Cross posted from MacroBusiness
Ok, we all know that anyone who says “this time it is different” is to be treated at best as misinformed, at worst as a fool. “They are the five most dangerous words in the English language” etc. etc. But, to repeat my question: “Are things always the same?” Mostly, yes. Modern housing bubbles are not unlike 17th century Holland’s Tulipmania, government debt crises have not changed all that much since Henry VIII reduced the gold in coinage, greed, profligacy, irresponsible plutocracies are always with us.
But in global finance there are some things happening that are genuinely different. Dangerously so. It is becoming a hall of mirrors, money referring to itself in an infinite regress. Little wonder that people are attracted to gold, because gold seems to be a tangible, solid measure of value, something we can rest on in an environment where everything seems relative. Yet this, too, is an illusion. The yellow metal only has value because it has a history of being deemed to have value. It is no more an objective measure of value than the pieces of coloured plastic, notes, that make up legal tender.
To explain what I mean, let’s start with a definition of what money is. It is rules. Rules about value and obligation. Those rules are usually based on legally enforced structures, although that need not be the case. In the case of cross border capital markets, the enforcement is informal because there is no supranational government to impose penalties. Disputes are resolved by a handful of law firms, the main penalty is to be prevented from participating for a period.
Now if money is rules, then what does it mean to “de-regulate financial markets” as was claimed in the 1990s? Can you de-regulate rules? Obviously not. So what happened? The place where rules were set shifted.
Instead of government for the most part making the rules, the traders started making the rules. The logic was, as Alan Greenspan argued, that because everyone was acting in their self interest then nothing could possibly go wrong. Pricing would be accurate, the less formal self organisation of the market would be superior to the formal oversight of governments (what would governments, which are always bad, know?) and everyone would win. Free lunches as far as the eye can see.
So the rules proliferated, especially after the advent of the Black and Scholes pricing of risk, a clever piece of maths based on what is probably circular argument, but one that is sufficiently concealed to give traders the impression that they are handing off risk accurately. This led to the explosion of derivatives and securities markets, including such instruments as collateralised debt obligations, credit default swaps and endless hedging games (my personl favourite is a derivative on “volatility”).
Now the point about rules is that they are based on agreement, and their creation can be without any limit provided traders are prepared to agree, to trust each other enough to transact. They are not finite in the way that, say, gold is. And so the rule making exploded. The global stock of derivatives is $US600 trillion, about twice the capital stock of the world (all the shares, property, equities, bonds and bank deposits). Far from deregulation making the rules of finance more more streamlined and more efficient — as if the efficiency of money could be measured anyway, given that it would mean measuring money with itself — the rule making expanded wildly. And we all know what happened when the trust that underlies those rules collapsed. The Global Financial Crisis. We are lucky to have a financial system left.
This era of meta-money, I submit, is different. It is “different this time”. Some versions of it have appeared on the margin before. Hedging has a long history, for instance. But meta-money has never been the centre of the action before. In the past it has always been, for want of a better phrase, “normal” money: bank debt, equities, bonds, property and so on.
The massive volume of meta money, the ever expanding hall of mirrors, now dominates and distorts more conventional forms of money. For instance, the $3.8 trillion that is transacted every day in the US dollar makes the annual budget deficit of over $1 trillion look like chump change. About 8 hours trading. There will not be a crisis in demand for US debt, causing an economic collapse, while there is such intense demand for US dollars in the foreign exchange markets.
What is happening instead is that the logics of “normal” money are being used by the meta traders as a game (a game mainly of signs, semiotics) to try to make profits out of their exploitation of the rules of meta money. If the US government looks like it will reduce its government debt, then traders can make a play in the foreign exchange markets that the US dollar will rise. So the US dollar rises. Not because an imbalance is being corrected, changing the dynamics of supply and demand, but because a signal has been sent that an imbalance has been corrected, giving the traders something they can exploit. The rules of normal money are being overridden by the rules of meta money.
That is the world we are now in. It is why such huge distortions are appearing in areas like quantitative easing, extremely low interest rates, an ailing cost of capital, the hankering after something solid in precious metals like gold and silver, equity markets whose pricing seems strange. Governments have given up oversight of the financial markets, handing it over to the traders. We must now suffer the consequences as the traders try to outdo each other in an infinite game of pass the parcel. Or, more accurately, taking out bets on who will pass the parcel to whom.
Eventually, I suspect, GFC version 2 will come along, and the rules will finally collapse. Governments will have to come in and re-set them. There will be a huge re-regulation backlash. But how is it that governments allowed it to get to this stage? What ever happened to governing?
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We are lucky to have a financial system left.
That seems to be contradicted by the rest of the post.
And if we look at phenomena like globalization, economic centralization, and corporate consolidation, all of which were also reasons the financial system allegedly needed to exist, we see how all have proven to be destructive and malevolent toward humanity.
So we know that nothing the finance sector has wrought was ever worth anything or had any goal but our destruction. As this post describes, it is totalitarian in its mindset, processes, and goals. It and humanity cannot coexist. One of these must perish once and for all.
In “American Dynasty”, Kevin Phillips (Nixon’s editorialist-economist) discusses move of Bush family from munitions to
“financial services”=Carisle, AND historical reality behind
3 world economies who moved from manufacturing to economics
based on “paper debt”, which, as Yves notes, has brought about $600 Trillion in “paper debt”=derivatives, ala Robert
Johnson expose’. Those 3 world empires were Britain, Spain,
and Netherlands. People could read Phillips’ summation in his book, also repeated in his “American Theocracy”…
when you get to your computer will you please give us more info; kind of like a book report; so very ineresting
Correct me if I’m wrong, but didn’t the Bush family fortune come from financing the Nazis?
