More Musings on Money

Off the keyboard of RE

Published originally on The Burning Platform on December 24, 2010

Discuss this article at the Frostbite Falls Daily Rant table inside the Diner

Note from RE: This article was originally titled Christmas Musings on Money, since I published it on Christmas Eve of 2010. Since we are well past Christmas of 2012 and even further from Christmas 2013, I retitled the article for this publication.

I’m having a debate over on REVERSE ENGINEERING with Toby, who many of your may remember from Raging Debate and occasionally contributing to TBP1. Unlike my Christmas Poem, this is more in keeping with my verbose style. This sort of theoretical stuff doesn’t usually engender much real debate on TBP, so I have for the most part stopped submitting this kind of post here. However, perhaps the Christmas Spirit will inspire some critical thought on where the real source of our problems lie, which from my point of view is embedded in the nature of money and interest.

Now, most of us are aware that a strict reading of the Bible forbids Interest as Usury, although this definition has been manipulated quite a bit over time. The Bible isn’t fond of Money in general, but that hasn’t stopped generation after generation of people from using it either. You do have to ask yourself however just why it was that the writers of the Bible found so much wrong with Money, other than perhaps being informed by God that it was bad, which I will discount for the moment as a likely possibility.

First off, money has 3 Primary Functions.

1-It puts a Numerical Value on the Worth of any asset or service.

2-It provides a means of exchange as intermediary in Trading

3-It provides a Store of Wealth

Now, its at least theoretically possible to divide up these functions, but that hasn’t been the case since using money became prevalent in Biblical times. The result of the first 3 functions result in some subsidiary effects.

A-A division of classes of people between Haves and Have Nots

B-Creation of the Financial Intermediary Class, aka Banksters

C-Aggregate effects of amassed Wealth and the concept of “making money with money”. Call this proto-Capitalism if you will.

This post is mainly concerned with C, although I am sure I will drift off to discuss all the rest of the factors here as well. However, lets explore the concept of “making money with money”.

This is where charging Interest on Loans comes in. Without interest, there isn’t a monetary incentive to loan out money, so without it whatever you use as money will tend to aggregate up and disappear from circulation. Back we go to RE’s Island, where 100 people landed and found 10,000 Nuggets of Gold, which they decided to use as Money.

Over time, anybody who has control over the land and other productive assets will aggregate the money. So right off the bat, money is mainly about Power and Control, which Jesus wasn’t to big on. How does the Money get distributed back out in this situation? Only through Labor, which is the only thing someone who does not have power over the means of production has to trade for it. With many people competing for low skill jobs, this eventually leads to penury and a slave class, even if its not explicit slavery.

However, in the real world off the Island, back in the olden days there wasn’t One source of power and wealth, there were many, and they were all competing with each other. Gold became a very good Measure for aggregate Wealth and Power, because since its so rare, in order to keep accumulating more of it you must control more territory. This is where Debt comes in as it applies to the State.

A King holds say his Castle, some land surrounding it and his Treasury of Gold. He wants more Power and more Gold though, which is sitting over in a neighboring King’s Treasury. Unless he has amassed a fortune, chances are he is not going to have enough in the Treasury to pay all the soldiers he needs to capture the neighbor’s Gold. In fact, its mostly Kings who have a depleted Treasury who find it necessary to go after the Gold of the neighbor’s Treasury. So how does he fund this War? Through Debt obviously, thus was born the War Bonds.

Now, anyone anywhere with some Gold, even on the opposite side could go and buy Bonds, which garnered Interest. This makes them better than the Gold itself, because assuming the side you bought Bonds from wins, you get back more Gold than you loaned out. You make money with money this way.

As you can see, this is why the Debt market goes hand in hand with War Mongering. Going back to the very beginning of the use of money, loaning Gold to Sovereigns to fund wars of conquest brought the very best in the way of returns, generally much better returns than slow growth building schemes. This goes right back to the time of Rome, and almost certainly before that to Sumeria. Egyptian Pharoahs got themselves into a world of shit borrowing money from Roman Banksters.

