HOW MONEY IS CREATED

Few people know how money is created. One Obama supporter who expected the President to give her money said it was from “his stash.” A member of Congress whose name I forget said we shouldn’t worry about the national debt because we could just “print money” to pay it off. This was frightening. The following is a chapter from my book “Politically Correct Economics.” It is PC, and PC language is used. It is a humorous approach but is basically true. “Humyn” is used instead of human. Women are “vaginal humyns. Men are “nonvaginal humyns.” Read and enjoy.

THE STORY OF MONEY AND BANKING

Money is described in the Christian Bible as something the love of which is the root of all evil. Yet, one of the points on which nearly all economists agree is that money, in and of itself, is worthless. Money has no intrinsic value. Why is it, then, that humyns regularly abuse or kill other humyns for money? How can so many people desire something that elitist economists declare as worthless?
The answer, say economists, is that while money does not provide any direct satisfaction, it allows humyns to acquire those goods that do provide satisfaction.
Money is valuable only because of its acceptability in exchange for goods and services. When money is no longer acceptable, it no longer has value. It therefore stands to reason that anything that society accepts in exchange for goods and services can be money. Indeed, many things have been used as money in this country. Early Native Americans used wampum, beads of polished shells strung in strands or belts, as their medium of exchange. Early oppressors of Western Native Americans would exchange horses with Native American chiefs for a vaginal humyn to serve as an unpaid sex worker throughout the long, cold winters. The white oppressors of the era would also exchange for their winter provisions the skins of nonhumyn animals that they had assassinated during the summer months. Vaginal humyns have even been known to exchange sex for items that provide various amounts of satisfaction. In the ultimate oppression of Native Americans, the ethically challenged European male cheated the rightful owners out of Manhattan Island for a mere twenty-four dollars in trinkets, beads and baubles.
Beads, horses, nonhumyn animal skins, sex, and trinkets and baubles were used as commodity money in the above examples, but such commodities may not be acceptable in other times and under other conditions. The politically correct would certainly not accept the skins of nonhumyn animals in exchange for goods. Nor would they be involved in the trading of nonvaginal humyns. Religious conservatives would probably object to sex as commodity money. Something had to be used as money that would be acceptable to all. The answer is fiat money.
Fiat money is money because the government says it is, and is therefore a type of funny money. It is not backed by anything of value, which is the major difference between fiat money and commodity money. Commodity money can provide direct satisfaction. The malist Native Americans who traded the vaginal humyns of their communes to white European oppressors derived pleasure from riding their newly acquired horses. Recipients of the nonhumyn animal skins derived mentally deficient pleasure from wearing the skins as furs. Trinkets and baubles were worn as beads. Fiat money provides satisfaction only when it is exchanged for something of value.
One cannot speak of money without considering the ultimate institution of oppression of the economically challenged–the commercial bank. Banks evolved from the practices of ancient goldsmiths and are a creation of European white males for their descendants.
Suppose, during the days of the mythical oppressor monarch King Arthur, a knight should arrive in a strange town on his companion animal, which is engaged at the time in providing personal transport. The purpose of the visit is to acquire a castle for his soon-to-be unpaid sex provider. Since knights were malist and sexist, he continued to refer to her as his future wife.
Knights of the day were generally economically privileged and this knight was especially so. He had several pieces of gold in his possession, the bulk of which was for the purpose of buying the castle. Another indication of the degree of sexual oppression of the day is that the knight did not allow his future partner to share in the decision of which castle to purchase. Indeed, the castle-buying decision should have been the decision of the womyn alone since it would be she who would maintain the interior of the castle while the knight was off on his crusades or slaying dragons.
A problem of the day, as it still is in modern times, was to find a safe place in which to keep one’s gold while visiting unfamiliar places. Even in those days of chivalry it was not uncommon for a black knight to knock a white knight in the head and take his possessions. A solution was provided by the local goldsmith. People have always placed a high value on gold and have desired luxurious baubles made of the metal, frivolous though they may be. Malist oppressors who were seeking favors often gave gold baubles to vaginal humyns. For that matter, they still do. Gold was valued so highly that those who believed in the brute force method of distribution often attempted to steal the gold of other humyns. The goldsmith would therefore have a safe place, or strong room, in which to keep his gold. Local goldsmiths would gladly store safely the gold of visitors of economic substance while they were in town. Of course, an appropriate fee would be assessed for the service.
