The problem is that we simply do not understand the nature of money.
It is a contract, with one side an asset and the other a debt, yet we treat it as a commodity, to save and store.
Some forms of money are commodities, like gold and bitcoin, where the value is presumably inherent to the token, but most amounts to a form of voucher, where the asset is backed by a promise. Consider the Federal Reserve creates money by buying government debt.
So in order to to create the asset, similar amounts of debt have to be generated.
For one thing, this creates a centripetal effect, as positive feedback pulls the asset to the center of society, while negative feedback pushes the debt to the edges. Since finance functions as the value circulation system of the entire community, this would be the heart telling the hands and feet they don’t need so much blood and should work harder for what they do get.
The Ancients would use debt jubilees to reset this dynamic, but we lack that long term perspective.
The other significant feature is that government has been manipulated into being debtor of last resort. Where would those trillions of surplus wealth be stored otherwise? Derivatives? Apple stock? So public debt backs private wealth.
It also explains why we can have endless, strategically inept wars and no one is held to account, as their primary function is to spend money, in order that more can be borrowed and our illusion of wealth is increased.
This isn’t simply the fault of the rich, as they are simply both smart enough and sociopathic enough to take advantage of it.
We are goal oriented creatures and so money has become the signal we extract from the noise of society, the economy and the environment. Without taking into account that as the medium, it needs to circulate, not be stored.
Econ 101 tells us money is a medium of exchange, store of value and price setting mechanism, but the last is a function of being a medium.
Though a medium is inherently dynamic, while a store is static. Blood is a medium, while fat is a store. Roads are a medium, while parking lots are a store. Fortunately economists are not doctors, or highway engineers. They only design how our economic foundations work. Poorly.
The irony of our individualistic ethos is that the resulting social atomization makes people easier to control by institutional authorities, while much of their relationships are mediated by a parasitic financial system.
We all save for many of the same reasons; raising children, housing, healthcare, retirement, etc. If these could be invested in as community functions and assets, than everyone trying to save for all of them individually, with our bank accounts as our economic umbilical cord, we would have the stronger societies and healthier environments to provide us with the security we try to save money for. Networks matter as much as nodes.
Obviously this is a reality few of us can effectively conceive, given our compartmentalized lives and lack of trust in much more than the dollar, but the system really is crashing. There will come a point the debts cannot be paid, or ignored any longer and all those notes will be so much confetti.
As 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. It’s not our picture on it, we don’t hold the copyrights and are not responsible for maintaining its value. Money is a public utility, like roads and should be regulated as such.
No more pouring more vodka in the punch bowl to keep the markets happy.
The government should consider taxing out what it currently borrows. That would teach people to find more organic ways to store value.
Obviously this is a much larger conversation, but one that will have to occur, sooner, or later. The future we have been borrowing against is here.