So the “Market” which is discussed with such reverence by Capitalists has always been for the most part the Debt market that grew in response to the need Sovereigns had for funding wars of conquest. Gold came to represent a measure of that conquest, how much you actually were in control over. The only way the pile of Gold increased in size was to take it from others, once the easily mined up stuff in your own neighborhood was exhausted. Of course, much later the thermodynamic energy of Oil allowed for much more Gold to be mined up, but by this time having a pile of Gold wasn’t making you any richer, controlling factories and the Oil resource was what made you richer.

Around the time of the Enlightenment, the Debt market for Gold and War Mongering began to morph into the Debt Market we know as Capitalism. Now what holders of Gold and other assets bought were Equity shares in companies that they felt would grow in the Colonial and then Industrial era. Of course, a lot of Industrialization was centered around building a better War Machine of course. Almost all the seminal inventions from guns to trains to automobiles and trains all make an industrialized nation far more powerful than a non-industrialized one, so if you are bent on conquest, this is what you will invest your money in.

Now remember here, anybody who was doing this kind of investing throughout the ages had by some means acquired a fairly large pile of Gold to begin with. Inheritance, theft, and of course the occasional wise Saver and lucky Gold or Oil prospector. The common man up until very recently in western societies never had much surplus to “invest”, and really to make any significant income at all from investing at say an average yield of 5% you need quite a large pile hoarded up. Once hoarded though, assuming steady growth and not too many foolish investments over the years, it keeps compounding up ever bigger all the time.

So, going back here again to the Biblical times, its likely that the writers of the Bible were all well aware of how Money aggregates through interest, and its close relationship to War mongering. So they defined money and interest as Fundamental Evil. Of course, simply setting up a Religion wasn’t sufficient to stop the Juggernaut once the cat was let out of the Bag. Even the destruction of the Roman Empire never ended the use of and manipulation of Money by Power Seekers, although there were any number of periods through the Middle Ages where money was extremely scarce. You almost could define the Dark Ages by the lack of a functioning money in the western world.

By the 1500s, in places like Florence and Venice, wealth had consolidated once again, and again the process of issuing Credit on that is how the great exploratory voyages got funded. While risky, some of those Investments provided some awesome returns, .like for instance the Spanish who came in with the Kick Ass Mother Load of Gold of all time when they knocked down Montezuma. However, such a rapid influx of Gold into the Spanish economy quickly devalued it as Money, which is proof in and of itself that Gold doesn’t have a real intrinsic value, just a value based on relative scarcity and the choice to use it as money because of some of its basic properties, which are good from the Storage point of view.

Other Metals, and even Gold coins weren’t ever given their value by actual market conditions when used as coinage for currency, they were given their value by numbers stamped on the coin. Even today doing transactions in metal by weight would be about impossible, so for a coin to have value it had to have a Value stamped on it by the Sovereign. The people who really had control of the currency were of course the Coiners, the folks who ran the Mints. They had the power to debase currency just as Helicopter Ben does, by mixing in base metals. Where the real ability to control currency in metals came in was in how you could arbitrage the value of one metal against another and create artificial scarcities of Silver or Gold in a given neighborhood. If you control the Silver Mines, its easy enough to halt production, driving the relative price of Silver up. No wonder of course the House of Rothschild was a founding Stockholder of the Rio Tinto mining group, eh?

Anyhow, to return to the original thesis of this post, Interest results from using the dependence people have on Money for commerce. Once you control a sufficient amount of whatever the Money is, the entire rest of the society depends on that, INCLUDING the “Sovereign”. I put sovereign in quotations because no King or State is truly Sovereign if he or she does not control what Money is in his neighborhood. The general acceptance of Gold as Money going back to Biblical times has allowed for the Money Changers, the financiers of the world to become the real Sovereign here, and over time this has consolidated ever more, with of course the Final Push for a New World Order and One World Currency being the wet dream of the Illuminati. However, I think they came as close to that as we will ever see with the Dollar as World Reserve Currency, backed by the Thermodynamic Energy of Oil. In the process of that transition, I think the general acceptance as Gold as money became forever lost, although at least for a while here it may retain some of its properties as a store of value.