In storing gold for the visiting knight, the goldsmith had initiated a service now provided by all commercial banks–holding the deposits of rich, white European oppressors and their descendants.
Then, as now, most humyns engaged in brokering real estate were vaginal. The knight would meet with the hufem engaged in brokering real property in the early hours of the first morning in town. She would show the knight several less than appealing castles first, saving the best offering for later in the day. As soon as the knight saw this castle, he knew it was the one that he wanted for his future domestically incarcerated vaginal humyn.
“My future wife (remember that the knight was not yet politically enlightened) will love this castle,” said the knight. “How much is it?”
“Ten pieces of gold,” replied the real estate salesfem.
“That’s exactly the amount I have in the goldsmith’s strong room,” said the knight. (The wofem knew how much gold the knight had, because she and the goldsmith are mutual sex care providers. She had extracted information about the knight the previous evening by temporarily employing a maneuver military strategists call a withholding action.) “I will need at least one piece for my trip home. (The knight actually had two pieces of gold hidden in his boot. The buyer and seller of real estate thus established a tradition of mutual lying that continues today.) Besides, this castle is not in perfect repair. It looks like it needs a new roof.”
“The roof is in perfect condition,” said the real estate salesfem, thus continuing the newly established tradition. “I also have another buyer waiting to see this castle later this evening. If you don’t want to buy it, I am sure the other party will.” (This statement was also truth deficient.)
“I had better buy it, then,” conceded the knight. “We can go to the goldsmith’s store and I can get the gold for you.”
It was very late in the day by this time and the goldsmith was closed. He was at home preparing his chamber for an expected visit from the real estate wofem.
“I guess we will have to wait until tomorrow,” said the knight. “I really wanted to finish this tonight so I could get an early start home in the morning.”
The real estate wofem also wanted to close the sale as soon as possible. In addition to a developing vaginal ache as she thought of the goldsmith, she was fearful that if the closing were delayed until the morrow the knight might find a castle better to his liking through a competing castle broker.
“I know what we can do,” said the wofem. “The goldsmith knows me quite well. When you left your gold in his safekeeping, he gave you a receipt for exactly ten pieces. That’s the price of the castle! You can give me the receipt and I will pick the gold up tomorrow. We can sign the paperwork now and you can be on your way early in the morning!” The deal was thus consummated.
The castle was paid for not with gold, but with worthless pieces of paper representing gold. Soon people would trade gold receipts for various products and services as they previously traded pieces of gold. In order to save time and be ready for increasing numbers of depositors, goldsmiths began to preprint receipts that were symbolic of one piece of gold. When a citizen brought gold to the goldsmith for safekeeping, the goldsmith would give the depositor one piece of paper for each piece of gold. The goldsmith had inadvertently invented paper money, backed by gold!
Now we can move forward to some later, undetermined time. Another knight is in town to buy a castle for his significant other. This knight had also left his gold in the care of the goldsmith and had received twelve pieces of paper as receipts for his twelve pieces of gold. He was shown a castle by the real estate salesfem, a castle that he thought would be to the liking of his unpaid sex provider.
The knight inquired, “What is the asking price of this castle?”
“A mere eleven pieces of gold,” replied the salesfem. (This was a period of moderate inflation.) “The price is firm,” she added.
“I suppose I will take it,” said the knight. “But my gold is at the goldsmith’s. Since it is late, we shall have to wait until the morning to close.”
“I don’t think so,” said the salesfem. “You may just give me the receipts for eleven of the twelve pieces of gold you have.” (OOPS, she thought. The knight would know that she was getting inside information from the goldsmith. How else would she know that the knight actually had twelve pieces of gold? )
However, the knight was gray-matter challenged and did not notice the realfem’s slip-of-the-tongue.
“That is quite impossible,” said the knight. “Thieves seem to be stealing the receipts as they were stealing gold. I left them in the safe at the Knights Inn. I can’t retrieve them until morning.”
Again, for reasons stated previously, the salesfem did not want to delay the closing until morning.
