Money has no value unless you spend it!
The Sunday Nation
Nairobi,
26 July 2015
Currency notes issued by the Bank of England have the following inscription: “I promise to pay the bearer on demand the sum of ‘X’ pounds” (where ‘X’ is the face value of the note). This raises the intriguing question of what exactly is one pound. The same can be asked of our very own shilling: what exactly is it?
Contrary to popular belief, money is not real. It is an imaginary quantity that we use for the purpose of exchanging goods and services. The money you are paid as a salary is just a number written on a piece of paper (may be on your pay-slip, or a cheque, or even a bank note) in exchange for the service you provided to your employer.
Thankfully, you can also exchange that imaginary number with some one else and get something that you need, say, a kilo of meat. Without this abstract quantity, you would probably have to do some work for the butcher so that he gives you the meat in exchange for your labour. But that’s assuming that he has something for you to do – if he doesn’t, then you’d have to do without meat!
If you really think about it, money has no value whatsoever until you spend it. It is what you spend it on that has value. The value we place on money is dependent on what we think we can buy with it.
When you hear that some one has won, say, Sh10 million in some promotion, your mind immediately begins to think about what you’d buy with than kind of money – for some people it is car, for others it is a house, and yet others it is stock for a business.
Currency notes and coins are not money! They are just one form of representing it. In modern economies, there is a lot more money than all the notes and coins put together.
For example, according to the most recent Central Bank of Kenya Monthly Economic Review, there was Sh220 billion circulating in the country in the form of currency notes and coins in April 2015.
But, the total deposits in banks was Sh2,456 trillion. In other words, currency notes and coins represent only 9 per cent of that money. The rest is just numbers written against people’s names! After all, most of the money was not taken to the bank in currency notes – if you are like me, NONE of yours was deposited in “hard cash”!
Nevertheless, I have heard rumours that some crooked government officers have taken to hiding their stolen loot in cash in their homes: the idea being to avoid raising suspicion with fat bank accounts. But I wonder what will happen when (not if) we change our currency notes and declare the present ones unusable. Remember: this is a constitutional requirement!
 |
 |