Archive for

What Money is and is Not – Part 1

Few people in our technically sophisticated western economies realize that the Earth and what we call “mother nature” provides the great abundance of all that we consume in the form of minerals, plants and animals. The Earth has an annual growth cycle for plants and animals; and we harvest this produce to provide for our near future. How we share, or refuse to share, this natural produce and the Earth’s mineral resources, has created the misery and poverty that surrounds us.

Human society did not and cannot start on a barren planet with only mineral resources. We require large surpluses of food and complex organic materials for clothes and shelters, provided to us for free, but for the labor of processing. And yet we divide and consume our portions in such discriminatory fashion, that wars, poverty and social unrest plague our planet. We suffer recessions, depressions, wars, economic domination, and periodic social chaos, because we have invented nations, exclusive societies, and exclusive economies; and empowered them with socio-economic alliances that feed off dominated nations and societies; enforcing discriminatory laws and alliances with police, courts, and military organizations.

As a rule we are almost all pre-occupied with the desire to amass wealth in the form we call money. We hope to receive more of the Earth’s bounty even if others receive less. At the same time, we are striving as various politically independent societies for the social equality that eludes us for various reasons, many of which are tied to our belief that there is insufficient money available in our society to solve our social problems. We also believe, incorrectly, that our individual future security depends very much on the amount of money we will acquire, because we attach intrinsic value to money that does not exist.

The subject of money has always gotten a lot of attention. If we do not dwell on money personally, we certainly do discuss it with family and friends. We relate a person’s social status to the quantity of money that he or she possesses. But money, as we are taught to understand and desire it, is an illusion, a socially destructive illusion.

There is no such thing as money or wealth, in the form of paper, plastic, or metal. These objects – dollars, checks, credit cards, gold and silver – that we call money, are really only transfer agents for what money really represents; and as transfer agents they have no intrinsic value. So what is this money-wealth we want to amass and control? It is Labor, more specifically everyone’s PRODUCTIVE LABOR. For human societies, Productive Labor is the only wealth in the universe! We consume the Earth and all that its environment provides; but only labor may harvest and transform the materials we consume. There is no other form of wealth; there is no other form of money than productive labor. The paper and plastic money we use is simply the exchange medium of productive labor. We know this when we exchange our labor for money (our paycheck), but we do not commonly realize that we can only exchange our labor-money for the goods and services of other people’s labor. That is, we barter our productive labor to purchase the goods and services of other people’s productive labor, by using money as the most widely accepted exchange medium.

To call money an illusion is to suggest that it does not exist, which flies in the face of reason, when anyone can pull a couple of dollars out of their pocket. The illusion is – our common perception that our paper dollars have value intrinsic to the paper itself, separate from productive labor. Every nation that distributes money, without regulating the quantity in circulation to reflect that nation’s total production of goods and services, knows the fallacy of such a belief.

Most accountants and economists will say that the idea of money as an exchange for labor is about 200 years old, and that their college courses taught them this fundamental fact. However, they soon forget what money really is, and join the rest of society in worshipping money in place of productive labor, and thereby support this illusion of money-wealth in place of productive labor wealth.

All of our physical acts are a form of labor. At work, at play, at home, at the office, on the golf course, volunteering for a charity, doing time in jail, all such acts are labor. Most of these labors are not suitable for exchange with others. Gossiping on the telephone or clicking through the channels of the TV is not to be compared with farming, manufacturing, teaching, etc. While many of our labors are directed toward fulfilling our personal wants and needs, these efforts are not rewarded with the labor receipt of money.

So the first great division in the concept of labor is that it is either socially productive or non-productive. Socially productive labor is that which can be exchanged for other productive labor or stored for future exchange and consumption. Even in the simplest society productive labor divides into two basic forms. First we have the labor necessary to sustain life; by choice or coercion we produce food, clothes and shelter. The second form of labor, also provided by choice or coercion, is surplus productive labor over and above the labor needed to sustain life. This form of labor is the chief reason we are able to develop and expand our civilization. Whatever labor we commit to producing goods over and above our immediate consumption, that will be traded with others for future goods and services, or kept for our own future consumption, is STORED productive labor. The control of productive labor and ownership of stored labor is the foundation of what we call wealth, and those who cannot acquire productive and stored labor to benefit themselves, help us to define poverty.

Our society has amassed a great deal of stored productive labor in the form of public buildings, schools, highways, railroads, bridges, dams, airports, homes, factories, office buildings, power plants, communication networks, etc. Much of this stored labor has been built up over several generations. Each succeeding generation has enjoyed the stored labor of its forbears, and built upon the stored labor that preceded it; creating the social resources we call our infrastructure. Besides our infrastructure we maintain significant, but shorter term, stored labor in our household appliances, and furniture, our automobiles, and many quality of life gadgets.

Our capacity to produce an abundance of goods, such that we are able to maintain significant surpluses of food, clothes, appliances, etc.; requires an instrument like gold or paper or plastic money that can remove ourselves and our employers from any need to barter our productive labor directly with other producers. By being paid a (universal) labor receipt, dollars, we may shop in the stores where much of our combined surplus is displayed and exchange our productive labor for other people’s productive labor. This has led to our treating “Money” as a lubricant of economic activity, in place of productive labor.

Consider labor in a complex society like our own. Unlike simple hunter-gatherer societies, our cities and towns are conglomerations of many and varied types of labor. Many people cannot directly associate their labor with the transporting and transforming of the many resources that comprise our labor economy. While others labor directly with raw materials in industries where their labor is rewarded for time spent at the job, not for the amount of goods produced. These limitations cause us to view our wages as something separate from the productivity of our labor. This also skews our value system for labor in general; it causes us to desire the reward of greater consumption for less production, without realizing that in the totality of our economy, more for one means less for another. It also causes us to grow up with an unnatural desire to receive the benefit of others labor, defining a successful person as one who receives very much in the form of labor receipts (dollars), for doing very little in the form of productive labor.

Money, in various forms, has been around since before recorded history. It performs three basic services for societies, each of which is only one form or another of Productive Labor. The first and most common use of money is as a medium for exchange, allowing us to work and exchange our labor for dollars that we then exchange for the labor-goods and labor-services that maintain our lives. Second, the long-term ability of dollars to act as an exchange medium is based on the dollar’s ability to serve as a unit of account. We set reasonably stable dollar costs for our labor and for the goods and services we wish to purchase. All of our productive labor, starting with raw materials from the Earth, to processing in various ways, to advertising and distributing for consumption, is related within our economy by stipulating the value of each phase of productive labor in dollar amounts.

This allows us to spend our paycheck in any manner we choose and still get a relatively equivalent return of goods and services from others labor, because we all accept and use the dollar to define the exchange value of our labor. The third service that money provides for us is that it is a store of value. If we do not need to spend our wages for immediate consumption and choose instead to hold those dollars for some time into the future, they will still purchase goods and services from the overall surplus, without loss of value.

Except for the effect of inflation or deflation, money maintains its exchange value for future productive labor and thereby becomes our primary store of value. This store of value is also why we worship the dollar rather than productive labor. We define our productive labor in terms of dollars, rather than define dollars in terms of productive labor. If dollars were always viewed in terms of the labor they represent, then when we encountered people who had millions of dollars, we could properly ask, from whom did they acquire that surplus productive labor?

The third function of money, as a “store of value”, is actually the source of the illusion of money representing wealth. Because of its – apparent but miss-understood – ability to hold purchasing power into the future, money is desired by everyone in place of continuous labor. If the amount of goods and services that will be produced in the future is stable, and if the amount of dollars available to facilitate the exchange of future goods and services is also stable, then our money can represent a store of value that can be exchanged in the future, for future goods and services. However, if the supply of dollars is changing; if the supply of goods and services is changing; if the demand for goods and services is changing; then the value of money is also changing. The value that can be stored in money has to do with our ability to continue to produce goods and services; and not in any esoteric wish or belief associated only with the paper or plastic money itself.

Historically, the most familiar money in the Western World was gold and silver, which came back into use in Europe and the Mediterranean area around the twelfth century, following the so-called Dark Ages. Although Roman Empire had coin-money to allow for more efficient internal trade and labor exchange, the Dark Ages reduced labor exchange to mainly local bartering, with very little exchange between diverse and distant cultures. The European Renaissance brought about expanded production (stored surplus labor) and expanded trade, which promoted invention and greater efficiencies that continue to this day. Today we have replaced gold and silver with paper dollars and checks, as well as advancing credit to consumers through credit cards and bank loans; allowing such debts to be repaid by printed dollars or checks that we receive as wages, or profits, or charity.

Without a universal medium of exchange, a cabinetmaker for example, wanting to sell his services to a corn farmer could not do business unless he was willing to take corn in trade. Unable to strike a deal, they could go to a barter style marketplace and attempt to find enough people with other surplus goods and sufficient needs to allow the farmer to exchange corn with others who had things the cabinet maker valued, in trade for which he would build cabinets for the farmer. In this manner, the farmer could barter his labor for the labor of the cabinetmaker. The pace and productivity of our contemporary labors would be greatly hampered if we had to exchange our productive labor in a similar manner.

Problems like this were overcome hundreds of years ago by designating certain commodities (gold and silver, for example), which were in limited supply and difficult to counterfeit, to be the medium of exchange. The marketplace would establish values relative to gold and silver for all commodities and services. In essence, and in fact, the amount of gold and silver that were exchanged in an economy yearly was equal to the amount of labor (goods and services) brought to the marketplace yearly.

The amount of gold and silver in circulation in such a society always equals the productive labor made available for sale by its citizens. If the amount of labor made available to a marketplace increased while the amount of gold or silver was static or declining, everyone would receive less gold and silver for their labor. But they would likewise be paying less for the labor of others, because labor barters for labor and gold and silver were simply a means of labor exchange. If the amount of gold and silver coming to the marketplace were to increase, people would ask more for the products of their labor, and consequently they would pay more for the products of other people’s labor. Although prices would change with increases or decreases in exchange money, such a cash marketplace would be static in the value of labor being exchanged, and not really inflationary or deflationary.

Since the total consumption in a society is limited to the total productive labor-goods and labor-services available to be consumed, the amount of exchange money available to facilitate trading can only partially inhibit or promote consumption in a cash economy. Exchange will occur in one manner or other using different kinds of money, or even direct exchange of goods without money. Even today, when people can barter directly, trading goods or services with others for different goods or services, they will do so without the use of paper or plastic money.

Although all nations have developed money-currencies to facilitate trade for consumption amongst their citizens, trade between nations requires that goods and services be bartered for goods and services. A reasonable balance of trade must be maintained, or nations will cease trading with those who produce nothing of barter value to the world economy.

To understand the relationship of productive labor and our paychecks, consider what would happen if all the farmers and manufacturers stopped working and went on government welfare, receiving a monthly welfare check to support themselves. For the first couple of weeks we would not notice much more than that the stores were sold out on some goods. By the second month there would be very little to buy. But since most of us would have government paychecks, we would be inclined to offer more and more of this free money for the dwindling supply of goods. As the government kept increasing the money needed to supply our paychecks, our dollar’s exchange value would drop rapidly because there would be so few goods available and so many dollars competing to consume those goods. Since no one would be doing productive labor our currency would decline to worthlessness; it would lose its ability to be a store of labor-value. Since we would no longer be laboring to produce goods and services to exchange with others, we would not need any form of exchange money. To consume we must produce, both today and in the future. Any medium that we choose to be called money can only be an exchange medium, allowing us to more widely exchange the fruits of our labor for the fruits of others labor. Money can only facilitate the exchange of goods and services; it cannot maintain or represent a value other than productive labor.

