The Nature of Money

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While there is significant attention being paid to creating a public banking system, that doesn’t really get to the heart of the problem. Money is not a commodity. It is a contract. A promise. If you give someone a piece of paper that says redeemable for one ounce of gold, IOU, guaranteed by the taxpayers, the federal reserve, or whatever, it is a contract. The point here is that it is not notational value, but notational trust and it is the fact that civilization has managed to commodify trust that has first created a global economy and society and is now driving it over the edge.

Economists have long sought aboriginal peoples using primitive monetary systems in order to understand how they originated, but haven’t found any resembling a modern sense of common currency. That is because native societies are built on organic trust and reciprocity and when they break down, the result is schism and conflict, not lawyers and bankers. It is only as societies grew too large for individuals to be relatively familiar with most other members of the group that forms of tradable currencies became necessary.

Centuries ago there wasn’t enough economic data to determine how much currency the economy needed to function, so a banking system evolved where the money is essentially borrowed into existence. Since debt tends to grow in tandem with economic growth, this proved quite effective. The problem being that growth was required to pay off the debt and debt grew to finance the growth, so it tends to spiral out of control, until some form of event causes sufficient debt to be written off and the system resets. Now modern math, social fears and norms, along with computer information processing have manage to sustain the growth of debt far beyond any previous bubble. Those controlling this system have both closed off as many avenues of debt relief possible, while allowing the growth of debt to continue. The result being that the currency is being drained out of the larger economy and only those parts of the economy which sustain the enormous bubbles of stored currency have access to this flow of funds. It amounts to huge storm clouds of excess wealth over a parched economy.

If one were to compare society to the body and the ecosystem, government is a form of central nervous system, while finance is the circulatory system. For a long time, government was a private function, spanning the range from warlords, to their gentrified descendants, monarchs. Eventually though, societies grew more dynamic than dynasties could control and the patent on governance passed into the public realm. Now we are reaching a point where private banking is proving too inefficient and corrupt and there is a growing awareness that it really must function as a public utility. This should be taken one step further and the money should also be understood as a form of public commons as well.

What gives money its intrinsic value is the willingness of the larger society to assign it value and trade you other forms of value for it. As such it is a multi-party contract and its value is derived from faith in the system it represents. It is notational trust. The fact is that we really don’t own this money, because it would be close to worthless if it were our own currency. That’s not your picture printed on it and if it were, no one who did not know and trust you would take it. Just try printing up some and find out who owns the copyright. Now if it is a private system issuing that money, be it Caesar, the king, or a private banking consortium, then everyone else is sharecropping in their system. With a public system, the profits from its management go back into the larger society and not just financial vampires. Monarchists thought “mob rule’ would never work, but democracy does work by pushing authority down to the level it is most responsive and effective and using that local foundation to build a larger, federal structure. With banking, a system of local community banks, with state regulations, would serve local communities and use profits to fund infrastructure in those communities. Only as the system became more resilient, would it serve as a foundation for a revived national and world economy.

So if people understand that money is a form of public utility and not actual private property, then they will naturally be far more careful what value they take out of social relations and environmental resources to put in a bank account. This would serve to make people’s own self interest a mechanism to put value back into society and the environment. Thus building back up the more organic forms of trust and reciprocity, of which money is the notational derivative.

A related problem is the current system of public spending.  In the current system, enormous bills are bundled up by the most powerful interests and enough extra “pork” is added to gain sufficient support. The result is production of public debt to feed the banking system and facilitate its control of government. To budget is to order one’s priorities and spend accordingly. A possible method to apply this to government would be to break these bills into their “line items” and have every legislator assign a percentage value to each item. Then reassemble them in order of preference and have the president draw the line at what is to be funded.(The buck stops here.) This would still divide responsibility, as well as spread more power out over the entire legislature. The percentage voting would give legislators far more maneuvering room than a yes/no system.  Since this would undoubtedly reduce Federal spending on local needs, having a bottom up public banking system, that would funnel profits back into the infrastructure of the local economies, rather than draining it off to New York, to be borrowed by Washington and then sent back to those communities, would fill that need.

2 Responses to “The Nature of Money”

  1. chris wroth

    As activists calling for change, our concern is with the money created by the federal reserve for government expenses – the common money. I like your description of money as a “public utility”. Money created by the fed is common money until it leaves the federal reserve system. It then becomes privately owned money. The federal budget is the common money. It is the money we are always told there is not enough of to address our challenges – whatever they may be. OWS needs to examine and challenge that assertion. If we look at monetary operations from the time the Treasury asks the Fed for more money, through bond sales and subsequent injection into the private banking/investment sector; we begin to see that Adbusters was on point with their early “Kick it over” attack on the economics profession. Economics professionals have turned out to be mostly amateurs, most no better at their work than politicians. Like politicians, it seems their purpose is to complicate the simple, focus on the trivial, and protect the status quo. I digress. My point is that “there isn’t enough money” is obviously always a lie when told to you by the guy who owns the money printing presses. There has to be more to the story.

  2. Mosheh Eesho Muhammad Al- faraj Thezion

    Money is an invention… and it can take any form we chose… because its fake… and based on our will to accept it.
    I propose a way to establish real money as the constitution demands…..
    Its not that hard to fix this problem… if we have the will and wisdom.