The Situation


Money & Value One


This explanation will be an attempt to explain the basics of how money works.


Value in its simplest form is having something that somebody else wants. By the very nature of somebody else wanting it, it then has a barter value to what they are prepared to give up in order to get it

Lets say for instance there is an island with only 2 inhabitants on it. And 1 of the islanders has found a special purple shell. He is not that bothered about the shell. But the other islander really, really wants the shell. That shell is then a valuable commodity on that island. And it has value up to the limit of whatever the 2nd islander is willing to sacrifice in order to get it. If the 2nd islander decides they do not want it anymore, then it becomes valueless again.

But lets say there is an island of 100 inhabitants. And 99 of the other islanders want that purple shell. The shell then becomes much more valuable up to the limit of what the other islanders are prepared to give up for it. But because there is only 1 purple shell it is a scarce resource (meaning there are no other shells like it). So islanders will outbid each other or sacrifice more of what they have in order to obtain the shell. This is what is commonly known as a bidding war. When something of perceived value is desired by more than 1 person. They bid against each other raising the price of that item because they both want it for themselves. This is why paintings by famous artists go for astronomical amounts of money because they are unique and one of a kind paintings.

Now lets say for instance that the islander who found the shell, found it in a secret cave that no other islander knew existed. And in reality that purple shell was 1 of 1000's of other shells all exactly the same. But he did not tell the other islanders. He would then be creating "artificial scarcity" in order to raise the perceived value of his purple shell.

Artificial scarcity is the act of making out that their are less of an item than there really is, in order to drive up the perceived value and make more profits. This is exactly what happens in the Diamond industry. Diamonds are not rare at all. In fact they are abundant, but due to clever marketing and manipulation of our consciousnesses by the Oppenheimer cartel. We are led to believe that this little sparkly rock is a scarce resource so we must pay thousands of pounds to own one. It is a gigantic con job!. Albeit a very well orchestrated one. And one that every woman seems to of bought in to hook line and sinker.

Anyway back to VALUE!.


You see before our modern era our economy consisted of a barter economy. A barter economy is when people produce goods and then exchange those goods for other peoples goods with an equal value exchange barter. What I mean is. If I had a sack of potatoes & you had a sack of carrots. We could do an equal value exchange of goods. As each commodity has equal value. We may then exchange more of our potatoes/carrots for other things such as meat, bread, fish or other items.

This exchange has an equal value because we are swapping something of value (potatoes) for something else of value (carrots).

You see the VALUE in the exchange is because both items (carrots & potatoes) are equally valuable to each other. If I tried swapping you a sack of half rotten potatoes for your 100% fresh carrots. That would not be an equal value exchange because I would be getting 100% value in carrots and only giving 50% value (half rotten potatoes) in return.

This is because VALUE is the Golden rule of any exchange. If you are losing value on an exchange you are losing productivity. Because everything that needs to be exchanged takes valuable time to create. So if you exchanged 100% fresh carrots for only a 50% healthy sack of potatoes, You would of lost 50% of your hard work (productivity) involved in growing those carrots the moment you exchanged them. This is why value is so, so important in what I am attempting to explain to you. VALUE is where all the power in a transaction sits. And value is where we are all losing our productivity in exchange for things that have no value (i.e paper money).


The trouble with a barter exchange system is that in order for you to exchange your goods (say potatoes) you have to find someone else who A) wants those potatoes & B) has what you want in order to complete the exchange. There is no value in exchanging your potatoes for say garlic if you do not want garlic. But you could find someone who wants garlic who has what you need. Then exchange your potatoes for the garlic and then exchange the garlic for what you need, creating a 3 way exchange.

This would become extreemly troublesome and would eventually lead to fresh produce rotting before it got exchanged. As people could not find other people to barter exchange with. Imagine trying to find a 3 way, 4 way, or 5 way exchange that allowed everyone to get what they wanted and for everyone to be satisfied with the barter. It would be a nightmare..To solve this 2 things happened.

1). Gold & Silver were introduced as a medium of exchange to replace the exchange value of real goods.

2). Store houses or "convenience stores" opened in order to swap those gold & silver pieces into real consumable goods (food, clothing etc).

This became the start of our modern economies. Instead of exchanging real goods for real goods on an equal value exchange. We started exchanging our real goods (potatoes, carrots etc) for gold & silver coins. These gold & silver coins then became a store of our value. Because we could keep hold of those gold & silver coins until we were ready to exchange them for things we wanted to consume at a later date.

You must remember that Gold & Silver are nothing more than chunks of metal. Known today as commodities. They are just lumps of metal dug out of the ground and contain no real value other than the perceived value we ascribe to them. You can not eat gold or silver and you can not plant it in the ground and watch it grow bigger. What gold & silver have is intrinsic value. That means they have some sort of valuable attributes. These attributes are that they cannot be counterfeited. You can not create gold or silver out of other metals or materials. They are non-perishable and because they require hard labour (valuable labour) to dig them out of the ground they became perfect vehicles for storing the VALUE of our productivity & goods.

I have to digress a little bit here.

Because although I have shown above that VALUE is in tangible goods such as potatoes and carrots etc. Real value comes from the labour we exert in order to grow or obtain those goods. REMEMBER THIS: Without people working hard using labour to produce goods or services then nothing of value would ever be created. Except of course what could be collected from nature. But again this would still be using our physical bodies to move about and collect the fruits, berries and fish from nature. So you can see that all goods produced are valuable but the value of those goods comes from the LABOUR we carry out in order to produce those goods. This is a very important concept to understand. This concept can even be taken further, where we could say calories or energy is the base value, as without any energy or calories to burn we couldn't even labour to produce things. But for this article, Labour being the base value is ok.

