What's Wrong With Our "Money"?

Money is more than our daily neccessity as it is the main exchanges or trade means to obtain goods and services. Money was created in the past as the means of exchanging values in society so that there is an efficient and standadise means of trade. Prior to money invention, people used to barter. Barter is a form of value transaction in which two or more individual came together to make an agreement on how to exchange goods or even services in return for another goods and services. a farmer, for example, when he need meat, will go to a hunter house with his grains and discuss on the ratio of exchange like 2 Kg of grain for 1 Kg of meat and so on. This type of exchanges was too complicated and subjective in nature and there might also be exploitative behaviour by one party who are more "powerful" in terms of influences or members and etc. So here we come to the invention of "money" as a standardise exchanging mechanism.

So now the question come, "what's wrong with our 'money?'.

1. Loan
Loaning money is arguably good for society as a whole as it give opportunities for those who has lack capital but have a good ideas to be able to finance their "ideas" and reap success from it.But is it really the case?

Let's take a look onto "Loan" Mechanism :

1. "A" Deposit $10,000 to the bank. Bank has a reserve assest ratio which was set by central bank in each country. For instance, we take 10% which means 10% of $10,000 (or $9,000) can be made available as a loan.

2. "B" took a $9,000 Loan from the bank then through various means of exchanges it will end up in the bank again as $9,000. Bank will made 10% of $9,000($8,100) available for loan again.

3. The total loan will be [1 - 1/0.1] * 10,000 = 90,000

Conclusion: From $10,000 of monetary value banks created $90,000 of monetary value. This mean that most of our money was financed by debt. This also mean that there will always be a depreciation of monetary value (inflation) since 10,000 value can be made into 90,000 out of nothing.

Now, lets take a look the outcome of loan to business and people as a whole :

1. Bank lend "A" $10,000 but required A to give back 10,000*[1+ a]; in which a = interest rate.

2. Supposed there is 2 person in this world borrowing money from bank 10,000 each. and supposed a= 20%. They are required to pay back their loan as 12,000 each. What's wrong with this? the total monetary value of this world is just 20,000 and now they are required to return 4,000 more? How can they get that sort of money? The answer is the bancrupcy of the other business or at least the lost of assest from another businnesses.

This post is just a personalized view and is provided to give readers further insight about what the writer think. Please do not take this post seriously as the writer is not adept in Economics which means misunderstandings of concepts, errors, and defects might be inherent in this post. For further understanding, please refer to professionals bodies, lecturers, or textbooks.