As this monetary system fails, more people will be forced into considering what Money really is as it becomes ever more scarce. All the currently Dead Broke Sovereigns of the world will have to consider their own Sovereignty and how to become unchained from the Money Masters, the International Banking Cartel that has dominated the world since the time of the Medici. Most if not all of them do not have enough Gold to coin up as money, and I think even Silver would be a challenge for many places. Besides that though, commerce in the sense we have engaged in it for these last 500 years cannot function without Credit, its just impossible to move tons of metals around all the time to settle accounts.

Demurrage money may well be a part of this mix in some places around the world. However, even negative interest may not be sufficient because this makes explicit that money isn’t a long term store of value, and that is one of the qualities people want most in money. To be sure, inflation serves the purpose of devaluing money anyhow, but at least in theory in a growth paradigm you can find areas to invest in which will bring you a return greater than the loss of value from inflation. In the Demurrage economy, will there be investments you can make which will return more than whatever the Demurrage rate is set at? If there are, this pretty much defeats the concept of demurrage, because it won’t keep the money circulating, rather it would be hoarded by investing in whatever non-monetary asset was growing in value, or at least maintaining value.

The simple example here would be Gold, if you assume Gold will retain its qualities as a store of value. Immediately upon earning your paycheck, paying your monthly bills and stocking your larder with food, you take whatever is left of your still 100% value recently issued bills and buy some Gold with it. You don’t save the demurrage money, you save the Gold instead. You still have the problem of Hoarding.

Of course, in the case of Gold, this is predicated on a few assumptions. First one is that Gold will retain its value, which in a shrinking economy it probably would not. As other more necessary items become more scarce, Gold would lose value relative to them. Besides that, you would have to be able to find somebody willing to sell you Gold for your Demmurrage Money, and that person would only do that if they themselves were in need of the DM to transact business. For the most part, I would think as long as Gold was holding value, it would be in a state of permanent backwardation, and unavailable to buy at any price.

Gold is just an example though, there are many other things which might be invested in, for instance Shares in Monsanto. Long as you figure Food is necessary and Monsanto will be providing the bulk of it, shares in such a company should hold value. So again, rather than hoarding by holding onto the monetary instrument itself, you hoard by using it to purchase other assets which you expect will not decrease in value as fast as the rate of demurrage.

The fundamental problem here lies in having excess earnings beyond what you need to live on, regardless of the monetary instrument. As soon as you have excess, you can find some means to hoard it, and of course like squirrels the Human Savers of the world always prepare for the Cold Winter by storing up their nuts and seeds. In aggregate, this is always taking money out of circulation, and always ends up with the effect of people who have a large pile loaning some of it out to needy people at interest, essentially preying on their desperation. So again you see on a Moral Level why the Bible has the injunction against Usury, though despite that injunction for so long as the world depends on money, desperate souls will always borrow and hoarders will always lend, in the effort to prosper from the need of another.

So now besides having to somehow prevent hoarding to keep the money moving around, in order to do that you need to prevent people from earning or acquiring more on a regular basis than they need to live on, which of course smacks of Communism. In a small Tribal society for the tribe as a whole to survive, members of the tribe do this naturally. You don’t go out and hunt down more Buffalo than you actually need so you all can grow Obese on McBuffalo Burgers, you only take what you need and leave the rest grazing so there will be plenty next year. In a large society though, particularly one where the thermodynamic energy of Oil can provide seemingly endless quantities of food, few people feel the cultural imperative to limit their own consumption. Nor do most people feel naturally inclined to limit how much they will earn, rather since the society seems so plentiful the imperative is to go out and earn as much as you can, so you have the excess not only to hoard, but to live an extravagant lifestyle, with the McMansion and the Hummer in the driveway. Or better yet, the GulfstreamV Jet and the 400’ Yacht.