“I’m afraid it may not be available by then,” she said. “There is someone just around the bend of the road who wants me to show them this castle as soon as we are finished. This castle won’t last long. You had better think of something.”
“I know what might work,” said the knight. I have known the goldsmith for a few months and he knows my signature. I will just take my lunch bag and write a message telling him to pay you the amount of eleven pieces of gold. He will recognize my signature and turn the gold over to you.”
Through another inadvertent happenstance of fate, the check was born.
A few months later another knight came through town. This knight was in town on business other than buying a castle, but happened to encounter the real estate salesfem in the lounge of the Knights Inn. During their conversation, she told him of an excellent deal on a castle she had listed. “If you are even thinking about getting into the market,” she said, “you had better look into this. At only twelve pieces of gold (inflation again), it won’t last long.”
The knight still wasn’t convinced, but after being exposed to the wofem’s fuzzy persuader a few times in the knight’s room later that evening, he decided that it would at least be worth an hour or so of his time to see the castle.
He did in fact like the castle. He thought that if he ever had a significant other, she would like the castle also. During the interim it might be nice to have a place such as this to come on weekends. After all, the real estate wofem seemed to not have a significant other and her persuader was indeed a powerful and memorable tool.
“I would like to buy the castle,” said the knight, “but alas, I did not bring any gold.”
This was extremely disappointing to the real estate salesfem. She wanted very much for the knight to purchase the castle and had even considered lowering the price. The goldsmith had, at least temporarily, become an insignificant other and the knight had the previous evening proved to be a more than adequate substitute sex provider.
She said, “I shall see what I can do.”
She returned to her office and arranged an assignation with the goldsmith. She knew that the fuzzy persuader possessed by all females was a powerful weapon when properly employed, and would be instrumental in the eventual domination of sexist male oppressors by enlightened feminists. By midevening, the goldsmith would be more then ready to offer assistance to the traveling knight.
“You see,” said the goldsmith to the knight the next morning, “I have all this gold here that I have stored for people in this town. Nobody ever picks any of it up, or they don’t pick up much of it, anyway. The total amount I have on hand never decreases by more than ten percent. I figure that if I keep on hand only twenty percent of all the gold I have deposited, I will have more than enough to take care of my customers’ gold needs. I can easily let you use twelve pieces of gold to buy the castle. You must promise me in writing, however, that you will return the twelve pieces of gold, plus one more piece for my trouble, to me within six months.”
The goldsmith therefore created the fractional reserve system used by banks the world over and the lending of those reserves. Banks no longer are required to keep all their deposits in the vault. They needed to keep only enough money on hand to take care of day-to-day transactions. It is this feature, however, that resulted in many banks having to close their doors during the first days of the Great Depression. There was not enough money on hand when panic-stricken depositors, fearful of losing their life’s savings, made runs on their local banks to withdraw their deposits.
But that was not all the goldsmith did. “There is no need for me to burden you with heavy gold,” said the goldsmith. “I will just give you some of these gold receipts. People are trading them just like gold, and I have preprinted them as “pay to the bearer” in denominations of one and five pieces of gold. I have only 1,000 pieces of gold on deposit and have extra receipts.”
When the goldsmith gave the knight the twelve receipts, there were now 1,012 receipts in circulation. The goldsmith had actually created money representing twelve pieces of gold by lending his excess reserves. By excess reserves, we mean the pieces of gold that the goldsmith did not expect his customers to pick up. The real estate salesfem accepted the receipts as readily as she would gold, for she knew they would be accepted in trade for service at the local tavern.
It doesn’t matter that there was no gold to back up the twelve new receipts; it was still money because it could be traded for various goods in the economy. When the knight brought twelve pieces of gold to the goldsmith to repay the loan, the money would be decreated.
Commercial banks create money today by lending their excess reserves. Since lending creates money, the target of money creation is the borrower. Because of our oppressive banking system, humyns must have collateral in order to borrow money. Using their existing factories as collateral, rich capitalists borrow money to build more factories in which the poor and oppressed work, but workers cannot borrow money because they have no collateral. They therefore remain oppressed workers. As the goldsmith created money for rich knights of the middle ages, commercial banks of today create money for rich descendants of dead white European male oppressors.