Money Makes the World Go Around

I’m reading David Montgomery’s excellent “Dirt: The Erosion of Civilizations” and it blows me away. The message is painfully simple; abuse your soil and you die. No civilization can survive depleted soil, yet almost all seem driven by growth to deplete theirs. Here are some quotes relevant to modern times:

“half a million square miles of West African forest were cleared in under a century.”

“Soil erosion rates in sub-Saharan Africa increased twentyfold in the past thirty years.”

“More than a tenth of Earth’s land area is desertifying—about a third of the planet’s dry lands.”

“In addition, the 1972 Russian grain purchase encouraged U.S. farmers to plow up marginal land, undermining decades of soil conservation efforts.”

“The 1977 Soil and Water Resources Conservation Act required the USDA to conduct an intensive appraisal of the nation’s soil. Four years in the making, the 1981 report concluded that American soil still eroded at [an] alarming rate more than four decades after the Dust Bowl. In the 1970s the nation lost four billion tons of soil each year—a billion tons a year more than in the 1930s.”

“Recent USDA estimates show soil erosion from U.S. cropland as dropping from about three billions tons in 1982 to just under two billion tons in 2001, substantial progress to be sure—but still far ahead of soil production.”

“In the mid-1990s, David Pimentel’s research group at Cornell University estimated the economic costs of soil erosion and the potential economic benefits of soil conservation measures. [snip] They estimated that undoing damage caused by soil erosion would cost the United States $44 billion a year, and about $400 billion a year worldwide, more than $70 per person on the planet—higher than the annual income for most people.”

The last quote really gets me. Aside from throwing into sharp and sickening relief the amounts of money tossed about to save the financial system that, arguably, is destroying itself by soil (and other reckless) abuse, what most stuns me is that we need to look at dollar values at all. What sort of a mindset are we trapped in that we need to justify conserving soil from a dollar perspective?

The deeper story is one of failing to be wise even while in possession of the skill and knowledge necessary to be so. We have known for millennia how to conserve soil (the Chinese and Japanese (and others) do a great job of it in their paddy fields), and yet we somehow manage to overlook sustainability, to demote its importance, or wilfully ignore it. Money makes the world go around, right? GDP growth matters above all else.

And while we destroy the ecosystems that gave rise to and sustain us, the thing our culture prizes above all else concentrates to the sociopathically wealthy, and stays there. They can’t get enough wealth or power, and are seemingly incapable of understanding or caring about consequences, and yet we insist on playing their game by their insane rules, chasing the American Dream and confusing it for success.

Musings on Steve Meyers' Latest Report

Thanks to Jesse again for bringing this to my attention. It makes for interesting listening. I recommend all ten minutes of Steve Meyers’ jaded diatribe.

Two quick things: First it’s not really Global Perspectives, as the company hosting the analysis calls itself, but American. Without exception—and this is no surprise—nation states look to protect themselves. The institutions with which an idea like the Nation State is made manifest and functions, can of course do no other thing than protect their own operating, stay alive and perpetuate that which they are. But what they are is already broken beyond repair. Not in the sense of a broken arm or sick stomach, such things require a fix, or at worst an amputation. No, the nation state and it various constituent parts, plus the corporate structure, plus ‘free’ market economics, plus money etc., are systemically joined and broken. The paradigm which gave birth to the nation state—of control over nature—is out of creative juice, can no longer power civilization forward as it once so spectacularly did. The noises of desperation and despair emerging now from many quarters will remain desperate and despairing. No solution within the paradigm can be of any use. Too much has changed. And this is no sudden, unpredictable ailment, fallen upon us out of clear blue skies because of Wall Street, or Larry Summers, or Robert Rubin, or any other single factor. We are going through the closing phases of a process which has its origins in deepest antiquity. What we are going through is inevitable, is hard-coded into the scarcity-based thinking that got us here. Its opposite, abundance, is the way forward.

Second, I long for the day when mainstream commentators realize the above, despite what that will mean. The status quo is defunct, a zombie, a sac of poison leaking into society and bringing it to its knees. We are all infected, all sick, all more or less blind to the depth and breadth of the sick state we are in. There is no escaping this, no corner of earth, no ‘precious’ metal or other commodity in which our money can find refuge. The status quo, in its entirety, has to go before meaningful change can begin. Swapping out Larry Summers for Bill Black, for example, would have only a short term benefit. We must relearn value itself, redefine growth, initiate a deep revolution in education, labour-for-wage, politics, law, money, and even science. Western Civilization is rotten from top to bottom. We must let it down as gently as we can, rescue the good and the beautiful (a very painful process for sure) then start building the new.

