True Purpose of Money
In Francisco's Money Speech, Ayn Rand and Francisco d’Anconia question the well-known saying, money is the root of all evil, which suggests that the love of money or an excessive focus on wealth can lead to negative outcomes, such as greed, selfishness, and unethical behavior. At its core, currency is simply a piece of paper that cannot directly be used for safety, shelter, food, or any other essential means of survival. However, in society, it serves as a “tool of exchange”, which can’t exist unless there are goods produced and men are able to produce them.” (Raud, p.1, 2020). Despite currency being nothing more than a shallow piece of paper, over time it has stood as the root to worldwide chaos. This hollow commodity has demonstrated the ability to dictate human behavior and value. Ayn Rand voices her viewpoint on the power of money when she states,
”Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders.” (Raud, p.1, 2020)
While it may simply be a piece of green paper, the true importance of all capital lies within its ability to personify human personality and simplify exchange between two parties. Money is commonly used to purchase electronics, clothing, and other goods that exemplify who we are. Because of our distinct interests and style, all goods do not carry equal value. Some individuals share a larger interest in luxury merchandise, while others are content with a standard lifestyle. If two individuals from different parties decide to exchange items, it can be extremely difficult to determine a price point that is equally beneficial because their core values are contrasting. Unlike other materials, money is equally valued and accepted amongst all vendors. It will always carry a comparable trading value, and thus makes these exchanges between all parties trouble-free. Over time, there has been an obsession by many to obtain as much financial security as possible because it grants one the freedom to trade for any possession, they deem necessary. Ultimately, money itself is not the cause of the chaos, but rather those who are looking to take advantage of its purpose for their own selfish advantages.
The Switch of Currency
Capitalism, and other government parties have built their economy around currency that acts as a margin of trade. However, the troubling matter has always been determining the value each individual unit should carry. The success of capitalism lies in discovering and maintaining this stable measuring rod value.” (Tammy, pg. 34, 2022). Prior to President Nixon's decision to sever the dollar’s link to gold in the early 1970’s, gold acted as the primary unit of exchange in America and most other countries. Mass producers were in favor of receiving gold in compensation for their goods or services. In The Money Confusion, John Tammy states
” Why was it “obvious” that money measured in gold “provided a substantial benefit to global commerce,” as argued above? Money is most useful when its value is constant and gold imbues money with constancy. (Tammy, p. 27, 2022)
In the past, gold acted as a ground unit of exchange that allowed the circulation of consumable goods. Our nation has since moved away from this unit of exchange and, consequently, to some, it has become more challenging to determine the true worth of a dollar bill. While many scholars have argued we should never have swayed away from our previous currency system, I view the shift we made as a much more efficient and sustainable approach. With our current financial structure, the government can manually produce all money, and regulate its movement. Because of their ability to control the amount of capital being produced, they can ensure the power of each unit of exchange remains relative. As a result, we can prevent other countries from securing bargaining advantages over America.
The Efficiency of a Dollar Bill
Ultimately, the biggest reason our economy was modified was to ensure every citizen would have a proper understanding of currency in hopes that all futures trades would be equal. The value of any commodity lies within the purchaser. A variety of factors can drastically influence the need of a good, which is why there is no set price point on items of trade. For example, if multiple parties are bidding against one another to purchase a product, the demand and value of exchange will increase. Bylund illustrates this example when he states,
“Bidding to buy products forces buyers to offer prices higher than they think is worth it, which means they will always offer prices in money that they value lower than they anticipate the product they aim to purchase is ‘worth’ to them…” (Bylund, p. 22, 2016)
As a result, the individual willing to exchange at the highest value, will take control of the product. This is the outcome of a successful exchange because both parties understand the price point and have agreed on a trade value. The seller is satisfied with a higher profit margin, and the consumer is happy he was able to purchase the item. Because we have a complete understanding behind the value of a dollar bill, we can dictate whether we believe any private good, public good, or common resources, is worth the exchange. We can use our knowledge to negotiate and ultimately determine if we believe a price point is worth its cost. (Bylund, p.17-20, 2016) This in turn creates more well-balanced transactions between parties that leaves everyone satisfied.
References
• Rand, A. (2020, April 13). "Francisco's money speech" by Ayn Rand. Capitalism Magazine. Retrieved February 24, 2023, from https://www.capitalismmagazine.com/2002/08/franciscos-money-speech/Links to an external site.
• Bylund, P. L. (2016). Chapter 2: The Price Is Right. In Seen, the unseen, and the unrealized: How regulations affect our everyday lives (pp. 15–26). essay, Lexington Books
• Tamny, J. (2022). Chapter 2: The Meaning of Stable Money. In The money confusion: How illiteracy about currencies and inflation sets the stage for the Crypto Revolution (pp. 29–41). essay, All Seasons Press.