Money: Staying mindful of how the State regulates society

The State regulates society via the following:

1. Via money;
2. Via a payment system;
3. Via profit; and
4. Via taxes.

Via money …

Gold, silver, currency, bank notes, etc., are not money. Sounds like heresy, but in actuality, these items are derivatives, representations, of real money. Real money is the energy released and used in the creation of value. The time spent and the sweat created when harvesting food, writing a book, or building an infrastructure is the money. Gold, silver, bank notes, etc., are attempts to put the exercise of energy into some material or corporeal form.

The State creates a currency for the encapsulation of energy. Once encapsulated, the energy can be transferred, accounted for, and taxed. The State has created an inorganic mechanism for extracting your energy.

The encapsulated energy can be traded for goods and services. The State ordains by law and coercion by force that only encapsulated energy can be used to trade; can be used as the underlying asset for trading vehicles. By edict and force, the State creates a market for the trade of encapsulated energy.

Money markets, defined in their broadest sense, are the creation of the State. By making money markets necessary for the common man’s survival, the State regulates society.

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Via payment system …

A payment system is necessary for exchanging value. This system needs the merchant trader on the purchasing end of the exchange of value to trust the merchant trader on the selling end. The value of their trade has to be vetted so that each participant in the trade is satisfied that their trade is properly settled.

The State regulates society via the payment system by providing the rules and regulations for using the system. The degree of regulation is contingent on the State’s economic philosophy i.e., a self-regulatory scheme or heavy, direct government regulation. In addition, each node in the payment system, i.e., banks, settlement and clearing companies, depositors, etc., pays the government a tax on the profits it earns.

Via profit …

At first blush, one may not think of profit as a regulator on society. Pursuing profit is a good thing because profit amounts to trader income. Income is necessary for the trader’s personal and commercial sustainability.

The State encourages the pursuit of profit for practical reasons. The more profit the trader makes, the more income available for taxation. The more profit a trader makes, the greater the capacity for consumption. The more a society consumes, the greater the demand for its government’s currency. Profit and the pursuit of profit benefits the validity of the State’s currency.

The State regulates society’s behavior by encouraging the pursuit of profit.

Via taxes …

Finally, the State regulates society via the government’s taxing power by creating incentives to produce and pursue profit. The level of tax rate figures into the trader’s decision matrix as to where capital should be allocated. A high tax rate on profit means that certain commercial activity will not be financed because expenses underlying a certain going concern and the time horizon for generating and sustaining profits may not justify the tax expense.

Trader mindfulness of the true derivative trade …

How does this exercise impact the trader? The trader should remain mindful that whether they are trading currencies, bonds, options, futures, etc., the true underlying asset is the society; the political economy. How the State regulates society will have an impact on the value of the overlaying commodities, currencies, and securities.

Alton Drew

2 April 2023

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