Global warming is a concern for a lot of people. I’m one of them. There’s this dawning realization that puny humans can affect the big world in big and (as far as we’re concerned) permanent ways, that minuscule increments of waste CO2 (parts per million) can affect the world for a very long time. It’s a problem, and a lot of people are trying to figure out how to fix it (while all of us are busy making it worse, but still, it’s on our minds. Better than complete unconsciousness, though not by much).
We used to think of nature as this thing that was so big, and we as humans were so small, that exploiting what we found seemed acceptable, and wasting what we used was fine. There was a mindset that didn’t concern itself with a systems role for human actions. We didn’t worry about ‘closing the loop’ because we didn’t think we wasted or used enough to worry about it.
Now we think we’re so smart when we build with FSC certified lumber and bike instead of drive and try to measure and reduce our carbon footprint. And I think it’s a great thing.
But we don’t bring that same kind of mindset to all the areas we could, in particular economics. Even fairly sophisticated news sources don’t deliver important aspects of the big picture.
We talk about money the same way people of the 19th century talked about air:
- it’s this stuff out there, that comes into and goes out of our lives;
- we need it to survive;
- it’s undifferentiated, all the same stuff. Different countries use different currencies, but it’s all the same basic idea, mutually exchangeable;
- it’s always been there. No one invented it. It seems like part of how the world works, and how it should work;
- we never ponder what it is, how it’s created, or how it’s destroyed.
And what’s saddest, I think, is this: if we developed some sophistication in our thinking about money, it would open up large opportunities for people to develop and sustain meaningful, durable prosperity for everyone.
We leave economic sophistication to, well, economists, but also bankers, traders, analysts: people whose business is money. The financial industry. But money is the business of all modern humans. It’s the very operating system of our civilization. Modern humans can’t function without money in a modern way. Many of us would starve and die.
And you haven’t read the manual. Or even skimmed it. You wouldn’t know where to find it. After all, it’s someone else’s job to know that stuff and handle it. They’re taking care of it… right?
No, they’re not. That’s what we call the ‘Great Recession.’ Blame Wall Street, blame Fannie Mae/Freddie Mac/the government; from the right or left, someone was too cravenly greedy or incompetent or shortsighted or all of the above.
And when we said ‘Let the financial people worry about all that complicated stuff,’ we trusted them. We did more than take out loans we couldn’t pay (though some did); we let them design the very architecture of our economy to enrich themselves at our expense. We let them assume a parasitic, heads-I-win, tails-you-lose role in the economy. When they do well, they profit. When they screw up, we have no choice but to bail them out, and they profit. Not a bad racket.
So what can you do? If you’re not willing to look into what’s going on and ask some questions about how money works or how it could work, not much. Maybe you’re a survivalist waiting for the big SHTF, and you’ll buy some land out in the country and a bunch of guns. Maybe you think the decline will be punctuated but slower, and you’ll scramble to get yourself on the happy side of the rich/poor line. But either way, you’re writing off any possibility of a future where prosperity is broadly shared.
I don’t think that’s necessary. If you’re smart and thoughtful, and you’re willing to do some homework, you could turn this crisis into an opportunity to help you and the folks around you get through the next few years. If enough folks do, maybe there’s hope for us all.
I don’t pretend to have all the answers. But I think there are some good ways to think about the answers people are coming up with, and I think it’s smart to educate yourself about the options. I think it would be smart to take action soon.
what is money?
This is the core question. If you don’t think a bit about what money is, you are left with the ideas of others, including all the fine-print aspects they’d rather you didn’t think about.
Money is: an agreement. There’s this stuff, maybe it’s paper with numbers on it, maybe it’s numbers in a bank’s database, maybe it’s strings of shells collected on a seashore. Whatever form it takes, there’s an agreement that it has value, and people accept it in exchange for things.
Sometimes that agreement has the force of law: that’s what ‘legal tender’ means. If someone pays you with a sufficient amount in dollars in the US, you can’t sue them for nonpayment. A court of law in the US won’t accept that.
Now, that doesn’t answer a lot of questions. Like, where does it come from? How does it get created/enter/exit the system? What does it do along the way? Are there different forms? How do they interact?
But it’s useful to think of it as an agreement because we make agreements all the time. ‘Let’s meet at the Cultural Center at six.’ ‘I’ll watch the baby while you go to work.’ ‘I’ll give you $60 for those shoes.’ It’s possible to make our own money agreements with your friends and business associates. Which basically means, starting a private currency.
Whoa, John. Is that legal?
Well, it depends. In some countries, no. Germany, for example, though there are some projects they are allowing to proceed. In the US, a few things are important:
- make sure it can’t be confused with US dollars–currency notes should be visually distinct. I wouldn’t even use the word ‘dollars’ at all. We aren’t talking about counterfeiting;
- don’t use the words ‘Legal Tender;’
- pay your taxes. You’ll probably have to pay them in dollars (at least for now). If you can get a local taxing body to join your agreement, all the better.
That’s as much as I know about it. If you’re concerned about getting in trouble, consult a lawyer. IANAL.
wait–money is an agreement?
Yes. That’s it.
Maybe it’s pervasive. If you’re surrounded by people who don’t accept the same currency you do, that would be hard to keep up, unless you’re a survivalist. Maybe under ‘legal tender’ laws the word ‘agreement’ isn’t quite right, because you’re not really free to decline. But with the way things are going these days, you might want some other choices available to you. And anything you and your friends and business associates come up with will have to be just that, an agreement. Possibly a legal one.
But just to be clear: when you and those you do business with agree on a price, you’ve just defined the value of the currency you’re transacting in. That’s where that value comes from as a currency, and nowhere else. You can use dollars, strings of beads, cows, gold dubloons, or anything as long as you all agree to it.
If you use a commodity currency, your currency may have use-value, about which more later.
what does money do?
Money, as we currently use it, has three basic functions:
- it is a store of value. So, instead of storing all the food you’re going to need after you retire, you have money in a retirement account to buy food to eat after you retire;
- it is a measure of value. So, you can use it to compare value between items. An orange has a value of some number of dollars (in the US). A car has another value. You can compare them and assess the relative value of the two things;
- it is a medium of exchange. So, if I have the right amount of dollars and you have an orange, I can exchange my dollars for your orange.
There are problems associated with using the same tool to do all those things, and different ways to deal with those problems. More on that later. Bernard Lietaer’s transaction.net goes into those issues in some depth.
These are books and sites I have found useful in beginning this thought process. If you have suggestions, please post them in the comments.
Thomas Greco’s The End of Money and the Future of Civilization
Jordan MacLeod’s New Currency: How Money Changes the World as We Know It
metacurrency.org has some interesting ideas about a generalized concept of currency
the Cyclos project