What is money? You will be surprised that it may not be what you imagined. The New World definition of money is: “Debt IS Money“. What a paradox this is! You must be wondering how can debt be money? It is hard to comprehend, but that is an accurate definition of money in today’s context. Except that there is a subtle caveat to define money this way. Indeed, debt is money as long as your are allowed to get into debt. In other words, someone must be willing to lend you the money. Once the money is in your hands, IT IS MONEY that is at your disposal, never mind if you have to pay back later. Just like credit cards without spending limits. Money “is created” once you used it. The fact that it is a debt does not make the money less fungible.
Money can no longer be viewed in the conventional way, which views money as a storage of wealth and a fungible asset. Traditionally, money exists through creation of wealth. Work is performed and a product is produced. The product can then be exchanged, bartered for another product or be sold for money. Wealth, by definition, has to be underpinned by products or services that have a value to man. Ironically to those who still think this way, they are grossly mistaken. The new financial paradigm does not support this view of money. Money thrives in a virtual existence and can be created out of thin air by those with authority, such as central banks, to do so. They in effect “issue” money, which is nothing but an IOU, i.e debt that is created. Money is therefore totally independent from creation of wealth.
Jim Willie raised some provoking remarks in relation to how money is being perceived by most people. In the interview by Rick Wiles, Jim cynically teased with the question, “How many people can differentiate between “money”, “legal tender” and the “USD” (or most forms of fiat currency)?” Most people may have noticed the words “legal tender” printed on the USD and subconsciously perceive the piece of green note as money without giving a real thought as to wha the USD really means. Is it really money?
Investopedia defines “legal tender” as:
“Any official medium of payment recognized by law that can be used to extinguish a public or private debt, or meet a financial obligation. The national currency is legal tender in practically every country. A creditor is obligated to accept legal tender toward repayment of a debt. Legal tender can only be issued by the national body that is authorized to do so, such as the U.S. Treasury in the United States and the Royal Canadian Mint in Canada.”
In the USA, the Coinage Act of 1965 states (in part):
“United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts.”
Whereas in Singapore, MAS (Monetary Authority of Singapore) is the sole authority that issues Singapore notes and coins. It is responsible for maintaining the integrity, security, quality and confidence in the Singapore currency. MAS took over the currency issuance function following the merger with the Board of Commissioners of Currency, Singapore in October 2002. All notes and coins issued by MAS are legal tender in Singapore, and are fully backed by external assets in the Currency Fund.
Unlike the Singapore currency, the US government does not guarantee its currency (USD) even though it is “legal tender” i.e. it is a fiat currency that has no backing of tangible assets. It is only “fungible” as long as there is confidence in the green note. Once confidence evaporates, the green note is nothing more than a green printed piece of paper worth nothing.
The Federal Reserve has printed trillions of fiat currency in the last decade. During that same period, the US did not create that amount of wealth. The current US national debt stands at over $18 trillion and growing (Read more). Even with a near zero interest rate, the debt burden is virtually impossible to be repaid. In addition, the unfunded liabilities are in the tune of $127 trillion, according to Forbes. Other estimates put the figure to beyond $200 trillion. So the US government had spent trillions. It is debt, and money that had been spent, but probably, never to be repaid.
In the interview with Rick Wiles, what Jim Willie was alluding to is that contrary to popular belief, the USD is not money. It is just a piece of paper printed out of thin air. It may be legal tender, but it is not money.
Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: