The "value" of money.

Firstly, my apologies for the long gap between posts. Work prevailed I'm afraid, but as we begin a new year, I thought I'd look at an issue that just seems to be beyond the understanding of most people.

The value of money.

Let me start with two scenarios. The point is to take this to an extreme, but I hope that it will "flick a switch" with you the reader; a kind of "Eureka" or epiphany moment.

You are dying of thirst in a desert. You know the next village with water is a day away, but you've travelled 3 days already and you won't make it without water. You will definitely die without a doubt, and you know that as fact. You also have a million dollars in a rucksack on your back.

A nomad wanders by on his camel, sees your plight and offers you a bottle of water which you know will get you to the village and survival... but at a cost. Yes, one million dollars!

What would you do? How much is that million dollars of paper worth now?

It's worth a bottle of water. That's all.

Another scenario about "paper", be it money or otherwise.

You walk to a shop to buy a newspaper. The newspaper has a value of one dollar. You are willing to pay that one dollar because you want the newspaper.

You buy the newspaper and walk out of the shop. What is the value of the newspaper now? If you stopped 100 people in the street, how many would give you one dollar for the newspaper?

The answer is, that if you found someone on the way to the shop to buy a newspaper, you *might* get your dollar back, however this is highly unlikely. You may get 10 0r 20 cents if you were lucky because people don't like picking up, holding, using old newspapers.
Let's step forward one day. How much is your newspaper worth now?

The answer is nothing. It has no value in dollar terms anymore.

So you see that an article has a value but to state that value in monetary terms is the wrong way to value it. Some may say this is a capitalist paradigm that we have all been hoodwinked into using, and there may be an element of truth in that. However, we have to look at commodities differently now, and value them for what they are actually worth to us as individuals and not in monetary terms.

This blog is about a potential collapse of the "system" as we know it today. It's already crumbling due to the economic crisis, but we can negate most of this by thinking very differently. I am a member of a forum which is supposed to be full of forward thinking people. These people are supposedly very understanding of the issues we may face in the near future, especially peak oil. However a recent post of mine revealed the true misunderstanding that even these people just don't get.

I asked a question regarding electric heating as opposed to oil based heating which I have in my home. The premise is, that if oil becomes scarce, I will need an alternative to keep my house warm. Post after post reveals the comparison with money.

Electric Radiators Forum Post by Troubled Times.

"It will be more expensive", "The costs will be high" etc etc. This misunderstanding is quite frightening because these are people I thought were thinking differently, however they are still comparing the value of something with a fiat, paper based monetary system.

There is also the possibility that my oil boiler will fail. This is very likely within the next 10 years and will be an expensive item to replace, if there are still engineers to do the work. They could be as rare as thatchers are today, but what was a boom industry 100 years ago. And when my boiler does go wrong, do I replace it anyway, or will that be the point at which to convert to electric heating?

If you are freezing in your home because oil is just not available, then what would you do? You have lots of money, in fact you could probably buy BP even with all their troubles, but the oil that fires your heating system is just not there.

However, the electric radiators your neighbour installed before oil was unavailable, are still going strong because electricity has managed to continue to be generated, thanks mostly to the renewables program encouraged in the previous 5 years by the Government. He has also installed a wind turbine in the back garden which he told you was £12,000 and you laughed and laughed at his stupidity, because at the time, £12,000 would have filled up your oil tank for the next 10 years!

But you look out of your window and his turbine is spinning, and he has one warm room in the house. He knows that the turbine may at some point fail, but for the time being, the £12,000 he spent seems very worthwhile. You on the otherhand have £12,000 in paper money that you saved under the mattress. You could burn it to keep warm, but then you'd probably be better off trying to build a wind turbine. You'd like to buy one, but unfortunately because of demand and inflation, they are now almost £100,000 in paper money, and you just don't have it.

So the point of this new post in a new year is to see the true value of your paper money, and to remember that what it buys today, it won't buy on systemic breakdown and to think on a different level to even the most forward of thinkers.

As for me, I shall be buying my electric radiators and storing them in my garage until they are needed. If (and its a big if) oil becomes scarce or prohibitively expensive in paper money compared to electricity, then I shall pull them out and plug them in to keep warm. The true value of money is not what it can buy today, but what it can buy if everything changes. Think differently to everyone else.

Good luck and have a peaceful new year.

As a footnote, it must be stressed that the radiators I am looking to fit are not the same as the portable, heavy cast-iron types you can buy very cheaply. These are made of aluminium with full climatic control and 98% efficient. They are commonly used in eco-homes and can be carbon neutral if connected to a renewable energy source which I intend to do.