Kai Ryssdal, host and senior editor of Marketplace, public radio’s program on business and the economy, leaves some to wonder just how deeply he understands the money that he writes and talks about. He doesn’t seem to understand the word MONETIZE. On a recent show, Kai referred to the Chinese getting money for something thereby ‘monetizing’ their production.
Many misuse the word ‘monetize.’ To ‘monetize’ something does not mean to trade or exchange that something for money. ‘Monetize’ means to ‘create money.’ Once, when Americans produced gold or silver metal; they would bring it to the Mint which would weigh, assay and stamp it into coins free of charge. The Mint changed the form of the metals into something new; coins declared by government to be money. When you get money for products or services, you are receiving money already created somewhere as a loan to someone else. You get the money. The customer receives your service. You have not turned anything into money. The items of both parties still exist. You have not ‘monetized’ anything. No new money has been created. If you ‘monetized’ a YouTube video, it would no longer exist as a video. It would be turned into money. When you exchange products or services for money, the two simply change sides.
Over the years, ‘monetizing’ has been done by coining, stamping, printing and digitizing and calling it money. Now, ‘monetizing’ is only done when banks make loans and lend. If you don’t have any money; you may go to the bank to borrow some. Maybe the bank agrees to make you a loan. To get the loan, you must sign a promise to pay ‘X’ number of dollars back and to pledge real property as collateral. The bank doesn’t loan anything that it has. It ‘monetizes’ your debt by transferring the number you are borrowing from your promissory note into your checking account. Now you have money to spend and are in debt to the money creator. The bank created new money by ‘monetizing’ your debt by simply creating and transferring new ‘numbers’ that never existed before into your checking account. Now you have money to spend. The bank has ‘monetized’ or used your promise to pay to create new money. When you write checks against the new numbers you put new money into circulation that never existed before. Yet, bank ‘monetizing’ is even more deceptive. In bank ‘monetizing’, new money is created but both the new money and the borrower’s collateral still exist. Why? Because the bank needs something to take if the loan goes bad. No collateral was needed with Free coinage as no debt existed.
One does not turn anything into money when one sells or trades something for money. You would not create any more cows if you traded a horse for a cow. You would not create any money if you traded a cow for money. You would simply make an exchange for money that had been previously created as a loan to someone else.
As time goes on, you’ll hear more and more people using this new found word, ‘monetize’ and most using it incorrectly; like Kai Ryssdal of APM Marketplace did on Thursday, June 6, 2013. I would talk with Kai about this. But, like so many, he has a one-way bully pulpit. We all get to listen to what they have to say but it is very difficult for us to connect with them.
One does not ‘monetize’ or create money when one sells or trades something for money. All ‘monetizing’ takes place when your neighborhood bank makes loans thereby ‘monetizing’ your collateral as an asset to them and a debt to you. They are the only ones that ‘make money’ or ‘monetize.’ You, I and ‘the’ government are simply forced to borrow it and pay interest on it. When the loan principal is repaid, that money is extinguished.
Gregory K. Soderberg – 2013