While you present a well researched and coherent description of the history and classic interpretation of our current economic paradigm, I would like to add some thoughts from both directions, that of morality, as well as the financial dynamics currently destroying the world economy.
For one thing, we have this top down, essentially theological view of a moral reality that has evolved upwards.
We have this vision of good and bad as some cosmic conflict between the forces of righteousness and evil, but the fact is they are the basic biological binary of beneficial and detrimental. The 1/0 of sentient judgement. Even bacteria sense this dichotomy. So all our higher moral constructs; respect, responsibility, rights, pride, humility, sympathy, empathy, etc. evolve upwards from this elemental push/pull, fear/greed. Unfortunately when we hold this basic black and white dichotomy as the highest ideal and not the basis from which our more evolved cultural constructs emerge, then conflicts quickly become a race to the bottom, rather than each side being able to hold the other to higher standards.
To which I would add that a spiritual absolute would necessarily be the essence of sentience, from which we rise, not an ideal of wisdom and judgement, from which we fell. Yet no culture could function by simply reveling in sentience, so we have this top down father figure lawgiver as the upholder of our moral standards. Or a totally convoluted civil code. Which really only puts us about a step ahead, if that, from the Ancients.
The other side of the issue goes to the nature of capital.
Econ 101 tells us money is a medium of exchange, store of value and price setting mechanism. Though the last is a function of the 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. The hallway is a medium, while the hall closet is a store. If your child confused the two, would you point out the difference? Would it be a problem if doctors or highway engineers didn’t understand the difference?
Unfortunately economists don’t seem to recognize both the difference and the crucial importance of this difference. Consequently money has gone from being the medium of exchange, that enables markets and societies to function, to a metastatic monster bent on tearing them apart.
Money is largely a contract, with one side an asset and the other a debt, though we think of it as a commodity. Some forms of money, such as gold, or bitcoin, do function as commodities, as their value is presumably inherent, not an iou, or voucher signifying some obligation.
Since we are taught that money is a store of value and we should pile as much as possible into our bank accounts, the effective result is the overall economy has to generate similar amounts of debt, somewhere in the system, to back these assets.
For one thing, it creates a centripetal effect, as positive feedback not only draws the asset to the center of the community, while negative feedback pushes the debt to the edges, it pretty much defines the center versus the edges. Such as why we have totally amoral sociopaths controlling society, because they are primarly focused on that signal of money and can ignore the noise of the overall economy and society from which it is drawn.
Yet since 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.
Since banking is the value distribution system of the comunity, it’s like 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 used debt jubilees to reset this dynamic, but in our fast paced world, we lack that degree of vision.
The other effect is that government has been manipulated into being debtor of last resort. Could Wall St function, without the government conveniently siphoning up and backing those trillions in surplus capital?
Given the Federal deficit got started during the New Deal, not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well.
Paul Volcker didn’t cure stagflation with higher interest rates, as that only restricted capital to those willing to borrow it. Since they would have been the ones to grow the economy and increase the need for money, it was a wash.
Reaganomics cured it, by borrowing up that surplus already in the system and sending it in ways that didn’t compete with the private sector search for profit, but expanded its opportunities, such as military spending.
Consider the main way the Fed shrinks the money supply is to dell debt they are holding, so the only difference for the Treasury to issue fresh debt is that instead of retiring this money, it can be used to “prime the pump,” largely, unfortunately, through military spending.
Which would explain why we have endless, strategically inept wars and no one is held accountable, since their primary function is to spend the money, in order that more can be borrowed.
Basically the elephant in the room is the degree to which public debt backs private wealth.
The tragedy will be when the government can no longer afford to issue endless debt and disaster capitalism/predatory lending comes home to roost, as certain actors pile up enormous piles of supposedly increasingly worthless US debt, at pennies on the dollar, then use their flunkies within the government to facilitate trading this debt for valuable public assets, from highways and parks, to water and mineral rights. Then we will find what true oligarchy means.
The fact is that we all save for many of the same reasons, from raising children and housing, to healthcare and retirement, so if ways could be developed to invest in these directly, as community assets, than everyone trying to save for them individually, with their bank accounts as an economic umbilical cord, we would have the stronger communities and healthier environments we seek.
The irony of our individualist ethos is the resulting atomized culture is more easily controlled by institutional authority and mediated by a parasitic financial system. Networks matter as much as nodes.
Not that banking should be a direct function of government, given politicians live and die on the hope they inspire and printing more money is a quick shot of adrenaline. Like the head and the heart, government, as the executive and regulatory function, and banking as the value circulation mechanism, are different organs with different functions, though both serve the entire body.
When private government lost sight of the fact it served a function to the community, in order to be served by it, the kings were usurped. Banking is currently having its ‘let them eat cake’ moment.
