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In which Niall finds out why things went wrong.

One of the classes Niall was expected to take included a brief history of money. In this class he got a new perspective on much of history in general.

“All right class, shall we begin?” The young instructor’s high pitched voice cut through the gentle murmur of chatting students.

“This session is on the history of money. Since I appear to be the youngest person in the room by quite a few years, I won’t try to tell you what it was like to live in a POM economy. I’m sure you know that far better than I. But since I have been up at University for quite a number of years, perhaps I can give you a new perspective on it and explain, to some degree, why things happened to you as they did.

Let’s start at the beginning of history. I realize that is a rather late place to start, but we don’t have all day. By the time history began to be written, money had been in existence for thousands of years. Accounting had been invented and money was well on its way to taking the forms that would seem most familiar to you before the transition.

At first money was, itself, something that one could consume. You might be able to eat it or wear it or wrap up in it on a cold night or ride it. It took many forms because it was a commodity in each case. But it was a special kind of commodity, a commodity that was so widely used that everyone could be confident that if they didn’t want to use that commodity themselves they could easily find someone who would accept it in trade.

This made each of those special commodities something new in the world. It made each a medium of exchange. A medium of exchange makes trade much easier because then trades don’t require a coincidence of wants. That is, person A does not have to want what person B has and person B does not have to want what person A has for a trade to take place between A and B. If person A has what person B wants then person B can offer a sufficient amount of the commodity which serves as a medium of exchange knowing that person A will want that. Then person A can then go to person C and trade the commodity for what person A really wanted all the time.

In this way trade was made so easy that cities became possible, specialization became practical, and government inevitable. This was the age of agriculture. The great majority of people lived and worked on family farms and pastures. Only a small percentage lived in the towns and worked at other things. This meant that relatively few things were traded. Most things people used they or their families made for themselves. Since so few things were traded, most people were experts on the things they traded, so it wasn’t easy to fool the person you were trading with. But there were others who didn’t want to trade. They wanted to take, by force if necessary.

Someone had the bright idea to mint coins to provide standardized units of the commodity metal. Each denomination of coin was to have exactly the same amount of metal and be of the same purity. Thus trade was simplified and increased where coins were available. In fact, the monetary units the coins represented became a means of indicating relative worth for otherwise quite different goods. ‘That is worth three coins while this is worth five coins.’

Banks were invented as a safe place to store one’s money if one could not afford strongboxes and guards. One could write a message to the banker to give some of one’s money to someone else and the check was invented. The bank could issue pieces of paper that represented a certain number of coins each and the banknote was invented.

It was while this development in the physical features of money was taking place that the concept of the ‘account’ was born. If one deposited gold coins in a bank, the bank would record in a ledger that the deposit had taken place. When one returned to the bank to get some of the coins, one might be given other coins of the same weight. The coins were all supposed to be the same, so it shouldn’t matter exactly which coins one were given, so long as one was given the same number of that kind of coin as one deposited. The record of the number of coins deposited and the number withdrawn was the account.

From the depositor’s point of view, the money was just a set of records. That meant that it was possible to create money which did not physically exist. For example, if a bank had 100 gold coins deposited by 5 people at 20 coins each, it could loan out 20 of those coins to a sixth person. Then each of the original 5 would have 20 coins each and the borrower would also have 20 coins for a total of 120 coins. But the number of actual physical coins would still be just 100.

So long as all 5 of the depositors did not withdraw their money at the same time, this ‘sleight of hand’ in the accounts would do no harm and the effective amount of money in the economy was increased. But sometimes, if the bank loaned out too much money or if the borrowers were unable to pay off the loans, then the bank would fail and the amount of effective money in the economy would drop suddenly.

I hope that all this has been only a review for all of you. I’ve given it just to get you to remember the circumstances of money’s development. As you can see, the commodity money of 8,000 years ago and the money in a bank account are still fundamentally the same thing, just in different forms. A trader from 8,000 years ago would quite understand that you were giving something to another person in exchange for what they gave you when you wrote that check to pay for it.

