Making It: How to Create Money

What a crazy, confused world we live in! I recently read an interview with one of the leading democratic contenders for the White House. This person proposed spending THIRTY TRILLION dollars on social programs, should he get elected. When the interviewer asked, “How do you propose raising that kind of money?” the person replied, “The government can simply print all the money it needs”.  I was stunned at the naivete and ignorance of someone running for high office. This is scary!

Those of us who understand the language of money know that no one “makes” money by printing it, whether it is an individual or a nation, unless he’s a counterfeiter. Venezuela’s dictator Maduras just halted his experiment of printing money to help in their financial crisis because it resulted in an inflation rate of more than 20,000%. Germany tried printing money to pay for their World War One reparations payments, but by doing so it drove the inflation rate to more than ONE MILLION percent. You can go online and view pics of German people pushing wheelbarrows filled with German money notes to purchase one loaf of bread.

Printing more money to solve economic problems is…well, in the words of that great comedic philosopher Gomer Pyle, “Dumb, dumb, dumb”.

Making money demands an exchange, because money represents value, whether in services or in goods; thus, if there is no exchange, money cannot be made or earned. That’s why the only way to “create money” is to have new businesses started or existing businesses to expand. Money is created when goods and services increase and there is a demand for those goods and services.

When freestyle rock climber Alex Honnald wants to climb a rock face, he must exchange his physical energy, mental preparation, and risk management skills and time to be able to scale the rock. He can’t “print” a climb. That would be like photo-shopping a picture of yourself on a rock in place of Alex and expecting people to value you as a professional rock climber. It might be novel for a prank or conversation, but it would be dishonest if you really believed it. It would be a “fake” and no one would give you “credit” for the climb. Do you see the parallels with finances? To find value in the climb, Alex (or you) must exchange something to make it to the top.

People who think they can just print more money are implying one can “print success”. Imagine printing a college diploma without earning it? Or printing a picture of a business and calling yourself the CEO? Or perhaps printing a picture of a luxury car with yourself at the wheel? Does that mean you are a college grad, or a CEO, or the owner of a luxury car? Of course not. In the same way, to “make” money demands earning it by exchange, not faking it.

When a person lacks money, he or she must exchange what they DO HAVE to attain the cash.  It’s called “sweat equity” or “mental equity” for a reason. Effort, labor and accomplishment create all wealth. If a writer “creates” a book, that book can become an engine of wealth production. A construction worker can pound nails, build walls or lay brick and “create” a house, and that house can be exchanged for money.

Once a person has cash, that cash can be exchanged for stock in a business or exchanged for future profits in a start-up or exchanged for a bond that is an investment in a business or municipality. These are called investments, but they are simply exchanges that have the potential for greater wealth creation.  Remember that no wealth can be made apart from exchange or investment, which is simply another form of exchange.

Those who think otherwise will only bankrupt themselves and anything they control. It ALWAYS costs something to make money: Time, energy, thought, accomplishment. The important thing is to find the best exchange rates so you can get the most value from what you have to exchange. We’ll explore that subject in another blog.