It does seem there is an underlaying aspect of this, which doesn’t get much notice.
Financial instruments and in fact money itself, largely function as a contract, with one side an asset and the other a debt. Necessitating similar amounts of debt to be generated, to back the assets.
Yet our culture largely treats it as a commodity, to save and store. Consequently those mountains of wealth some sectors of the community own, are necessarily backed by debts owed by someone elese.
For one thing, it creates a centripetal effect, as positive feedback draws the asset to the center of the community, in fact creating the center. While negative feedback pushes the debt to the edges. Given the financial system serves as the wealth circulation mechanism of the entire community, this is analogous to the heart telling the hands and feet they don’t need so much blood and should work harder for what they do get.
Which would seem to be a dynamic that goes to the roots of civilization, as the Ancients used debt jubilees to reset this process.
Another factor is that government has become debtor of last resort. It’s safe to say the financial markets could not function, without the government siphoning up trillions of dollars of apparently surplus capital, then finding questionable uses for it. The secret sauce of capitalism is that public debt backs private wealth.
Keep in mind the deficit really began with the New Deal, so not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
Also that Paul Volcker could not have actually cured stagflation with higher interest rates, as this mostly starved capital to those willing to borrow it and potentially grow the economy. It was Reaganomics which pulled out the surplus already in the system and spent it in ways which didn’t compete with the private sector for profitable investments.
What has to be taken into account, in any long term economic analysis, is simply that there isn’t sufficient investment potential to satisfy all the savers in the world. We need to learn to invest directly into the social and environmental structures and stores that will carry us into the future, not just assume enormous amounts of abstracted wealth, backed by increasingly nebulous promises, can do this.
The functionality of money is in its fungibility. We own it like we own the section of road we are using, or the fluids passing through our bodies. Its circulation enables markets to function, so when we treat it as the signal to extract from the noise of society and the economy, more has to be added and ever more complex and inventive ways are created to store what has been extracted.
It is a medium, not a store. Blood is a medium, fat is a store. Roads are a medium, parking lots are a store. They are different functions and economics does not seem to recognize this.
It needs to be regulated as such. The punch bowl taken away, when the party gets going, not more vodka poured in, when it runs low. Otherwise it creates a metastatic feedback loop, where society ends up in service to the financial system, rather than the other way around.
Government, as the executive and regulatory function, was private once, but when monarchs lost sight of their purpose to society and viewed society as a projection of themselves, they were usurped. Finance is having its ‘let them eat cake’ moment.
We save for many of the same reasons, from raising children and housing, to healthcare and retirement. We will have to learn to create these investments as a function of communities, rather than assuming we can save for them individually, with our bank accounts as a personal financial umbilical cord.
The irony of our individualistic ethos is that the resulting atomized culture is more easily dominated by institutional authority and mediated by a predatory financial system. Networks matter as much as nodes.
Life is a two way street. You can’t starve a profit, be it a company, or a community.
