by John Brodix Merryman.
The success of capitalism is that it functions as an ecosystem, with individuals, businesses, communities, governments and other entities as the organisms making it up. As in nature, these entities are constantly tested against one another. There is no singular control, other than the medium that connects it all together. Money.
We are taught in Econ 101 that money is a medium of exchange, store of value and setter of prices. In the larger reality, medium and store are very distinct functions. For instance, in the body, blood is the medium and fat is the store. Or for cars, roads are the medium and parking lots are the store. A river is a medium and a lake is a store. Your hallway is a medium and the hall closet is a store. Obviously it is foolish to confuse them, so why do we?
When societies were very small, economics was reciprocal, as it is far more efficient to share, than individually hoard food, ideas, etc. Yet as they grew, accounting became necessary. Which is what money is. Basically a social contract, with one side an asset the other a debt.
The ancient Assyrians used clay tablets as vouchers for grain they would put in the communal granary and these would be traded around. While they were certainly valued, it was evident this was a receipt for the actual value. We have lost sight of that relationship.
In large societies, money is experienced as quantified hope and so we try to save and store it. Since that pulls it from circulation, as least in the times this meant burying coins, the powers that be could simply issue more such receipts, without needing the actual value to back them up. The result was that money has come to be seen as a commodity in itself, not a receipt for some underlaying value.
Even gold backed currencies are still a receipt for some quantity of gold.
As society became more complex and we stored money in banks, this kept the money in circulation, as it was loaned back out. Yet having come to see it as a commodity that we own, rather than a contract with the entire community, we still assume it is our store, rather than value flowing around the community. Then we are weaned on the notion that not only do we own it, but we need to be paid interest for having it.
The reality though, is the functionality of money is in its fungibility. We own it like we own the section of road we are using. So the system mutated from the efficient transfer of value, to the creation of this medium as an end in itself. It is as if the Assyrians said to the heck with the grain, we want the clay tablets.
So how does the system store so much money, given one side is an asset and the other a debt? Necessarily by creating as much debt as possible. The US government buys back its own debt, in order to issue dollars, but some countries buy other forms of debt, from corporate bonds, to home mortgages. This allows the system to issue more debt.
For example, does the government really try to budget, or is there an unspoken impulse to spend as much as possible, in order to issue more debt, in order to store more private wealth?
Consider that the budget deficit started to grow with the New Deal. Not only was Roosevelt putting unemployed labor back to work, but unemployed capital, as well. Then with World War 2, much of this borrowing went to fund the military and there was no stopping what Eisenhower originally referred to as the military, industrial, congressional complex.
Budgeting is to list priorities and spend only what can be reasonably afforded, but the legislature puts together enormous bills, adds enough goodies to get the votes and the president can only pass or veto it, Basically it is a pack of kids in a candy store, while the clerk writes up the bill to send the parents.
Some decades ago, G.H.W. Bush proposed the Line Item Veto, as a way to rein in spending. Since it allowed the president to line out any item he didn’t like, it had an ice cube’s shot in hell of passing the legislature, so was dropped after whatever elective function it served.
Just as a hypothetical, what if they broke the bills into all their various items, had each legislator assign a percentage value to each one, put them back in order of preference and then the president would draw the line? “The buck stops here.”
That would leave prioritizing with the legislature, while giving the president executive control over the overall level of spending. There would be horse trading, but as there would be limited support for those not making the cut, it would be limited. As the president likely wouldn’t want to be known as a spendthrift, it might well work to reduce deficit spending.
Yet how could Wall Street function, without those trillions of dollars of government debt, to soak up all the money that it does? Would they go to derivatives? Buy more Apple stock?
Given how much does get spent on the military, we seem to be blowing up other countries to create the illusion of saving money.
Then there are social programs, which are all well and good, but they only patch the social disfunction, not get at its sources. When Reagan tried to gut welfare, in ’86, one of the strongest opponents was Archer Daniels Midland, the food conglomerate, as this money eventually ended up in their pockets. The people were just a passthrough.
We do mostly save for many of the same reasons; housing, raising children, heathcare, retirement, etc. If ways could be developed to store value in these, as community assets, rather than everyone trying to save for them individually, with our bank accounts as our economic umbilical cord, then we would have stronger communities and the healthier environments they require, rather than this atomized culture, mostly mediated by money. With banks as the real power. Economics would return to being organically reciprocal.
As the executive and regulatory function of society, from tribal chieftains and elders, to kings and courts, to presidents and legislatures, government functions as the central nervous system of society. Finance and banking, as the value circulation system, amounts to its heart and arteries.
When kings grew so powerful and distant from society, that they lost sight of the fact that they served a function to society, in order to be served by it, they were usurped and we developed government as this semi-functional public utility. It now appears finance is reaching its Marie Antionette moment. It 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.
What if the government threaten to tax out, what they currently borrow? People would quickly start finding other way to store value, such as in closer, stronger communities.
It is not that banking should become just another arm of government. Like the head and heart, they serve different functions and are separate organs. Politicians live and die on the hope they inspire, so it is a cheap high to print more money, when the harder stuff is failing.
Currently banking has fallen prey to the powers that be and when the party gets going, they don’t pull the punch bowl away, just add another bottle of Vodka, when it gets low.
The fact is that younger generations cannot and will not support a system that is both burying them in debt, by whatever means possible, while still expecting them to carry the load of sustaining society.
That the older generation thinks they can make it work, puts them in the position of a scab over a wound. As it grows more rigid, it only separates that much more from the underlying organism.
It is evident that much of our politics and media are in a state of denial about the real facts and do not intend to accept them without a serious fight. Though it is also evident that change is coming.