THE matter of making money out of money instead of on account of trade and/or industry, the issue of having money as a means of profit to earn more money rather than by reason of honest to goodness investment in business, the question of using money to produce more money merely by speculation in place of sweat and toil—this is the ultimate premise of the debacle of the market as such. And this is what is precisely at the bottom of the so called “economic collapse”, “downgrading” among other bad news the world over.
There are many able economists who certainly see it otherwise. Some say that such an economic disaster is caused by national socio-political instability if not outright regional wars. There are also those who affirm that investments in business especially that of production, have become less and less due to instability, graft and corruption here and there. There are those who even claim that the downfall of the world economy is basically on account of the rising world population. And there are those who cite and proclaim other factors for the deteriorated and still deteriorating global economy. And being experts and professionals, it is highly impossible that what they think and say, are altogether wrong.
Question; How about the fact of money being traded for money precisely because the value of exactly the same amount of money goes up and down depending on a pure seat-down speculation? How about the value of money going up and down merely depending on how much money trading goes on all over the world? Wherefore, how come the same money with the same amount can buy less or more goods in one and the same time-span?
Perhaps—just perhaps—one of the ultimate root causes of the present financial downtrend the world over is the fact that the then previously long observed principle of “Fixed Rate of Exchange” has been effectively undone and altogether unobserved. This seems to be known as the “Brettonwood Agreement”—or something the like. More concretely, there was a time when one US dollar was worth two Phil. Pesos. And that was it.
With such a fixed rate of exchange—fixed value and fixed purchasing power of money, which can be also done to present “Euro”—the pure speculative agenda of making money out of money would not be engaged in. Money would then be invested in trade and commerce. Money would be thus made productive of goods, of infrastructures and other socio-economic developmental projects, the world over.
When exchange rates change, when the value of the same amount of money goes up and down simply by keeping and/or selling them, when money is thus mainly and purely used to make more money—the result is nothing less than economic stagnancy.
17 August 2011