Week 1 - What is Money?

Week of January 22, 2009


What is money?

Briefly mentioned in class discussion was a five part video entitled “Money as Debt” available on YouTube.com. The origins of money were originally based on trade. Something of value was exchanged for another item of value. This evolved into precious metals molded into standard coins. Eventually, it became burdensome to lug around many coins, and people would store their gold coins with the goldsmith in return for a slip of paper called a claim ticket. At some point in time, the goldsmith started to loan out the use of the coins to other people. Then he discovered that he can loan out more money than he actually has on hand, provided everyone does not come claim their money at once. Eventually interest became an additional way for the goldsmith to gain funds, and he accumulated wealth. This system of loaning more money than actually exists is called a fractional reserve system. Today, governments around the world have adopted this system and allow banks to create money according to a standardized ratio. The paradox of this system is that you constantly have to feed debt into the system to keep the money supply available. The debt is based on things of value like houses, cars, business production. Ultimately, banks control all the resources and the system promotes overuse of resources. In the fifth segment, the creator suggests some ways to overcome this.
This concept has never crossed my mind before. I always thought banks were limited to loaning only the amount of their deposits. The realization of this monetary system makes me fear the future. It is only a matter of time before something of this nature collapses. I only hope that Barrack Obama has seen this…hahaha.

http://www.youtube.com/watch?v=vVkFb26u9g8


Total Quality Management and Edward Deming

Edward Deming was hired by Japan after World War 2 to rebuild their industrial system. He came up with many valuable quality management theories, starting a wave of quality obsession. This fad has since declined, after businesses realized that 100% quality is unattainable at reasonable costs. The result was a mutation into Six Sigma efforts. The government requires a certain level of quality in manufactured goods, so does the consumer. So quality is a very important aspect of operations management. An article from PR Newswire discusses the Six Sigma approach to quality management. http://sev.prnewswire.com/advertising/20090128/DA6369228012009-1.html

Also, many companies are responding more responsibly to quality lapses. See this article from the Wall Street Journal about Toyota: http://online.wsj.com/article/SB123318164275026113.html


American Auto Industry

We discussed the failing US Auto Industry in class. Many American cars are not even made in America any more. In fact, America even gave up on the Industry by not providing a bailout. Now, the UK is offering to step in. Not only will the components be foreign, but the financing as well. This article in the Wall Street Journal discusses their offer. http://online.wsj.com/article/SB123307576867520133.html