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Money is useful or more correctly, essential, as a medium of exchange in a free enterprise, capitalistic economy. This type of economy has a large number of products and services, and a high degree of specialization. Consequently, people are occupied with their specialized work and don’t have time or means to produce all the products and services that they need and want. People exchange their specialized work for money and then use this money to exchange for the results of other people’s work.
Money represents productive work and it is illegal and illegitimate to make money by non-productive means called counterfeiting. Counterfeit money does not represent productive work so that if it mixes in the money supply, the counterfeit money will dilute the value of the money representing productive work. This is a form of stealing and a violation of the property rights of everyone whose money has been devalued.
Fractional banking is legal and consists of lending more than the bank has on reserve. These loans do not represent productive work since they are simply numbers added to an account balance. These loans enter the money supply and dilute or devalue the money. The difference between devaluation due to fractional banking and counterfeiting by private individuals, is that fractional banking is legal, illegitemate, and the scale is so large as to render the devaluation due to private counterfeiting irrelevant.
Besides legalizing fractional banking, governments also engage in a manipulation of money to monetize debt. In this process, the government incurs an obligation and pays for it by printing money. Once again, this money does not represent productive work, will enter the money supply, and devalue the money. And again this is legal, illegitemate, and on a grand scale.
The devaluation of money by fractional banking and government money manipulation is easy to do with fiat money which has no commodity base. Fiat money is simply paper supported by legal tender laws. The value of fiat money is not tied to anything like a precious metal, so the amount of fiat money can be increased at will.
It is the people doing productive work that lose due to the devaluation of money. People tend to pay more for products and services over time, not because these things are worth more, but rather because the money is worth less. In a truly free enterprise economy, things get cheaper as the capital expands. Consider the difference between digging a hole with your bare hands or using a shovel or using a backhoe. Capital is productive resources and as people accumulate these resources they become more efficient and productive so that the cost of what they are producing decreases and things become cheaper. Computers have come down in price even in the midst of money devaluation. The computers are more dramatic because it is emerging technology. Gasoline priced in gold is cheaper in 2014 than it was in 1960.
We should have stable money that keeps its value and fairly represents the productive work for which people are paid. This is possible if the devaluation of money by fractional banking and government money manipulation is illegal just like counterfeiting by individuals.