What if, instead of some of our citizens having to remain unemployed, we put them to work making widgets? Since they now have jobs we can assume that society will flourish because of full employment. But Widgets, by definition, are useless contraptions, and since they are useless, no one, not even widget-makers, will barter their labor to consume them. Therefore, these workers would be unable to barter their widget-making labor. It would have to be considered unproductive labor; no different than the welfare they were on before they became widget makers. Labor must be productive, it must accomplish or assist in the production of some social material goal. Simply having a job does not necessarily benefit the rest of society. On the contrary, as make-work projects and bureaucracies grow, they inhibit the success of our collective endeavors. Those who labor at unproductive jobs, like welfare recipients, must receive their sustenance from the contributions of others that do labor productively.

To define the notion of money as labor in a more fundamental way, consider the Earth and its resources. Minerals, gas and oil, water, trees, farm and pastureland, wild and domestic animals, etc., all were here long before us. Although we put dollar values on these resources, they are really without value. The value we attach to them comes from the many uses we have discovered for these resources. These uses have all entailed lesser and greater amounts of our labor to transform and control them, and lesser and greater amounts of our labor being bartered for the opportunity to consume the Earth’s resources.

Consider the building of a home out of refined wood products. Outside of its intrinsic value in the eco-system a tree in the forest has no value in any human society, because we have not invested any labor to create the tree, or to transform the tree into food, clothes, shelter, transportation or communication. To use a tree, we must first create a log. We do this by cutting down the tree and removing the limbs. Creating the log has required that we destroy the tree. Therefore, the value of the log is equal to the labor it took to transform it from its natural state as a tree. We now have to transport the log to a place where it can be refined into wood products. Our road building labor and our transport labor add additional labor value to the log – a log at the mill is worth more exchange-labor than a log in the forest. After we transport the log to a lumber mill, we destroy the log to create lumber and other products, adding more labor value.

When the uniform boards and timbers are transported from the mill to a building site and transformed into a home, the uniformity and availability of the lumber are destroyed. In transforming the free resource of a tree into a house, or many and varied other products, we have labored with the tree and the other resources on the planet. The total labor that has gone into manufacturing and transporting the parts as well as the whole is the cost that must be paid for with the buyer’s labor. Profit and interest on borrowed labor are the other costs.

When we get a loan to build a house, we are not paying for trees or oil or mineral ores (etc.), we are borrowing the labor of the loggers, transporters, mill workers, builders and the manufacturers of all of the parts and appliances that make up a house. All of these laborers are being supported by the surplus goods and services available in our society at that time, and we are in debt until we can return to society an equivalent amount of our labor in the form of surplus goods and services that we specialize in providing.

In our day-to-day economy, the continuing demand for lumber by consumers (i.e. their willingness to barter goods and services in order to consume lumber) causes the lumberyard to order lumber from the mill, which causes the mill to purchase logs from logging companies, which causes loggers to seek more trees to harvest. Substitute any other resource for this tree example and the same economic relationship applies.

This reasoning may seem to over simplify what appears to be a sophisticated and complex system of people and equipment at work. But it is important to realize that all of our machines, energy, tools and structures are products of labor, and only labor, applied to the free natural resources used to create them. Both in total, and in each minute part, all machines and structures, regardless of how complicated they may appear, and regardless of how many other machines and industries were required to create them, are only the result of our labor transforming the natural resources of the planet. There are only two ingredients in everything that we consume – material from the Earth and our productive labor. Our hands and minds are the means of transformation. Our food comes from our environment through the labor of farmers. Our clothes come from fibers made from animal, vegetable or mineral resources. The metals and minerals from which we construct buildings, machines, roads and bridges are taken from the environment. These materials were provided to us free. We need only invest the labor of transforming them to our needs.

