Friday, November 28, 2008

10,000 People In A Room - Work is Not Money.

Let's suppose that you have 10 people in a room and that each of these people has ten 1 dollar bills - that's $100. They can buy, sell and trade and seem to have enough money. Some may have a few dollars more, but there is enough to go around - the money supply is adequate for commerce.

Now, imagine adding 10,000 people to that room. Would there be a shortage of money? Of course; $100 is not enough money for 10,000 people to conduct their business.

Now, suppose that the 10,000 people work very hard, 20 hours per day and that they produce multiplied truckloads of wealth - good products that everyone can use.  How much money is there in the room?

Still $100.

Work does not increase the money supply.
Producing wealth, sometimes referred to as "production", does not increase the money supply.

In today's system, only borrowing increases the money supply.