Secondly, it places that situation somewhere in the future, requiring another feat of imagination, since the only access we have to the future right now, in the present, is to leap across time by means of imagination. And since all these things are so intrinsically tied to imagination, and since, as a creative artist I can vouch for the infinite scope of imagination, it stands to reason that there is no end to the amount of money or promises a government can generate, which means there is no end to the devaluation of money they can effect.

Isn’t that awesome? You need to work and deliver the fruits of your labour to generate value, but a government can accomplish all of that with a mere promise.

I can wax lyrical about the end game of this system, I can provide scenarios, I can show examples and I certainly can rant a whole lot. But this is an article, not a book. So let’s get to some point here:

Treat your paper money like a hot potato. Don’t let it sit in your hands for too long; it loses value every second. Use it to make more money. And if you’re all out of ideas to make more of it and you feel the need to save, don’t keep it as fiat money, which will lose value. Convert it to something that has proven value. If I may be so presumptive as to advise, convert it to gold.

Convert it to gold and don’t tell your friends about it. Because friends are smartasses who will tell you something they heard somewhere said by someone who read it elsewhere that it has been proven that gold is not a good investment. And then you’ll have to spend time you could have spent drinking and having a laugh at the braai explaining to them that gold has a 6,000 year history of storing value, much, much more than any currency that has ever existed on this planet.

  • Explaining that investments crash and that history repeatedly has shown that fiat currency is unsustainable and eventually goes up in a ball of flames.
  • Explaining that even the money you make from investments loses value every second if you don’t reinvest it.
  • Explaining that the system that appears to have eroded the reliability of the value of gold is 50 years old and built on trillions of dollars of promises that can only be kept if backed by threats of violence supported by more machines of violence which have been purchased with money based on promises of more violence.
  • Explaining that we’re living in a 50 year old Ponzi scheme of which the ‘ponziness’ is becoming ever clearer.
  • Explaining that the tight spot banks found themselves in, in 2008, are where most western governments find themselves in today.
  • Explaining that some of the world’s smartest minds (and most foolish) have been arguing about this for at least half a century and are still not in agreement, so there’s not a good chance that a satisfactory conclusion will finally emerge with the help of a couple of beers around this braai.
  • Explaining that you need to save in accordance with your personal values.
  • Explaining that you wouldn’t secure your savings based on the promises of people (I prefer to call them by their trade: politicians) who have the worst track record of keeping promises of all legal professions.
  • Explaining to people that they work hard to get money to pay monthly insurance while we live in probably the most dynamic, volatile, fastest transitionary period in human history and that now is probably a good time to invest in value security (not to be confused with financial security).

Rather, just smile, flip a chop and peer at your friend through the rich, golden hue of your lager.