The importance of circulation in a monetary system is nicely illustrated in this story, on the value of circulation of money.

In a small East European resort town bordering Russia, a Russian oligarch came to the only hotel in town and wanted to examine the facilities in the hotel before deciding whether to hold a meeting therein or not.

The Hotel Manager demanded and received a 100 Euros note as a security deposit for giving him the keys, to which the prospective customer agreed. The Hotel Manager immediately sent the 100 Euros as part payment of his overdue bill to the butcher requesting him to resume supply of meat. The butcher in turn immediately paid part of his dues to the sheep farmer calling on him to resume supply of sheep. The sheep farmer in his turn used the money to pay a part of his dues to the feed supplier requesting continued supply of feed Now the feed supplier was able to pay part of his dues to the farmer to enable continuous supply of grain and hay. This farmer was now able to pay his Tractor mechanic who was then quick to pay his favourite ‘call girl: who in turn paid her dues to the Hotel to enable her to continue to entertain her clients there.

By the time the Oligarch came back to the Hotel Manager to demand the return of his deposit, as he did not find the facilities satisfactory, the Manager was happy to return the 100 Euros which, in this short time, had restarted the stalled economy of the town by its circulation:

Clearly it is the circulation of money that makes the world go around and keeps the economy Healthy. Interest is a human construct operating in a system as per Man made Laws, which as per Man made Laws, which in this case, are not in conformity with Nature’s Laws, which everything in the Universe has to follow to avoid catastrophic failure. Laws made by Man require Man to lay down rules and procedures to direct Man’s efforts to detect, apprehend, charge, prosecute, sentence and punish violators. As detection is not certain and punishment is thus not inevitable, we find that such laws are often violated with seeming impunity asmost people feel free to ignore them whenever that seems to suit their purpose. (Hence, the implicit 11th Commandment – ‘Thou Shall NOT get caught’).

But Nature’s Laws have no tolerance for people’s disobedience, their enforcement. is automatic and without exception, leading to an appropriate loss or punishment when contravened, even if at times not instantaneously. Such absolute right to obedience of Nature’s laws ensures that right results are obtained only when behaviour conforms to the Law.

Hence, the story about a man who, not believing in the law of Gravity, jumped out of the upper window of a 100 storeyed building and proclaimed he felt fine even as he fell past 99 storeys, only to be proved resoundingly wrong as he hit the ground a little later!

If instead we had a system that recognizes money as a representation of the value of some asset or effort (e.g.: – embedded Labour, Energy, Water, other resources, and Time) and thus, as a workable medium of exchange between a variety of products and services, and as a scorecard to keep track of and facilitate transactions and allowing for settlement thereof, then money would reflect the real value of the assets it can be settled for. Also, if the system allowed for devaluation of money in a steady and transparent manner, and not generate any ‘Interest’ thereon, thus ensuring that the absurdities of compounding interest would not arise, then there would be no reason for ‘Busts’. The true measure of something’s worth is not only the Labour, energy, water and other resources embedded in it, but also, the time, the hours of work, and the time it saves you, so that you can enjoy more leisure or do more work. (See – ‘SWADESHI – self-sufficiency/ protectionist policy’).

‘Money’, is of value only when it is in circulation. Money held as jewellery, gold and unutilized lands would become like stagnant ponds that are soon covered by slime and become of little use for adding value to life. Circulating money encourages wealth creation, like flowing river water generates power and wealth through irrigation and also, purifies itself.

But ‘Money’ is not a substance by itself, but only a score card, a way of keeping track of how much people are owed or owe at any time. We thus, today don’t need a Bank’s paper money. We only need a flexible, efficient and stable means of keeping score. Now, if money has only such a tenuous link to reality, how does it work?

For over 100 years now, many people with a visionary grasp of economics (Silvio Gessel, Nicholas Georgescu Roegen and others) have noted that the ‘Boom and Bust’ cycles seem to reflect the rise and fall of interest rates rather than any shortages in supply and demand and that human exploitation was due not to private ownership of the means of production but to structural defects in the monetary system. They have suggested that the financial system be duly modified to bring the concept of ‘Money’ in tune with Nature’s Universal Laws, as it cannot be an exception.

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