Vahe,
Money is, as you describe, a contract, in which one side is an asset and the other is a debt, yet we treat it as a commodity, so save and store, because we individually experience it as quantified hope and security.
Consequently Econ 101 tells us it is both medium of exchange and store of value, as well as price setting mechanism, though that is a function of a medium.
Yet a medium is 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. Economists would fail at medicine, or highway engineering.
In order to store the near infinite amounts of the asset we desire, similar amounts of debt have to be generated.
For one thing, this creates a centripetal effect, as positive feedback draws the asset to the center of the community, while negative feedback pushes the debt to the edges. Given that finance and money function as the value circulation mechanism of the community, this would be like the heart telling the hands and feet they don’t need so much blood and should work harder for what they do get. Ask younger generations how they think that will work out over the longer terms.
The other consequence is that government has become debtor of last resort. Where would those trillions be invested otherwise? Derivatives? Subprime loans? Blowing up the market bubble a little more?
The US deficit really started with the New Deal, so not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
So public debt backs private wealth. We are blowing up other countries to sustain the illusionary value of surplus notational wealth.
Consider that the government doesn’t really budget. Which is to prioritize one’s needs and desires, then spend according to ability. Instead they put together enormous bills, add enough goodies to get the votes and then the president can only pass, or veto the whole thing.
One suggestion has been the ‘line item veto,’ but that had an ice cube’s shot in hell of passing congress, since it would have gutted much of their power.
One way to fix it would be to break the bills into all their various items, have every legislator assign a percentage value to each one, put them back together in order of preference, then the president draws the line. “The buck stops here.”
This would leave prioritizing with congress, while leaving the president with sole responsibility for overall spending. Which would create some savings, as being a spendthrift on every possible cause would not be popular overall.
The fact is that money functions as a medium and should be closely regulated as such. Possibly taxing out what is currently borrowed, but that wouldn’t be too popular with those sitting on the biggest piles of treasuries and they hold the strings, like the bank holding your home loan.
The functionality of money is in its fungibility, so we own it like we own the section of road we are using, or the fluids passing through our bodies. We need to store value in more tangible assets and not just mine money out of society and the environment, to throw in this hurricane of financialized capitalism.
We all save for many of the same reasons, from raising children to retirement, so if these could be invested in as community projects, than everyone trying to save for them individually, we would have stronger communities and the healthier environments they entail, not just an enormous financial sector, with our bank accounts as personal umbilical cords.
The irony of our individualistic ethos is it leads to an atomized culture, that is more easily controlled by an institutional authority, that’s supposedly anathema to the individual, as well as most interactions mediated/monetized by a parasitic banking system. Networks matter as much as nodes.
Not that banking should be a direct function of government, as you also hint.
As the executive and regulatory function, government amounts to the central nervous system of the community, from chieftains and elders, to kings and courts, to presidents and legislatures. It is to define and direct the energies of the population. Which is not always popular with everyone.
Given we experience money as quantified hope and politicians live and die on the hope they inspire, printing more money is always an effective, short term high.
Like the head and the heart, government and finance are different organs, serving different functions, to the entire body of the community.
There was a time when government was private. It was called monarchy and when when kings totally lost sight of the fact they served a function to society, in order to be served by it, they were deposed. Finance is certainly having a ‘let them eat cake’ moment.