A conglomeration of industries, built up over the years, gives the illusion that those industries, and their products, are only partially our labor, and partially something we do not generally understand. That unknown something is really only a different form of labor, labor from the past, which has been stored in roads, utilities, buildings, machines, tools, and technical knowledge. Stored labor gives us the opportunity to expand our industrial abilities by building on the past. If we use tools or factories that were provided by the labor of our ancestors, then we are increasing our standard of living by not having to invest our labor to produce those tools and factories.

Our standard of living today depends very much on the labor of our ancestors, as well as our own labor to maintain and expand it. No payment of what we call money has ever been made to the Creator for rent, purchase, use or abuse of the Earth’s resources. We consume the Earth without consulting a catalog, placing orders for goods, receiving invoices, and making money payments. The Earth is given to us, as is. It is only our labor, along with the Creator’s labor, which transforms resources into useful products. Paper and plastic money are just necessary tools to help us exchange the various fruits of our labor. The resources were meant to be free and available to those who have responsible needs. Labor was meant to be exchanged with labor for goods and services, or to be donated to those unable to offer any labor for the goods and services they require.

This article is being published in two parts due to its length. Part_2 should be available on this site now or very shortly. This article is taken from the author’s book “SOCIAL BENCHMARKS”.

Welding and Fabrication Engineering

As we know well, welding is an ancient art which is prevailing since the Bronze Age. It is the process used to join materials, usually metals or thermoplastics by melting the work pieces. The molten material is then allowed to cool and become a strong joint, with pressure sometimes used in conjunction with heat to produce the weld. Welding produces a secure, strong joint that cannot be compared with other methods. In today’s world, welding engineering has become an arising need in job market. Welding and Fabrication Engineering Technology is structured to support welding and joining operations. Here engineers pass plans and projects to mid-managements personnel who are supposed to carry out the planning, organization and delivery of manufacturing projects.

The major emphasis lies on developing skills needed to lead projects and interface with engineering and development teams. Welding and Fabrication engineering involves the techniques of utilizing welding and fabrication methods in an efficient way. Fabrication is an industrial term that refers to building metal structures by cutting, bending and assembling. The cutting part can be done by sawing, shearing or chiseling. The bending is done via hammering, press brakes or similar other tools. And finally, assembling is done via welding, binding with adhesives, riveting, or threaded fasteners. Fabrication and machine shops that use engineering techniques have overlapping capabilities, though they generally concentrate on metal preparation and assembly. Fabrication and welding engineering generally covers essential fabrication and welding skills like safety, engineering communications and teamwork.

Welding fabrication engineers make, join and repair metal parts for machinery and equipment such as motor bodies, trailer units, containers, truck frames and bridges. The fabricator is the one who employs or contracts out steel detailers to prepare shop drawings, which the fabricating shop will use for manufacturing. Manufacturing engineers will program CNC machines as needed. Welding is considered to be the main focus of steel fabrication. Initially the formed and machine parts will be assembled and tack welded into place, then rechecked for accuracy. In case if multiple weldments have been ordered, a fixture might be used to locate parts for welding. The welder then completes welding as per the engineering drawings. Special precautions might be needed to prevent warping of the weldment due to heat. This includes re-designing the weldment to use less weld, welding in a staggered fashion, covering the weldment in sand during cooling. Using a stout fixture and straightening operations after welding.

Composite Materials in Ships, Pipelines, Liners and Aircraft

One future problem, which has not sufficiently been addressed, is that of the fumes and smoke created when composite material burns. Composite material is a truly great human achievement in material science, however as we use this material in more and more places we need to be acutely aware of the risks and potential consequences of their use. One risk is that many types of composite give of poison ness gaseous compounds such as cyanide gas. Not all composite materials will do this, but some do.

