Some Funny Things About Money

What Does it Profit a Man.....

You might have misconceptions about money:

l.  There is no gold backing our money.  Since the Bretton Woods agreement in l945, the gold backing for currency was removed.  In its place was fiat standard:   faith in the government, or sovereign guarantee.  Most currencies have expressed guarantees, with no less than the President of the state signing the note.

2.  Money may be your asset, but in reality it is a debt instrument;  it is a promise to pay by the government.  And when you go to the cash department of BSP, (or Federal Reserve Bank in US), what will they give you to redeem that promissory note?

You guessed it right, another note....

3.  The note is not a value per se, but a promise of value.  It is only as valuable as the note it is printed on.  Thus, all notes are worthless;  just like Mickey Mouse or Japanese WW II scrips.  Only the productive activities of people, ie farming, construction, manufacturing, gives value to the currency and vice versa.

4.  The increase in money supply (ie bills in circulation) is not backed by any real asset of the government, or BSP.  It is notes debit on the asset side, and credit on the other side.  BSPs capitalization is only Pl0 B supporting billions of notes and coins in circulation.

5.  Printing more money causes value of goods and wealth to go down.  Law of supply and demand.  More money vs goods means, higher prices, but value of goods remain the same or lower.  Inflation means real value of money gets eroded.  It is the same for your other financial assets.

6.  The taxes that we pay stabilize the government and the currency;  more borrowings by the government diminishes the value of the currency. In a way, inflation robs people of value blind;  because you can not control it;  it comes without your consent (taxation needs your consent)

People are migrating to purchase of hard assets like gold;  unlike notes which are paper, gold is more stable and its price has gone up to $l,500+ @ ounce.

According to Andrew Tobias, the best place to park your money is in stocks  -  stocks of food that you need.  Your gain on the stocks you hold, is equivalent to the price increases and you are better off with a hoarded case of tooth paste or detergent, than investing in Treasuries or Stock Market.

Do they make sense?