Money is inherently a debt. The asset is backed by an obligation. Even gold backed currencies are an IOU for a given amount of gold.
What we need to understand is that this makes a very effective medium of exchange, but to be a store of value, the asset requires equal debt. So in order to save money, the financial system requires some method of generating debt.
One way is austerity, so that the real economy doesn’t have sufficient money flowing through and lubricating it, then it creates debt, putting the “investment” money to work. Think all those mortgages, car, student, credit card loans, etc, bundled and sold as investments.
The other is having the government as debtor of last resort. The capital markets could not function, without the government siphoning up trillions in surplus money. Where would it go otherwise? Derivatives?
The deficit really got started with the New Deal, so not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
It would explain why we can have endless, strategically inept wars and no one is held to account, if their real function is to spend the money, so that more can be borrowed.
The fact is there isn’t sufficient productive investment to put the amount of money we think we need to work, but we do save for many of the same reasons, such as raising children, housing, healthcare, retirement, that if these could be invested in directly, as community assets and networks, rather than everyone trying to save for them individually, maybe we wouldn’t have such an atomized society.
The functionality of money is in its fungibility, so we own it like we own the section of road we are using, or the air and water flowing through our bodies. It is a public utility, like roads and should be treated as such. The problem is not so much putting the money in, when it’s necessary, as being able to draw it out when it’s unnecessary, because people view it as personal property. So if this belief could be changed, then people would not try storing wealth as money, but as more tangible assets. The government could logically tax out what it currently borrows, but the power is currently on the other side of that string. This crisis is going to change that when the economy blows up and everyone turns to the government for help and it has to turn to those who actually do the work, not just live off it.
