I argued in a previous post that when banks create money electronically we shouldn’t call it “printing money”; the metaphor doesn’t adequately describe a situation in which most money is not printed but created electronically on the balance sheets of the major financial institutions then passed on to the public through electronic transfers, credit cards, debit cards, and the like. Most money is not printed–it is a virtual reality that people accept in exchange for very real goods and services. In my view, this situation is analogous to a game of monopoly. During the game, the money is received in the form of salaries, rents, gifts, and bonuses, and in turn it can be used to pay rent, mortgages, penalties, and taxes. In the end, when the game is over, all the money goes back into the box and regresses to its intrinsic value of zero. But Monopoly is just a game, you say? But so is our virtual economy. It’s a game we are playing with non-real money which has no intrinsic value, not even the paper its printed on, because the central banks don’t bother to print much of it anymore.
Monopoly games last about 1-3 hours. It is not certain how long virtual economy game will last, but it won’t be much longer with Ben Bernanke keeping interest rates at virtually nothing and creating virtual money ex nihilo–eventually the public will stop accepting it in exchange for real goods and services. That will be the end of the game, and at real money with intrinsic value, like gold and silver, will become the norm. And we shouldn’t make the mistake of saying that gold has no intrinsic value because it can’t be eaten. That is a fallacious argument created by fascists trying to confuse the issue. Gold and silver have intrinsic value by definition.
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