So the question I want all of you to consider is what do all these monies have in common? What characteristic do they all share? If you cannot answer this question correctly, then you haven’t been paying attention since the transition,” the young man smiled cheerfully.

There was a general murmur in the class of people saying, “POMs, they are all POMs.”

“Yes,” he smiled. “They are all physical object monies. They are all either physical objects (commodities, coins, paper) or represent physical objects (accounts). That was the easy question. Now the hard question. What difference does that make? What is it about physical object money that matters?”

Silence. Finally a tentative, “People can steal it?”

“All right. Yes. That is something that matters. If a thing is a physical object and usable as a money, then it can be stolen. Can our current money be stolen?”

“No,” in a chorus.

“Why not?”

“Because it isn’t a physical object?” someone ventured?

“That’s true, but many POMs also exist in computer accounts just as our money does, yet the money in those accounts can be stolen. There is some other characteristic of POM money that is different from our money so that our money cannot be stolen and POM money can. What is that characteristic?”

“You can’t give our money to someone else. You can give a POM to someone else,” Oscar ventured.

“Very good, Oscar. Yes. POMs are transferable from one person to another. With our accounts, the money cannot be transferred. If money cannot be transferred, it cannot be stolen.”

“Wait a minute,” Niall interrupted. “If money cannot be transferred, how can it be a medium of exchange? That doesn’t make sense.”

“Would anybody like to take that question for me?” the instructor asked. “OK, Natalie, have a try.”

“My two girls sometimes didn’t want to share their toys even when they weren’t playing with them at the time. So I would offer each a reward if she would let her sister borrow the toy for a while. That way, each girl gave up something to the other. They traded. The rewards I offered were the medium of those exchanges.”

“But they each had a toy the other wanted to play with. They could have traded without you,” Niall pointed out.

“People don’t have to use money at all. They could use just barter,” Natalie shot back.

“People, we’re drifting. Let’s concentrate on why a person gives up ownership of something to someone else,” the instructor put in. “D.W., can you help us?”

“If I have something you want and I give it to you, what do I get? With our money, if the thing benefits you, I get money. I’m getting paid for whatever it is. I am trading the item for the money. The fact that the money doesn’t come from you is irrelevant,” D.W. finished triumphantly.

“But that isn’t a trade. You aren’t exchanging anything with whoever you gave it to. The payer gives you money but you didn’t give him anything,” Niall felt on firm ground.

D.W. persevered. “From my point of view as the producer of the item I’m giving up something to get something, and so for me it is a trade. For the person who buys that item (assuming it was a luxury item) they also give up something and get something. They give up money and get the luxury item.”

“But the person who produced the item isn’t trading with the person who consumes the item. They’re each trading with the Payers,” Niall maintained then thought again, “No, wait, the Payers aren’t getting anything out of this. They aren’t trading. There isn’t really any trade here at all.”

If there isn’t any trading,” Clayton said, “how come all those produced items keep getting into the hands of other people? How is it that I produce something and give it to others and other people do the same thing all over the country? It sure looks like trade to me.”

The instructor held up his hand. “How many parties are involved in a trade, Niall?”

“Two, of course. What else could it be?” Niall replied.

“Wendy, how many parties are involved in a trade?” the instructor said, turning to Wendy.

“In a POM there are two parties to a trade involving money, though there may be many individuals involved. In our economy there are always three parties involved in any use of money. In a POM economy the parties are the buyer and the seller or, put another way, the producer and the consumer. In our economy there is the producer, the consumer, and the Payer. Our economy has three-party trades,” Wendy subsided with a somewhat surprised but happy look on her face.

“Niall, what is the function of a medium of exchange, what benefit does a medium of exchange provide for a society or an economy?” the instructor said turning back to Niall.

“A medium of exchange makes trade easier,” Niall replied, shrugging,

“Go on.”

“It lets people specialize. It allows people to do the things they are best at rather than having to do what everybody else does.”

“Would you say that in our economy goods are moving freely from those who produce them to those who consume them?”

“Well, we all ate breakfast this morning,” Niall grinned.

“When you worked, did anyone tell you what to produce or how you had to produce it?”