Intrinsic Value is a Contradiction in Terms

Jesse, of Jesse’s Café Américaine, is an eloquent and persuasive writer, whose writing I admire and enjoy. His article on Jim Grant’s analysis of recent Federal Reserve nominees is no exception to his usual high quality. It caught my eye though for the quotes he chose, in particular this part:

“These are people who I think are unlikely to propose novel solutions to our fundamental monetary dilemma which is that the US dollar is a faith based currency of no intrinsic value that is manipulated by the Fed, and the consequences of the manipulation are often quite distinct, different from what was intended. That’s the problem.” [My emphasis.]

People like Jesse and Jim Grant (I respect Jesse but don’t know Jim Grant) are trying to think outside the famous box, which is good, but they don’t go far enough in my opinion. All money is faith based. Nothing has intrinsic value. Even air, water and food are ‘valuable’ as a consequence of the web of life that has emerged on this planet. It is relationships and interdependencies that give rise to notions like value. Air in and of itself has no ‘value’ as one of its properties. Some other thing, e.g. with lungs, has to need it. And money, in any form, is far less important to humans than air, and as a medium of exchange has no intrinsic value. Money can only represent value. Furthermore, even if we overlooked the fact there is no such thing as intrinsic value, a commodity like gold, which in economic myth has instrinsic value, can be manipulated, and often has been. Also, gold’s value varies relative to other commodities. In fact there is no Value Foundation Stone against which all other things can have their value measured. When is mainstream economics going to get this? Ah the folly and illusion of control!

Jesse and Jim Grant warn of the dangers of group think. But there is only group think, albeit in varying degrees. No human can grow up outside all social contact with other humans and develop language. Without language no thinking is possible. Nothing we can do can alter this logical relationship. We can at best strive to be perpetually cognisant of this ‘pitfall’ of being a highly intelligent social beast, and improve our chances of preventing the emergence of the vested interests and frozen status quos, which so bedevil us now, by taking those painful and difficult steps away from elitism and hierarchy generally, towards the new egalitarianism hinted at by Open Source Software. It is in the gentle pursual of sustainable abundance that such a change can be realized, in the slow transcendence of ownership, shallow materialism, conspicuous consumption, the nation state and so on, that a new money and consequent new economics can be born and find lasting form. In his immediately previous post, Jesse suggests the same:

“The lifting of the veil from their scheme will be like the rising of the sun, as things long hidden become known. And we will look upon money and value in fresh ways.”

I dearly hope so. The question is, how fresh?

Of Profit and Loss

“The true scale of the national debt is £2 trillion - more than twice the official figure, an alarming study shows.

The black hole in the public accounts equates to £78,000 for every household in the country.” Read in This Is Money (hat tip Mike Shedlock).

Here we see the standard and totally unsurprising equation of money and earnings with wealth, and consequently of debt with not-wealth. Nowhere is the nature of money creation discussed, nor is it even implicity suggested that wealth and money are not in fact joined at the hip, that the “black hole” in public accounts is a mere notion, a totalled number of other numbers we have counted over time to track things like pay and costs. Everywhere we look, money is value, money is wealth. This silly story we tell ourselves is deeply and dangerously wrong. There is indeed profligacy and useless State and Market waste across the world, but this too is part of the deeper problem of the flawed money-story this post briefly discusses.

The tight and inflexible cultural association of money with wealth is doing unknowable amounts of harm to society and the wider world. It veritably forces us to pursue those endeavours and enterprises which earn money, at the cost of pursuing those which lose money. After all, money makes the world go around, right? If you’ve got enough money, you can do anything, anything at all. Only your imagination limits you. But what exactly are ‘earning’ and ‘losing’ money, and why is the former good and the latter bad?

First a brief reminder of what I believe money is. It is a symbolic tool for distributing scarce goods and services (including land and labour) throughout a forever insatiable planetary population. It is furthermore an enabler of complex economic activity (as opposed to barter which only enables simple economic activity). It is NOT a store of value. A medium of exchange cannot store value. That’s what makes it a medium. Just like language does not contain reality but strives to represent it, so money does not contain value but strives to represent it. So, money is an abstraction of value, or wealth, for distributing scarce stuff, via price information, to and from people.

