DAY 20 – MONEY – DOUGLAS SHAW

Tackling South African Banking Malpractices

In order to understand banking malpractices we have to know what money is. If someone has a big house does this mean that tney necessarily have money? No – because money is not wealth and his wealth might not be reflected in the amount of cash he has on hand.

Money is a commodity that is exchanged for goods or services. Money is not necessarily debt either – if you maintain a positive balance in your bank account then it is not debt. Gold and silver used to be money and Treasury Bonds (a debt to the government) is close to being money because they are used by governments for transactions.

Notes and coins in the UK are only 2% of the money supply, i.e. it is only a small percentage of the total money in circulation. Most of it is the money in our bank accounts.

The amount of money in circulation is calculated according to lines of liquidity and coded according to how liquid it is, the codes being M0, M1, M2, M3 and M4.

If there is more money in circulation to pay for the same goods and services then the price of money rises, which is one of the factors in inflation. If the money supply rises then we are losing something.

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