“So if we don’t have trade, how are these things happening? You’ve said that you weren’t forced to produce. Why did you produce?”

“I wanted self respect. I wanted to be considered important. I didn’t want people to think I was a slacker. The money was nice, too,” Niall admitted.

“So you were getting something back for the benefits of the work you did. You worked and you got rewarded. Does that sound at least similar to a trade, from your point of view?” the instructor was closing in for the kill.

“Well, I always thought of trade as being between two people, not three.”

“But when you bought things back before the transition, how often did you actually give money directly to the owner and how often did you give it to someone else? Weren’t those cases in which you gave it to someone else cases of three parties, the owner, the clerk, and you?”

“But the title went from the owner to me. The clerk wasn’t involved in the transfer. Or at least the clerk never owned the item,” Niall’s rear guard battle.

“Ah, but the payer never owns the item either. But wait, let’s look at this in another way which might make it more acceptable. Perhaps if you thought of yourself as trading with the society as a whole. You give society the fruits of your labor and society gives you some of the fruits of other people’s labor in return.”

“But,” Niall said, “Society isn’t a person. It has no mind. It owns nothing at all. Individuals own things. There is no trade between an individual and society.”

“All right,” the instructor laughed, “for some people looking at it that way makes the idea easier to grasp but something tells me that it’s just possible that you aren’t one of those people. So, let’s avoid the word ‘trade’ since that seems to be a stumbling block. Niall, would you agree that at the beginning of the day all the property in the economy belongs to a set of people and at the end of the day some of that property belongs to people who didn’t own it that morning?”

“Sure. That’s obvious.”

“Would you say that this change of ownership was forced in some way? Would you say that it came about as a result of coercion?”

“I haven’t seen any,” Niall conceded.

“Class, do any of the rest of you know of any case where property changed ownership as a result of force or coercion?”

There was a general shaking of heads. Oscar said,” I know there are robberies and things are stolen sometimes. Do those count?”

“Did ownership of the property change or was it just the physical possession that changed?” the instructor asked.

“I guess those are just changes of possession rather than changes of ownership,” Oscar agreed.

“In fact,” the instructor said, “the possession of those items, now that they are reported stolen, can constitute a crime. It is very difficult to account for possessing property you don’t own, especially if that property is stolen.”

“So, Niall, all these changes of ownership should be called what? We can’t call them ‘trades’, you say, because person A and person B are not exchanging goods with each other, alone. What, then, are these changes in ownership? They aren’t robbery or theft because, in those cases, ownership doesn’t change. They aren’t examples of charity because the people who give are getting something as a result of their giving.”

“I don’t know,” Niall replied after a pause.

“Could we say that whatever they are, they correspond to trade in a POM economy. Ownership changes in a POM economy by trade and ownership changes in our economy by this, shall we say, ‘tradelike’ activity that involves three parties. Now in our economy there are actual barter trades which involve only two parties, so there is some of what you can comfortably call trade but the vast majority of transfers of ownership involve the Payers and thus are three-party interactions.”

“So, to get back to our points. One significant way that our money and POMs differ is that POMs are transferable and our money is not. There are several consequences of this besides the fact that POMs can be stolen and our money cannot. Can you think of any?”

“The only way to get our money is from the Payers. You can get a POM from anybody.” said Clayton.

“Right. So what? Niall, what difference does that make?”

Niall was a little taken aback, paused, then had an idea. “The Payers control our money because only the Payers can give it to you. POMs can’t be controlled so long as there is currency or coins or whatever. You can’t prevent people from passing their money to whomever they want regardless of what they’re buying. You can make it illegal but you can’t stop it. That’s why all the POM nations have black markets and organized crime.”

“That also means,” Clayton said, “that so long as the Payers are moral, our money is moral, since you can only get it by doing moral things. Since a POM is used for all kinds of purchases, both moral and immoral, a POM must be amoral.”

“Now wait just a darned minute!” Niall barked out. “Only people can be moral or immoral. You can’t say that some physical object is moral, immoral, or amoral. It’s just silly.”