Earning money is the short or long term accrual of this representation of wealth to some part of the economy, be it an institution, a corporation, a person, or whatever. Losing money is the opposite. That this equates to good and bad in modern society (post-farming) is a function of the utility value of money. While society is capable of producing surpluses for sale, money is very handy to have. And since we have specialized labour to the extreme point of total dependency on surpluses being produced by others (typically machinery), we badly need money to survive. This societal progression deeper into the money story explains, in part, how we have come to equate money with wealth. Without it we are in deep doodoo.

But – and this is an extremely important ‘but’ – you can neither eat nor drink money; you can only spend it or save it. Of course this is a tired cliché, but that does not make it less true. As time goes on we are destroying the ecosystems and burning through the fossil fuels that make surplus possible. See ecosystems as the organisms keeping our social bodies alive, see fossil fuels as inherited savings from Mummy Earth and Daddy Sky. We are, like spoiled brats, racing through our savings to destroy our life-enabling habitat, just to perpetuate, for as long as we can, the enormous, high-paced, multi-century party we think ourselves addicted to. We call this party Perpetual Economic Growth. It is totally unsustainable, just like the tower of Babel which was supposed to reach heaven. Money (among other things) makes us do it, but money will be of no use to us whatsoever once the surpluses start running out.

That is one way in which money earnings and losses are not that important. Ecosystems and communities are important, and in a state conducive to human society.

The second is derived from a systems analysis of money’s functioning in society. Money needs to flow, to move from place to place if it is to enable trade. Money-wealth is hoarding, which is the antithesis of flow, so important to functioning economies. It follows therefore that earning and losing money are (or should be seen as) brief but necessary eddyings in the total money pool as economic activity takes place, where “brief” is the important qualifier. The more we stress ourselves culturally and politically about these poolings, the more we will tend to hoard, or stagnate economic activity. A stagnant economy is one in which wealth/debt divisions freeze in their current positions. Also problematic is the simple truth that having more and more money makes sense in this system. Being ‘rich’ is better than being ‘poor.’ (This second observation does not take growth into account, so is incomplete. It serves therefore merely to highlight the internal illogic of lauding profit and denigrating loss. Both are logically necessary qualities of flow, money-flow is vital to healthy economies.)

The third way in which profit and loss are not the sweet and bitter our incomplete money story characterises them as, relates to the different societal roles and consequences of Market and State. In an old post I describe how debt-based money becomes ‘genuine’ money in the economy via asymmetrical payback of loans. This happens in the private sector, because borrowing leads to production, buying and selling, which generates the uneven pooling I describe in the paragraph above. To my way of thinking, uneven pooling is what profit/loss is, systemically speaking, and occurs only in the private sphere. Because we have come to confuse money for wealth, this in part explains our current cultural love affair with private enterprise – it ‘earns’ money.

Modern Monetary Theory offers a model of society in which the State sector functions as provider (creator, printer) of the money the economy needs to function. To see this money-creation as somehow indebting the State is deliberately to fail to see, 1. that money is not wealth, and 2. that the State is providing a service from which economic activity can thrive. Also important is the acceptance of the necessity of non-pooling (loss making “black holes”) societal activities, such as public education, army and police, which cannot generate money profits. They do, however, generate other, more important, profits, such as a well educated (hopefully) and healthy population. To think of the State, which is society’s self-organizing element, as going into debt for maintaining (paying for) a fire brigade, a national health system, a national education system, a defense system etc., is completely to misunderstand wealth, and also the complex ways in which society stays cohesive.

I had intended to write a short blog. I failed, even without discussing taxes as government ‘earnings’. Yet even this would have been too little. All money-systems are necessarily about scarcity, and therefore encourage hoarding and fear of want by design, on a planet rich in abundance of those things we need to survive happily and healthily. If this were not true, we would not be alive (we don’t eat money), and yet this simple fact utterly eludes us at the cultural level. Planet Earth, not money, gave birth to us, is the set of systems out of which we arose and in which we are embedded. This deeper component of the money story, which most will not confront, including flawed notions of ownership, control and elitism, is the deeper root of the nonsense I quote above.