Money is created..

Energy can neither be created nor destroyed; it can only be transferred from one form to another — says the First Law of Thermodynamics, which also states the same fact in other words — the sum total of all the energy and matter in the universe remains constant. An analogy can only be drawn partly between energy and money. Energy can be transferred from one form to another. For example, heat energy can be transferred to kinetic form. The same can be said about money. We can convert one form of money into another. We can convert Dollar to Yen, Yen to Euro, and so on. But, can we create money? Yes, of course. Money can be created and destroyed unlike energy — this is one of the most fascinating facts about money. if we had not created money, then where did trillions of Dollars come from? A hundred years ago countries did not have trillions of Dollars of GDP. Also, we know money has been destroyed and we know this since most of us have evidenced the financial crisis the world faced in 2007–2009. In two years time America lost nearly $14 trillion net worth of household wealth.

I always wonder how we can keep on creating money perpetually. Before I talk about creating money I need to understand what money is — any medium with which we can buy or sell goods or services — in a layman’s definition. So it’s a medium of exchange in the first place. (I am sure economists must have defined money in terms of its other functionalities and characteristics). So what are these goods or services? I can think of a house, a broccoli crown, a cell phone or an Uber ride. Wading further, how are these things manufactured and what are these composed of? A house may be composed of wood, bricks, concrete, etc. A broccoli crown comes out of soil using water and sunlight. A cell phone is manufactured using hundreds of other components made of plastic, metal, glass, lithium-ion and what not. An Uber ride was provided by a person (P.S: Driverless taxi service was still being tested at the time of writing this article.). Each and every ingredient inside these goods and services is a resource coming out of nature. We are mining minerals, cutting trees, using land, building components, burning coal and we are doing so many other things to manufacture goods and services. We are extracting resources and we are creating money. We are extracting more resources and we are creating more money. We as humans are growing in numbers and we need these goods and services and so we need money. The more we are, the more money we create for us. So essentially money is a form of natural resources. The more we extract and use natural resources, the more money we create. (Let’s not talk about the ‘sustainable’ resources such wind energy, sunlight, etc. for a moment.) We will keep on extracting resources out of mother nature until they are over. That may be a point when we stop creating money.

I used to wonder how a country’s GDP grows year over year. Now I know a country extracts resources and creates money. Moreover if a country is like America, where there is no dearth of resources, so much so that its people have been living a ‘pampered’ life when compared to a third world country. The abundance of resources lead to bigger houses, bigger cars, bigger portion of food and so many other things bigger in size. No one thought of conserving resources. This was human nature and we did not think of its long term consequences. Corporations were formed manufacturing more goods and services and selling those goods and services to create money contributing to GDP.

In creating money we realized we are doing something that will cause to deplete all the resources required for the existence of humankind. We have already done so much harm that some of the other kinds have already ceased to exist and some are on the verge. We need to save the earth in a state that it can support life as it has been doing for thousands of years. So should we stop creating money. I think yes. But this may not be the only solution to save earth. We need to think of creative ways to create money. We need to think of sustainable ways of creating money. How do we do this?

The very first thought which comes to all of us is to curtail carbon emission. Of course there are few ways out there of doing this. But who wants follow those ways, specially when there is an initial expense involved in those methods. Corporations will never be willing to spend this extra cost which may bring their operating margin down, implying lesser interest by investors in the company, lower market value, and so on. This can only be achieved by governments’ constant interference with policies and regulations.

There is another way governments can play a major role in saving the earth and its resources and that is by curtailing money creation. Yes, if more money means more resources, why would the inverse not hold true? If we control how much money is being created and keep the supply just enough to sustain the economy and jobs, then we may be able to control the consumption of resources, thereby having a lesser impact on the environment. GDP may not grow with the same pace as it has been growing. But we have to start behaving and seeing things for the future. Quarterly results and near term goals is slowly killing the world as we know it. We need to preserve it for our children, their children and the generations further.

Another way of creating less money is us asking for a lesser number of goods and services. Why do we need so many goods and services in the first place? We as humans have created our lives so much complicated that we do need one good or one service to complement the other. When we need a cell phone we also need a cover to protect it. Restaurants make money by serving food and we eat that food and pay. It may not be so simple as it sounds in terms of money, especially when a whole cycle of transfer of money is involved electronically. We may use a credit card and the credit card company charges a fee to its merchant for facilitating credit card payment. Another possibility is that we may order the food at home and another company may deliver the food. Every business involved is taking a share of the money spent and generated here. Every good and resource got converted to money. Food was converted to money and sold. Service, gratuity, food transfer, packaging, every bit was converted to money. We created money in every step.

We need to think of innovative ways on how to create less money. One simple way is to conserve and be a minimalist. Some of us are even doing this to save nature. Question is — are we doing enough? We may not use some of the goods and services we may not need for our living. I do not need a fidget to relieve my stress or a pair of shoes for hiking, another pair for running and yet another pair for going to a party. The more we need, the more money we will create and the more resources we consume, only harming the environment. Not only we are harming the environment by manufacturing more goods and services, but we are also producing equal amount of waste to pollute the earth — the earth which is not just our habitat, but a habitat of thousands of others. We, as humans, should definitely start thinking towards creating less money, or at least controlling how much money we create, the same way we are thinking to emit less carbon.