that bring comfort and pleasure to us. Others spend money to seek personal
satisfaction—perhaps through impressing others, by showing off an expen-
sive new car or watch. Money has become so important that people fight
over it, and hate and love because of it; unfortunately, some would be will-
ing to kill for it. It is amazing to witness all this respect and admiration for a
piece of paper that may be green, red, blue, or even have an impressive array
of colors and designs. This piece of paper may only be recognized and hon-
ored in the place it was printed and issued. Not all currencies in the world
are as well-known as the major currencies, which represent important
world currencies in great demand, suchastheU.S.dollar,theeuro,the
Japanese yen, or the British pound. Money cannot reproduce in the way
that ‘‘money experts’’ have been leading us to believe. If one seals one’s
money in a jar for two years and returns to open the jar, one will find the
same pieces of paper—except in most cases the paper will buy you less than
it did two years before. It is also fundamental to understand clearly that we
cannot eat or drink these pieces of paper called money. However, we can
use the money to buy food from those who produce it, so that they can take
that money and buy their needs—which may include clothes and medicine
in addition to the items needed to produce more of that food. Money is not
anything but a medium of exchange—a measuring device.
To realize the American dream of buying a house for which one has
insufficient capital, one can go to a banker to seek financing. The applicant
fills out an application and passes a few due diligence checking procedures.
After appraising the value of the house based on the price at which the most
recent sales in the neighborhood were concluded, the banker will arrange
for the applicant to get the money. The bank draws a loan agreement that
essentially states that it is renting you the money at a rental rate called the
interest rate, to be paid back in installments over an agreed-upon number of
years. As we learned in Chapter 2, interest rate is the cost of (the price paid
for) renting the money from the bank. The bank does this mechanically, re-
gardless of whether the deal of buying the house makes economic sense. A
buyer might have expected the banker to advise him/her as to whether he/
she should proceed to buy a house because it makes economic sense or rent
a similar house or apartment because of a prevalent real estate bubble being
experienced in the community. That does not happen, because the banker is
interested in getting the customerto rent that money in order to make
money for the bank. We realize that this scenario does not happen in most
cases, because the world is full of honest and decent bankers and wonderful
people. Unfortunately, at some time or another all of us can be blinded by
the prevailing culture without stopping to think.
As to the ‘‘culture of making money,’’ many have forgotten that there is
only one entity that can make (i.e., manufacture, print, or coin) money: the
Money and Its Creation 85