Labour as Value:

Our labour produces goods. Those goods become a store of our labour. Those goods are exchanged for gold & silver to act as a better store of our labour because food items perish easily. We store our value in gold & silver that does not perish. This means we can store our LABOUR VALUE in gold & silver which can be saved for a rainy day or accumulated for old age for when we are not fit & healthy enough to labour in order to produce goods to eat or barter with. Hey presto: a Pension!.



Anyway, overtime those gold & silver coins became cumbersome to carry around. And some people started stealing other peoples gold & silver coins rather than work to earn their own. (Think Dick Turpin & high way robbery). So 2 things happened as a result. 1). Store houses for gold & silver sprang up (also known as banks) where people could safely deposit their gold & silver.

In exchange bankers gave us gold receipts, or "paper promissory notes", which was evidence that we had valuable items stored with the bank. Over time these gold certificates or paper promissory notes began to be exchanged like gold and silver. As rather one man going to the bank to collect some gold to pay for an item, and give this gold to another man, so he inturn could deposit his gold at a bank. The actual receipt of the gold deposit or promissory note was exchanged instead. This cut out the tiresome trouble of visiting the bank everytime you wished to exchange goods or services.

This means that paper promissory notes became a substitute for gold and silver!. So instead of withdrawing gold & silver to exchange for real goods we were now free to pass paper promissory notes signed by the bank manager as a promise to pay the person our gold & silver when they collected it from the bank.

These promissory notes worked as long as everyone in the community accepted that they represented VALUE held in the bank. Meaning the people could exchange those pieces of paper for real goods at the convenience store or go back to the bank and get gold & silver coins whenever they wanted to. The bank was just a store house for our labour's value held in gold & silver, much like a convenience store was a store house for labour held in fresh fruit and vegetables.

The trouble with these promissory notes. Which were nothing more than pieces of paper with a "promise to pay" stamped on them. Was that over time the bankers realised that only a certain percentage of his customers ever came and claimed their gold and silver at any one time. So Mr banker was sat with tonnes of gold & silver sat in his store house/bank doing nothing at all. So Mr banker thought for a while, how best could he use this to his advantage ?.

This is where loans started.

Bankers made loans to people to fund production of goods. As the more goods being produced the better off society would be. These became the first business loans & were initially on a 1:1 ratio. For every gram of Gold held in the banks vault. The bankers would create 1 promissory note equivalent. As the promissory notes were intended to be a direct representation of the value held in gold & silver in the banks vault.

In return the bankers were paid a commission for arranging the loan, creating the promissory notes & collecting the gold & silver as loan repayments when the loan payments became due. This in itself is not a bad thing & is the basis for a healthy economy.. However, overtime bankers got greedy. Because they recognised that only a small percentage of people ever withdrew their gold & silver at any one time. This gave them an idea. The idea was if people didnt come and withdraw their gold & silver then nobody knows how much gold & silver is in the vault.

This "insider information" left the bankers free to over estimate how much gold & silver they had in storage. And so they created more promissory notes than gold & silver actually held in the banks vault. What this did was to create value out of fresh air. Well they did not create actual real value as that requires manual labour to produce real tangible goods, but they did create perceived value. Which in turn purchased real value such as gold, silver, property & land.

You see because bankers were getting a commission on their loans. It was good business to make as many loans as possible. So they set about creating more promissory notes than gold & silver that they held in their vaults. This means that instead of getting a 1:1 ratio of commissions over a 12 month lending period. They could get a 2:1, 5:1 or even as we have it today a 10:1 loan interest ratio over the same 12 month loan period. That means if they had 100 ounces of gold in their vault. They could now lend out 1000 ounces worth of paper money, using their knowledge about withdrawals of customers. This meant they could now collect x2, x5, x10 the amount of commissions. Earning x2, x5, x10 the amount of money in the same 12 month loan period. As long as nobody found out what they were doing and people didn't enmasse turn up at the bank the same day and demand their gold & silver back. Everybody was none the wiser.

This is the same principle as to what happened to Northen Rock a few years ago. People got worried that the bank did not having enough money (value) in their vault and people started demanding their money back and the bank nearly collapsed. Because it did not have enough value in it's vaults to sustain the amount of withdrawals happening at the clerks desk. It was rescued by the UK government pledging our tax money to keep the game going.

And that's all it is, a GAME! - It is a confidence trick, a ruse, a shell game!.

In reality, the money (paper value) that Northern Rock recieved was in fact our own labour value that the government stolen off us through taxes & then handed over to a PRIVATE CORPORATION. Which is exactly what the government has done since the 2008 crash! Just handed over billions and billions of our sweat equity, labour value to PRIVATE "FOR PROFIT" CORPORATIONS!.

There's more..ooh so much more!

Although this over estimating the gold & silver stocks in order to loan out more money was dodgy dealing. It didn't have much of an impact on the economy as a whole. As long as bankers didn't get too greedy with loaning out too many pieces of paper. And that brings us up to our modern economy. Because in 1931 just before the 2nd world war our government committed a most heinous act against the people. Which we are still feeling the effect from to this very day. And that is that they removed the VALUE backing the paper promisses to pay. What they did was to remove the GOLD which has intrinsic value (as discussed above) so that they were then free to print as many paper promises as they wanted.

This single act of removing the real VALUE backing our currency by removing the gold that backed it has been the cause of all economic depressions from that day until now. Without any solid tangible commodities backing the paper currency the bankers in cahoots with government can create as much money as they want out of fresh air. And this causes massive INFLATION and untold misery as we shall see in chapter 2 of Money & Value.

Money & Value Chapter 2 Continued >>