Composite material has been a godsend for aerospace as the material is light and very strong. Boeing announced it’s forward-looking hope to sell 200 of the 7E7 aircraft in calendar year 2005. Already in December of 2004 Japan Airlines gave its commitment to order 50 Boeing 7E7 aircraft. Boeing has recently received a commitment from Continental Airlines as well for billions of dollars worth of aircraft purchases between now and 2009 to lock in a special price. The 7E7 is a little over half composite and is the first passenger airliner to contain this much composite material. Boeing through economies of scale is determining ways for robots to build the composite material to reduce costs in labor and to eliminate human error while standardizing perfect flawless manufacturing of less than one, one thousandth of an inch variance. This will allow a rivet free aircraft, save thousands of pounds and an unmatched smooth skin for absolute advantage in laminar airflows and reduction of parasite drag. Such precision has never up until now been achieved.

Composite material has also been used in pipelines due to its ability to go from hot to cold without the huge expansion and compression that exists with metallic pipes. With proper UV protective coatings it is the perfect material for such things. Boat hulls and ships with composite parts also can be great pluses and not have corrosion problems that occurs in salt water. Ship companies with composite component ships will find that their maintenance costs are reduced for corrosion control and the ships life will be increased. Metal fatigue will no longer be an issue either. Automobiles built with composite will be stronger and lighter, thus safer, longer lasting, more durable, better performance and better gas mileage. Bridges, structures, towers, antennas and buildings are all good uses of composite materials and often favored in the modern period. Skateboards, sporting equipment, mars rovers, street signs and flag poles can all benefit from the material characteristics of composite. Composite can also be manufactured on robotic assembly lines. Composite comes without the high costs of mining iron ore or precious metals.

Composite is an excellent material and makes a lot of sense really, but what about its other characteristics when it burns. What happens when a lightweight high performance 7E7 runs off the end of a runway and catches fire? What happens when a pipeline ruptures? Sure there will be less likelihood of sparks with such material but what do you do when there is? For instance landing gear hitting a fence and jet fuel leaking on hot engines? Will the passengers be safe once the fire starts emitting poison gasses? What about a pipeline made of composite material, which ruptures from an attack my International Terrorists? What about an auto accident with another car or truck with a steel bumper providing the sparks or a battery lead meeting up with fuel line rupture? Cars in accidents do not usually burn to the ground, but it does happen. Any attempt to rescue victims could result in death by cyanide gas, first responders will need to suit up prior to rescue adding to the critical time period to save the occupants. No one knows this better than US Military Airport firefighters who are trained for such things. The military has learned the hard way that new composite materials although with all their advantages also have some severe and potentially fatal characteristics as well? Ships with composite have incredible advantages to service life and maintenance costs, but a fire aboard would be difficult to fight and if out of control could be lethal to all aboard.

We need to study how to use material sciences to prevent the toxins produced by burning composite. A solution needs to be available which can be mixed in with the material during manufacturing and a coating applied in the hardening process along with special after post manufacturing ceramic coats of approximately 1-4 Mils in thickness for items which need to consider weight as a primary objective and 10-12 Mils in thickness for such things like automobiles, railings, decks, ship interiors, etc. For things such as railcars and pipelines where weight is fairly insignificant I propose 10-20 Mils of ceramic coating on all sides of the material, interior and exterior of surfaces. By doing this we can prevent unintended consequences when we are struck by Mother Nature, Murphy, dumb luck or even International Terrorists nuisances. Funding should be provided to Universities in Ohio, Pennsylvania, California, Virginia, Georgia and Texas, which currently have material science degrees available so we can stay leading edge and cover all the bases. This research should be funded by the DOE, DARPA and DOT, we must accelerate this sector now to keep up with the advances and needs we will see in the next five years. We must look at manufacturing, coatings, composite useful life and all possible variations of composite material. I propose this be done to take us to the next step while insuring;

“Strength and Safety now and forever.”