74. Money For Promises

Money For Promises
Bob Komives
::

Wherever money is a common medium of exchange, market expansion creates a need for more money. If money becomes scarce it ceases to work well as common currency. People will prefer to trade goods and services directly, rather than to round up the right amount of money. To prevent scarcity, new money is needed not only to buy new goods and services but also to buy new promises from those who say they will bring goods and services to the marketplace. New money is also needed to buy old promises from those who bought them but now wish to trade them (at a discount) into immediate cash. ("Discount" is another name for "interest" -- except that the buyer charges it to the seller when it is the buyer who feels risk and delay.)

Money should get to the places in the economy where it is wanted and needed. From where should it come? Ultimately, it should come from the government that caretakes it, but how? As the interpreters of public need, government officials can get money where they believe it is needed simply by spending it there. Usually, however, the thriving private marketplace must attract more than government spending to get enough money to cover expansion. To get the needed money the marketplace, through its traders, attaches interest to acceptance of a promise. New money must supplement old money so that buyer can buy today's delivered goods and services and seller can cancel the interest charged to her earlier promise of their delivery. When promises are fulfilled and interest paid, the marketplace has attracted the extra money it needs.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 74. Money For Promises ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

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