Money can be created, as I indicated, and destroyed. And I am not referring to burning banknotes. The simple act of repaying a loan is a destruction of that virtual money implied by the debt itself. If I sign a promissory note and others use that promissory note as payment, that promissory note is money. If I cancel the debt of the promissory note, the promissory note ceases to exist; that money disappears from circulation. In the moment before my payment, both monies existed—the promissory note and my money—and the moment I cancel it, the promissory note ceases to exist. Destruction of money.
Tag: bancs
The Money and money creation
MONEY AND MONEY CREATION (how it is done)
Money in the world today is quite confusing. It is not gold. It is not even a right to be given gold. It is simply “purchasing power.” Whether it is paper money or an entry in your bank account, what it represents is your purchasing power.
That is why central banks are so obsessed with inflation. Their fundamental mission has become ensuring that the money in circulation reasonably maintains its purchasing power. If there is high inflation, then the purchasing power of our money rapidly decreases, and the money loses value; and everyone looks for an alternative—another currency, goods, gold, whatever it is that doesn’t lose “purchasing power” in the market.