The Dynamic nature of Money
Money is not static. The same amount of money spent three or times will distribute three or times as many goods. There is an intriguing story of a man who wrote a cheque for a hundred dollars without having any money in the bank. With it he bought a certain article. The man from whom he bought the article took the cheque and without cashing it at the bank, used it to purchase certain goods (endorse / sign over / made over). These goods he sold for one hundred and twenty dollars, making a profit of twenty dollars on the deal. The person to whom he gave the cheque did likewise.
This happened ten times each person making a profit of twenty dollars in the process, after which the cheque finally reached the bank where it was dishonoured. The ten people who had handled it got together and decided that to avoid trouble, each of them would contribute ten dollars to cover the cheque. This was done; the amount of hundred dollars was paid; and each of them was richer by ten dollars!
This story illustrates that circulation of money from one hand to another for trade enables everyone to make wealth. Credit is the engine that sustains the process of economic activity.
But communists and bleeding liberals can’t fathom this process.
(Source: “You can trust communists” by Dr. Fred Schwarz.)
- Rendezvous with a vintage steam engine
- Naiveté, no virtue!
I think such cheque endorsement is being practiced by many in business. But look at it this way, it’s very interesting!