So, when I bring up Communism and bring up the idea that some means of controlling how much a person earns, you DO see how Central Control gets manifested here in trying to make any form of Money work. Capitalism is also a Central Control paradigm, its controlled by the “market makers” who are the TBTF Banks, and the BIS, which is the clearing house for international currency valuation. Is this strictly a limitation of my vision, because I am immersed in a Central Control paradigm to begin with? Perhaps that is part of the problem, but I do pride myself on my ability to think outside the box, so rather what I think is the case is that Central Control results organically from the aggregation of a large society. I am trying to think of any large system that doesn’t have a Central Control at the core, and from Banking to Transportation Networks to Computer Networks, I really cannot think of one. The Internet would come the closest I suppose, but even there you have the Nodes of the Routers, and the Central Control of the Protocols and the Language used for the communications. Imagine trying to make the internet function without agreed on address protocols, or having browsers function with many different codes used. Whoever controls the Java Script controls the net. Whoever controls the Search Engine controls the net. Once systems get very large, having a distributed control paradigm may be organically impossible. Not saying that is absolutely true, but there does not seem to be a human engineered system extant that exemplifies distributed control in a large system.

Now, in the Natural World, the opposite seems to be the case. Ecosystems are very large, they are very organized and balanced, yet there does not seem to be any Central Control. You can of course postulate that God is the Central Control for natural systems, but given that we cannot observe how God is controlling these systems from our reference point, you might try to mimic a Natural System with Money if you could Model it properly. Int his case, the Model would function in the role of God, but then whoever builds and tweaks the Model becomes your Central Controller. Big Brother if you will, or HAL 9000. I would be very hesitant in any event to put an AI program in control of a monetary sytem.

The best outcome I see as possible is rather than one single system, the breakup of the One to the Many results in many smaller redundant systems. If each of those systems is made small enough to be below the Critical Mass at which Central Control becomes necessay, then they can run by Distributed Control and Individual Responsibility. That size for Human Systems as I have written before I believe to Max Out at around 10,000 Human Souls. Is there some way to limit aggregations of people and Political Units to 10,000 souls? Historically there has not been since the Age of Agriculture began, large civilizations emerged with this technological development. So here again, I do not think we will achieve such small political units again (except in some very remote locations like where I live) until the Agricultural paradigm in the form it developed no longer functions. This is a ways off still I think, although overall the depletion of nutrients and the decreasing availability of water in many Ag lands might bring this along sooner than I expect likely.

If such a breakup doesn’t happen organically, might it be possible to legislate it into existence? This might be possible, but of course worldwide it would be very difficult if not impossible to enforce. Still, just the fact that mechanized armies will go the way of the Dinosaur means that modern means of maintaining control over large swaths of the Earth surface will become increasingly more difficult. It will be a while I think before another Mongol Horde utilizing Cavalry reasserts itself, and lessons of the past on how to limit the effectiveness of Calvary might prevent such an army from ever forming up again with so much power.

Anyhow, as usual I have drifted off somewhat from my original topic and ended up once again looking at my Crystal Ball and seeing a reversion to more simple technologies and a lower energy footprint overall for Homo Sapiens as the outcome here, assuming we do not self-extinguish before that comes to pass. I still have a hard time seeing how most of the technology we have that is dependent on the Thermodynamic Energy of Oil will persist long into the future, and I think that once most of that goes the way of the Dinosaur, the monetary structure will be the LEAST of our problems for quite some time to come.

In the short term, to prevent a descent into Mad Max, we must substitute some sort of Money, because big as this population is now, there just is no way its going to operate on Potlatch. Demurrage money is worth a try, despite the problems I identified above, and its certainly a more likely possibility than coining up metals. If it can at least slow the spin down and extend the die off over a few generations, this would be a worthwhile goal in and of itself. The other outcome here is just too horrible to contemplate, although I certainly do as is my Doomer nature.

One thing is for certain. The world of Tomorrow is not going to look ANYTHING like the world we have today in its structure. There must be and there will be vast changes here, because what we have constructed in our current systems is thoroughly unsustainable, and reaching the end of its working lifespan. The End of Humanity? Hopefully not. TEOTWAWKI? Most certainly.



Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s