Money

(1/03/2010) - Though its so pervasive in our lives, I find that the nature/essense of money is tremendously hard to pin down.  On a physical level it is fairly useless – paper, cheap metal, or more often than not, electronic signals and magnetized ferromagnetic material.  You can’t eat, wear, or sleep in money (note to literalists – you know what I mean).  Yet in the experience of much/most of the world’s population, it provides you all these things and possibly much more.

On a very basic level, we can think of money’s value as a symbol for goods and services it can purchase.  For example, lets say I received this twenty dollars for mowing my neighbor’s lawn.  My neighbor works for Google, and received the money to pay me by working approximately 30 minutes developing web applications.  I can trade my twenty dollars for some apples, milk, a chocolate bar, and a movie ticket.  Each of these products was produced and brought to me by the work of hundreds, if not thousands of people. 

In our everyday experience, money is interchangeable for goods and services.  But at the same time, money is not equivalent to goods and services.  For example, the six dollars in my pocket is not a rain check for 2 gallons of milk or a used shirt.  If a plague kills half of the country’s dairy cows and the price of milk spikes to $10 a gallon, I’ll be out of luck.  Prices change for a huge number of reasons.  And there are hundreds of ways to acquire money.  For many Americans, money is acquired in exchange for paid work.  But there are other ways to acquire money – investing, bank interest, relatives, robbery, etc. 

(4/6/2009) - The budget deficit for 2009 will, for the first time, exceed a trillion dollars.  The Obama administration is projecting that 2009’s record will be surpassed in 2010. 

Money is, among other things, a claim on goods and services.  Borrowing massive amounts of money is in effect promising to perform services or produce goods in the future, which will result in collecting more taxes in the future. 

Obama justifies the current spending and the stimulus package in particular as necessary to keep the economy out of the ditch and get it to produce wealth at its capacity.  Without spending, the economy will sink further, which will mean less production and debts just as high.  And, he argues, if we invest in education, reducing health-care costs, and an ability to produce clean energy, we will set the stage for paying off the debts we are incurring now.

On these points I agree with Obama. 

I do not agree, however, with another of Obama’s propositions – that we should avoid raising taxes during times of economic distress.  Now, I wouldn’t advocate an across-the-board tax hike.  Raising taxes on America’s poorest (a category which I conveniently fall close to) is probably not desirable.