AN OPEN AND PUBLIC LESSON IN THE USES OF PUBLIC MONEY – ADDRESSED TO THE HONORABLE MINISTERS OF FINANCE AND OF THE ECONOMY OF THE REPUBLIC OF LATVIA

Jan 21, 2010

My Dear Ministers:

MONEY is that which is tendered and which facilitates trade and transactions of all types.  In ancient times… the barber would cut the hair in exchange for milk from his farmer client. The carpenter would build the house in return for food with which to feed his family. The prostitute would sell her talents so that her child could get an education… and so on. This was known as barter. Then, along came MONEY… the universal tender.
Money is like electricity. It of itself is useless and harmless until it is engaged (switched on) with and by the authority of the ruling state as… legal tender.

An example of socially useless, non-productive money is that which (increasingly these days) is kept in a sock under the bed, waiting to pay for its pauper owner’s coffin. Useful money is that which freely circulates.

Imagine, Dear Ministers, this scenario:- 

A wealthy and successful investor is interested in renting several rooms for a conference in a hotel, but can’t decide as yet which ones. So as not to lose his options in the event that while he makes his choices there may be other conference organizers interested, he leaves a 24-hour deposit of $100 with the Hotel Manager. The Hotel Manager immediately takes this $100 and repays the mechanic who repaired his car. The mechanic then immediately takes this same $100 to repay the doctor who treated his child. The doctor then, quick as a flash, repays the bookmaker to whom he owed this amount after a bad day at the races.  The bookmaker, eager to cover his tracks, immediately repays the escort lady for additional services provided. The lady of the night then quickly repays this same $100 to the Hotel manager who made his premises available for her business enterprise.

Then, my Dear Ministers, the wealthy investor comes back as promised and announces to the Hotel Manager that he has decided not to lease any rooms and so is entitled to receive his $100 deposit  back which of course he graciously receives cash in hand.

In the end of this little scenario – everybody has been able to repay their personal obligations, nobody has lost anything, and best of all, the investor still has his original $100… ready to invest in worthy causes. Had he not come back, there would have been a spare $100 floating around… perhaps for the Hotel Manager’s pleasure!

Dear Ministers, when money is in circulation – goods and services are transacted, there is a vitality in the community, people can live normal healthy and perhaps even happy lives.  Money is one of those elements in our society  that increases upon itself… but to do so it must be in circulation.  As every national reserve bank governor knows, if money does not circulate, it is as useless as electricity that is not in circuit. Certainly it neither grows nor deteriorates… it is useless.
Why, Dear Ministers, do we need money?  Because we live in an urban society with its dependent service infrastructures… heating, electricity, water, food,  transport, clothing… even banking.

When the money runs out, or as in Latvia’s case is eaten away through non-productive hoarding – then one by one - all services will close down. The government administrative infrastructure is already seriously damaged through massive self-inflicted trimming and wasting of its human resource potential. Eventually, if it cannot maintain essential services to the community it represents, it (the government) will go bankrupt and the country will be up FOR SALE.  Just take a lesson from the complete lack of effective local infrastructure in Haiti. This has taken a serious toll on the Haitian  people. And… now anybody and his dog can freely pretend to authority in that country… presently it is the looters.

My dear Ministers… maybe you should pray for a natural disaster… which will of course highlight your lack of vision. And then the World Bank, IMF, the UN, the Americans, the Europeans, the Saudis, maybe even the governments of Somalia and Rwanda will of course come to our rescue. There is no doubt that even our great Russian neighbor to the east will want to help. Why not …they DO care about their own people no matter where they are in the world.  And that is great!
DEVELOPMENT and START-UP countries are a great business to be in.
Oh, what a feeling!  But I thought we already went through that Post-Soviet phase with the U.S. Peace Corps, UNDP, et al in the mid to late 1990s.  Didn’t we?

Oh yes, I remember we received gifts of massive handouts of money and resources. Now of course our Foreign Ministry engages in ‘development projects’ of its own…e.g. GUAM… Georgia, Ukraine, Armenia, Moldova. Great! Its good to be on the giving side, isn’t it!!

Dear Ministers… I challenge you to respond in this same forum. AND, provide some simple perspectives. The greatest things are simple – among honest peoples.

Edgars Kariks
Resident of the Republic of Latvia

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