Why does everyone confuse free markets, requiring the circulation of monetary value, with Capitalism, the creation and accumulation of monetary value?
Even Econ 101 says money is a medium of exchange, store of value and price setting mechanism. Though the last is a function of being a medium.
Medium and store are very different functions, as one is dynamic and the other 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. Would you impress on your child that they are not necessarily interchangeable? Would you expect a doctor, or highway engineer to understand they are different functions? How is it that economists are such dunderheads? Are they all paid to look the other way, or are they really just that blind?
As a medium, money largely functions as a contract, with one side an asset and the other a debt. So in order to create the asset, 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. Since finance functions as the value distribution mechanism for the entire community, this is 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 we are apparently not as smart.
The other primary factor is that government has become debtor of last resort. Where would those trillions go otherwise? Derivatives? Buying more Apple stock? Could Wall Street function, without the government sucking up such large amounts of apparently surplus capital?
The secret sauce of Capitalism is that public debt is used to back private wealth.
Which explains why we can have endless, strategically inept wars and no one is held accountable, as their primary function is to spend this store of surplus capital, in order that more can be borrowed and the public, which gains nothing from its waste, is on the hook for it.
The fact is 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 though our bodies. Would we try to store those?
Given the apparent purpose of Capitalism, as opposed to markets, is to extract this medium, ways have to be created to store it, resulting in this metastatic financial sector, many times larger than the economy it is supposed to serve. Why is that not apparent to every economist, that this is a problem???
This is why the punch bowl gets taken away, when the party gets going, not just more vodka poured in, when it runs low!
What if the government were to threaten to tax out what it currently borrows? Obviously never going to happen, as the world would be treated to nuclear war first, but just suppose;
People would have to find other ways to store value for the future, than just piling up notational savings. Given most of us save for many of the same reasons, such as raising children, housing, healthcare retirement, etc., if these could be invested in directly, as joint, communal projects, than everyone trying to save for them individually, with their savings accounts as their personal economic umbilical cord, we would have stronger communities and healthier environments, as stores of value and not just resources to mine wealth out of.
Boeing might even get back to designing and building decent jets and not just maximizing shareholder value and executive compensation.
The irony of our individualist ethos is the resulting atomized culture is more easily manipulated by institutional authority and mediated by this parasitic financial system. Networks matter as much as nodes. That is what markets serve.
Government was private once, but when kings lost sight of the fact they served a function to society, in order to be served by it, they had to be removed. Banking seems to be having its, “Let them eat cake.” moment.
Not that banking can be a direct function of the executive and regulatory functions of government, anymore than the nervous and circulation systems are one and the same, as they do serve different functions to the entire body.
Politicians live and die on the hope they inspire, so printing excess money has often been a cheap thrill.
People, even economists, are not going to be able to ignore the situation for much longer, as the future we have been borrowing against is fast approaching.
Though I suspect there are those who plan to bring disaster capitalism/predatory lending home and trade their piles of treasuries for the remaining public assets and the keys to the kingdom. Then this empire dies in oligarchy.
Just so they keep paying the economists to say it’s all right. Markets have be left alone. Ignoring the elephant in the room, that the very tool to enable markets is being corrupted.
