During my recent visit to Riyadh, I met one of the Kingdom’s most prominent professors and thinkers in the economic field — a man who possesses, enjoys, and delights others with a mind built on thinking outside the box. Even where I differ with some of his conclusions, I cannot conceal my admiration for the doors his thinking opens in my own mind on matters related to financial and macroeconomics. I took advantage of my visit and asked him for his view on the current financial system — “fiat,” or paper money — which is not linked to gold and was adopted in 1971 by Richard Nixon, then President of the United States, and whether it is superior to the previous “commodity” system linked to gold.

His view leaned toward favoring the current financial system, a preference supported by a simple equation: total money equals the prices of goods multiplied by their quantity. When the equation is inverted, the prices of goods equal total money divided by their quantity. Since gold is a naturally scarce commodity, and since the former system was tied to it, the total amount of money becomes the fixed factor. This causes the prices of goods to decline whenever their production increases. Accordingly, no one would invest his money today to increase production, because he would not achieve a future “book” profit, since the new goods would be sold at a lower price than today’s price. Under the current financial system, however, total money is variable because it is not tied to a scarce commodity, and it can be injected or withdrawn according to productivity so that goods prices remain stable or rise slightly.

To me, this appeared to be a new gateway to thinking outside the box as well. Today, you exert “effort” in order to obtain money that you can consume to secure things that create “benefit” for you, whether material or moral. On that basis, money becomes a bridge between this “effort” and that “benefit.” This leads to the question: after an investment that causes production to increase, what should be compared? The price of the good before and after the investment? Or the amount of benefit obtained from the price of the good before and after the investment, even if that price falls?

Theoretically, with all other factors held constant, prices in the former system decline only if the increase in production meets genuine needs. Today, however, the matter is different. Cash flow is increased alongside rising production whether that increase meets genuine needs or not. This causes a decline in the “benefit” enjoyed by those who create an increase in production that fulfills real needs, in order to enhance the “benefit” of others who create an increase in production that is not useful.

There is no doubt that the logic of declining prices is correct “theoretically.” Yet price is nothing more than a powerless number. What is sold for one dinar may be sold for three dollars. Price itself is not what should be considered. Rather, what matters is the amount of benefit received in exchange for a price that changes over time. You may invest your dinar today instead of buying a book for one dinar. That investment may cause an increase in production that meets genuine needs, lowering the price of the book by half. Your project may then be valued at one and a half dinars — a valuation that enables you to buy three books. This achieves a greater quantity of “benefit” at a lower “price.”

How does understanding the factor of the future help explain scarcity and trust in money?

Scarcity protects trust when it is clear and credible, while undisciplined expansion needs strong institutions to prevent value from eroding. It should therefore be read through the future, cost, results, and added capacity, not through intention alone.

How does understanding the factor of the future help explain the value of money?

Money’s value comes from its ability to preserve benefit, enable exchange, and represent trust, not merely from its form or name. It should therefore be read through the future, cost, results, and added capacity, not through intention alone.

How does money, value, and economic philosophy affect the economy?

Its effect appears in how costs, incentives, and resources are managed, and in the economy's ability to turn decisions into sustainable value. The direct context is fiat versus gold-backed money, arguing that economic value should be measured by benefit, not prices alone.

How does understanding the factor of the future help explain price and value?

Confusing price with value traps judgment in the visible number, while value is tied to benefit and the ability to preserve purchasing power. It should therefore be read through the future, cost, results, and added capacity, not through intention alone.