Rajesh,

If I may predict a meaning and parallel to this time in history, it is that private banking is going the way of private government.

As the executive and regulatory function of society, from tribal chieftains and elders, to kings and courts, to presidents and legislatures, government amounts to its central nervous system.

As the value circulation mechanism of society, finance is its heart and arteries.

As kings lost sight of the fact they served a function to society, in order to be served by it, they were usurped. Finance has lost sight of the fact that its primary function is to effectively circulate value around society, rather than skimming off as much as possible. It is as if the heart were telling the hands and feet they don’t need so much blood and should work harder for what they do get.

Econ 101 tells us money is both medium of exchange and store of value, as well as price setting mechanism, but should we mix up a medium and a store?

In the body, blood is the medium and fat is the store. Would a doctor confuse them? For cars, roads are the medium and parking lots are the store. Would a highway engineer confuse them?

Money functions as a contract, with one side an asset and the other a debt. Without that underlaying obligation, it would be confetti. Yet we have come to treat it as a commodity, to mine out of society and save and store.

The problem is that for the individual, money is quantified hope, so the impulse is to collect it. When this meant burying coins, it simply enabled the issuers to stamp more, with less need to worry about the obligations and making that connection fuzzy. Then as banking took over and paid out part of the interest they collected in loaning it back out, this belief in it as a store was magnified by the assumption that it naturally collects interest.

Given the evolution of banking paralleled colonialism, there was always opportunity to invest in tapping someone else’s untapped resources.

Yet the functionality of money remains in its fungibility. We own it like we own the section of road we are using, or the fluids passing through our bodies. It’s not our picture on it, we don’t hold the copyrights and we are not individually responsible for maintaining its value.

So in order to store the asset side, relatively equal amounts of debt are required. One very significant method is for the government to borrow up large amounts of surplus money. Where would those trillions go, otherwise? Buying more Apple stock? The derivatives market?

As this feedback loop has built on itself, capitalism has metastisized from the efficient circulation of value, to the creation of this notational abstraction of wealth as an end in itself. The bottom line.

What, just as a hypothetical, the government was to tax out, what it currently borrows? After all the shrieking subsides, people will start finding other ways to store value.

Given we are all mostly saving for many of the same reasons, raising children, housing, healthcare, retirement, etc, if ways could be found to invest in these as community assets, rather than everyone trying to save for them individually, we would have stronger communities and the healthy environments they would insist on, rather then this atomistic culture, where money mediates most relationships and our bank accounts are our personal economic umbilical cord. In a situation effectively equivalent to the movie, The Matrix.

Not that banking should just be another arm of the government, anymore than the head and heart are the same. Politicians live and die on the hope they inspire, so printing more money is a cheap high and history has many examples of how that ends.

Like blood, or roads, it has to be carefully calibrated to how much is needed. As that old Fed chairman put it, before government was complete slave to the banks, it was his job to take away the punch bowl, when the party gets going. Not just add another bottle of vodka, when it runs low.

Actually if more organic forms of reciprocity could be encouraged, that would be even healthier.

As it is, the younger generation is not going to be able to sustain a system that is both burying them in debt and expecting them to continue the process.

There is only so long they can cheat on the foundations, in order to store more gold in the penthouse, before it does more than just trickle down.