Paper Money.

 

                                                 Paper Money

     We have the rare opportunity to interview J. P. Morgan who was just recently admitted to heaven after serving 910,656 hours, 36 minutes, and 43 seconds in purgatory.  There he is, on cloud number nine.  Let us approach him.  Excuse me, sir, but aren't you the famous financier and banker John Pierpont Morgan? 
    
     That I am, and how can I help you? Do you need a loan? 
    
      Well, no, I'm a reporter from the Heavenly Post and it's a requirement for all new-comers to be interviewed.
   
      Oh, I see, well then get on with it. 
     
      Yes sir.  One of the things my readers are interested in is what exactly is paper money?   And you are undoubtedly an expert on the subject,
    
      That I am.  Paper money has a very long history and is extremely complicated.  It came into being with the dawn of civilization when bartering became too inefficient for business.  Now, do you want the complicated explanation , the simple explanation, or the kindergarten version of the simple explanation? 
    
      Pretend you're explaining it to your kids. 
    
      The kindergarten version it is.  And do not look at my nose.  I am very sensitive to people staring at my nose.  I have Rosacea, a skin disease, and there is no cure for it.
    
      But you don't have Rosacea anymore.  You are in heaven, and any afflictions you might have had is now gone.
   
       Really?  I didn't know that.  Are there mirrors somewhere ....so that I can see for myself?
    
     Trust me, your nose is fine, so can we get back to the question, what is paper money?
    
      Oh, alright.  Paper money is a consensual agreement by the affected parties that this piece of paper, created by a third party, is of a set intrinsic value depending on its denomination and, unlike a promissory note, is transferrable, without title, within the parameters recognized by all the parties concerned. 
    
     And that is your kindergarten version of a simple explanation?
    
     Yes.  As I said before, money, in any form, is very complex.  Would it help your readers if I use an allagory?
    
     It would help.
   
     Suppose you see a ten dollar bill on the sidewalk.  Would you pick it up?
    
    Yes, I would.
    
     Why? After all, it is nothing but a small, rectangular, piece of paper, touched by countless germ bearing hands, trampled on, dirt bearing, and with no more intrinsic value than a soiled wet tissue, except that it is printed in green and has a portrait of a president on it.  So why are you picking it up?  You can't eat it or use it for the making of things.  Is it because you want to clean up the sidewalk and remove litter to keep the heavenly city clean?  Or is it that you are particularly fond of the color green, or is it the portrait of a president you find attractive?
    
     Of course not.  I'm picking it up because it's......money.
    
      No, you're picking it up because you have faith.  You have the  blind faith that when you go to a store or restaurant, people will take this really useless piece of paper in exchange for whatever.  This faith is based on an illusion that this form of money you're passing around is written by an omnipotent, God-like entity and that others will have the same faith, as you do, that this is a transferrable legal tender for all services or goods desired.  So to answer your question, paper money is basically nothing but faith.  But here is the caveat, a big one.  If a small percentage of people, for some reason, loses the slightest faith, then a domino effect takes place and paper money becomes...paper.
   
      Does that happen often, people losing faith?
    
     All the time.
    
     How?
    
     When the organized society that is printing the money gets into trouble and begins to print more.  Some smart guy, like me, will realize that there is much, much more paper currency floating around then there are goods.  Slowly, more and more people like me begin trading the paper money for goods.  Paper money begins to lose value until it reaches the point where it is redeemable for nothing, and people will see what paper money truly is: paper, and only good for writing notes, starting fires, or wiping bottoms. 
    
      Another question that my readers are interested in, and that is, how does one country buy goods from another country when their paper money is not the same?
   
      You want the kindergarten version of the simple explanation?
    
      Now you're being patronizing.
    
     I will use a parable. Tommy wants some marbles from Dick.  Dick agrees but want something in return.  Tommy has nothing, but promises that when he does he will.  To keep tract, they get themselves each a little black book.  Both mark in their little black book what had transpired, the date, and the agreed value of the marbles in terms of points.  Later, Tommy has some thing that Dick wants.  He gives it to Dick and Dick just cancel the points earned.  No money exchange hands.  Just numbers of points in each other's black book.  But eventually, one  will have a hellva lot more points than the other, and you call that an imbalance of trade.
   
     You mean like the United States and China?
   
      Yes.
    
     What if the imbalance of trade reaches such a point that Dick insists that all the points be balanced?
   
     Well, Tommy can do one of two things.  One, he can print more money which will undervalue the points that Dick has in his possession.  Two, he can do the expedient thing, but only if he is a lot stronger.
    
     And what is that?
    
     Make up some excuse to beat Dick up, then take away his black book.
    
     You mean....?
    
     Yes, have a really serious war.  Either way, Dick, or China, will lose out because Tommy owes so much to Dick.  So it is to Dick's, or China's, interest that Tommy, or the US, is in good economical health, and friendly so that he can pay back the points.  I know my explanation is muddy but it does cover the ground. 
    
     On behalf of the Heavenly Post, I want to thank you, Mr. J. P. Morgan for this enlightening interview.
    
     Anytime....say, do you know where I can find a mirror?