Basic economics?

Have we forgotten what money is?  Money is a promise.  I do something helpful for you, but since you can’t do something helpful in return at the same time you promise to do something later.  Money is the lubricant that allows us to be helpful to each other but know that we will receive something helpful to us in return.  Banknotes carry the words “I promise to pay the bearer …”

This basic principle has been forgotten, and greed and fear leads people to collect more promises, or to put too high a price on their helpful work.  In an economic crisis people are afraid to use their promises, hoarding them instead.  Those who have made the promises are not able to redeem them, and to survive they have to make more promises – more than they are able to deliver.  Money, the lubricant, is taken out of the system and it stops working – try running your car without lubricant!

This presents an obvious solution to our present economic difficulties.  We should stop hoarding promises, and those who have lots of promises should allow others to discharge them.

What does that mean in practice?  Stop, or reduce what we save, and instead spend our money to give employment to others so that they don’t have to borrow to live.

A controversial suggestion to encourage this would be to change income tax to a saving tax.     If you earn a million and spend 900,000 then it is not taxed, but the 100,000 is taxed.  You can keep whatever you spent the 900,000 on, because that’s giving employment to others, who then give employment to others…..  it keeps the system lubricated.

But even without governmental tinkering we can all do our bit.  Be happy to buy what you need,  employ others instead of doing it yourself, give away the promises (money) that you don’t need.

Simple? Worth a try?

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https://philhemsley.wordpress.com/2013/12/10/austerity-is-working/

https://philhemsley.wordpress.com/2013/12/27/austerity-is-working-ii/