“Yes, Niall,” Clayton said quietly, “Perhaps I said that poorly. Payers use our money to reward good behavior. People use POMs to reward all kinds of behavior, much of it bad. Thus the Bible says that money is the root of evil.”

Oscar spoke, “First Timothy, chapter 6 verses nine and ten, ‘But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.’”

“I wonder what the Bible would have said about our money,” Wendy mused. “I think it is the root of much that is good among us.”

“Class, we’re wandering,” the instructor said. “Back to consequences of money not being transferable. So far we have that it can’t be stolen and that it is controllable.”

“People don’t try to cheat you when you buy things. We don’t have all that misleading advertising and planned obsolescence, bait and switch and so on,” said D.W. “They know they can’t get money from you, so they don’t need to fool you and they don’t try. In a POM economy you only have to fool some of the people some of the time to make a fortune.”

“Isn’t that just another form of theft?” Niall pointed out.

“Yes, but we’d been talking about theft by taking rather than theft by fraud.” D.W. countered.

“I know. I know,” said Leyden. “There is no alimony or child support or property settlements in a divorce. When a couple get married, the money he earns stays his and what money she earns stays hers, even if they get a divorce. A girl can marry for gifts but she can’t marry for money,” she laughed. “Back when we were a POM economy there were terrible court battles over how much of the couple’s money each would get. Some girls would marry rich old men and divorce them a year or two later and get a lot of money from them.”

“Okay. Well done, Leyden,” the instructor said. “That is a major difference. Money belongs to individuals and not couples or companies or clubs because it’s not transferable. If two people could share an account, money paid to one could be spent by the other and that would be a transfer of the money. Therefore, we have no joint accounts of any kind for anybody. POMs, on the other hand, can and do have joint ownership of money from not only two, as in a marriage to thousands, as in a club or a corporation.”

“Can you think of any others? There is one that is a real biggie.” The instructor looked around, especially at those who had not yet spoken.

“Did any of you ever work in a bank?”

“Oh, I know, credit, loans. You can’t have loans or credit,” Natalie said, excitedly.

“Niall, why can’t there be loans?’ the instructor asked quickly.

“Because a loan is a transfer of money from one person to another,” Niall shot back.

“But what about credit? Why is there no credit?” the instructor had a gleam in his eye.

“Because… well, let’s examine the situation. If you wanted to buy a luxury the owner could just give it to you, but that would be a gift, not credit. If the owner said ‘Take it now and pay for it later’ the ownership would not be transferred until the item was paid for, so there would be no credit in that case, either. Since the transfer of ownership only occurs when money is deducted from the buyer’s account, and since the money will not be placed there until the benefits are known, you can’t actually buy anything until you have all the money,” Niall sat back rather pleased with himself. The instructor looked at Niall with a grin and said,” What about if the payer gives you the money now and says you can earn it later?”

“That isn’t legal, is it? They were telling us in another class that the benefit must exist or occur before payment and we have to record what that benefit is and how the work done contributed to it with the payment. So that would be against the law.”

“Class, is what Niall said true? Is it illegal?”

You could almost hear crickets chirp as the class froze into immobility, hoping not to be called upon. The silence lengthened. Finally, Wendy timidly raised one hand just a little.

“I don’t see how it could be illegal for the payer to give you money. The Payers are making judgments. There isn’t any law about how the Payers must pay because if there were it would be Congress making payments.” Then her hand was clutched in her lap.

The instructor just looked at the rest of the class. More silence. Finally Niall raised his hand and was recognized.

“I think I was wrong. I agree with Wendy. I mean, there couldn’t be a law telling the Payers how to pay. If there were, then those who made the law would be the Payers. Besides, the Payers could just ignore the law and it wouldn’t be enforced.”

“Niall, I am impressed. It took me years to understand that point. There can be no law controlling Payer payments, because no such law could be enforced. Therefore, all payments the Payers make, no matter how outrageous, are legal. It isn’t the law that restrains and motivates Payers, since the Payers, by the way they pay, control law enforcement. It’s having to live among the general population at the bottom of the social class pyramid that keeps Payers in line.”

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