George,
It was the “Walker” of “George Herbert WALKER Bush” you speak of…
“American Dynasty” must be read for onesself..here’s a “reportage” from Amazon:
http://www.amazon.com/American-Dynasty-Aristocracy-Fortune-Politics/dp/0143034316/ref=sr_1_1?s=books&ie=UTF8&qid=1304836889&sr=1-1
RE the “move of Bush family from munitions to
‘financial services'”:
Makes perfect sense!
With munitions the target is dead right away.
But with financial services you can bleed them over a period of decades!
Touché! (—from the amen corner of the hallelujah choir)
“If a thousand [citizens] were not to pay their tax-bills this year, that would not be a violent and bloody measure, as it would be to pay them, and enable the State to commit violence and shed innocent blood. This is, in fact, the definition of a peaceable revolution, if any such is possible.” — Henry David Thoreau
That sums it up well. By now all taxes on the non-rich are poll taxes. We get almost nothing in return for them; on the contrary the money is used to commit crimes against us.
Friends;
“How is it that governments allowed it to get to this stage?”
May I suggest that, as your post points out, an inversion of values has occured. Money used to be a symbol, a proxy if you will, for power in the society. Now the symbol is mistaken for the object it previously represented. To be blunt, greed has overtaken the critical falcuties of the “elites.” It is the same old story, as people like Galbraith and Bacevitch have so amply demonstrated. I’m beginning to understand a bit how the Stoics felt.
Yves is quite a ways ahead of other economic thinkers in her critique of Wall St. banksters and their success in destroying this country, but whoever wrote this is dead wrong about gold. The precise reason why gold is valuable and will continue to increase in value as all paper converges into a singularity is BECAUSE it has had worth for millenia. Admittedly, its worth has waxed during times of economic uncertainty (Fall of Rome, French Revolution, Weimar hyperinflation, 1970’s stagflation, etc.) and waned during times of economic certainty (1980-2000 most recently). But given our current trajectory, which scenario do you think is the most likely in the coming decade?
I feel that the reason that so many people have trouble accepting gold’s imminent eminence over all things paper is because they were born into a world overflowing with technological, financial, fiscal upside potential. Like the fat tails which were found to be present in centuries of cotton price data, proving that markets do have memory and that the efficient market hypothesis is a load of BS, these financial and economic types are afflicted by thinking which has been addled by decades of Greenspan puts, $20/bbl oil, and Moore’s law. Their synapses are fundamentally incapable of processing a world of scarcity and stagflation/default, where the oft-ridiculed Malthusian catastrophe hangs over us like the sword of damocles. I hate to sound like someone at the top of a bubble, but this truly is a new paradigm. Is anyone developing a new iphone app to squeeze more oil out of the depleting Ghawar field? If we close our eyes and click our heels together, can we make all oil abiotic in nature and ensure a limitless supply in perpetuity. There are thermodynamic limits on technology which, let me assure you, form a very hard wall. We as a society throw ourselves against it at our own risk.
One thing I can never get my mind around when it comes to gold is that the value is always expressed in terms of dollars–the currency that will become worthless over time. So, if you own lots of gold that is tied to worthless dollars what do you really have? Is the supposed end game that some day dollars will become worthless and gold will take over as an independent currency? And if that occurs, how do you value the current worth of gold? Seems to me gold is just another commodity that makes a few people rich in dollars on the trade. But what do I know, the only gold I own is in my teeth.
It seems to me that it is precisely a scarcity of resources that now makes gold untenable as a store of value. Government will step up and take some action before it will pay 5k for a barrel of oil. For millenia gold has been accepted as the most valuable medium of exchange. Sometimes irrationally so. But never more irrationally than today. There isn’t enough gold to help us let alone save us. This is a new paradigm. Time was when time was money. Before we ran out of resources. Is this the underlying cause for meta money? We’ve run out of things to buy and sell at a rational pace so we are buying and selling time, better known as derivatives, and trying to profit by split seconds. Can critical mass be far behind?
Great thought processes, Susan…
Gee Whizz Folks;
If I didn’t know better I’d think that I’ve fallen into a meeting of the “Renaissance Faire Organizing Committee!”
As the late lamented Dick Nixon so amply demonstrated, a government can coopt any medium of exchange with ease in this modern world. Yes, Gold does have value; some industrial processes and a huge amount of symbolic heft. Consider though, most ordinary people don’t have the resources to own gold, or the sequestration of productivity that entails. For the ‘rest of us’ the precious metal within reach is Silver. And look how far over the place it’s been lately. Alas, I’m afraid that Gold, with all its lustre, will remain a tool and symbol of the elites. And, notice, due to its scarcity, one of its primary functions in the bad old ‘good old days’ was to limit and channel economic activity. The precise beauty of fiat money is its ‘magical’ ability to expand the horizons of economic activity, with an attendant rise in the general standards of living. Gold has its place, after we’ve been fed, housed and clothed.
I find the thinking in this piece refreshing, to a point, but the writer has not drawn the conclusion, as the logic bites itself in the tail. Everything in here is the essence of why gold is the only place of refuge. Gold is not somebody’s liability, it is value without someone having to make good on a promise. It is a parcel that does not have to be passed on, it cannot be created at will, multiplicated ad infinitum.
What might be left after this financial crisis has run its course will be barter and gold. Many fiat currency will cease to exist. Gold won’t.
Any idiot can see that deranged individuals paying themselves untold fortunes at the expense of countless poor is not a tenable long term strategy.
The only time gold is more valuable than fiat currency is when you have complete political collapse. In that case, our gold has value but you have to have it in your physical possession (not in a vault someone else controls), and you have to be able to protect it from bandits and tax collectors. A lot of gold still remains buried in the ground for safety by someone who didn’t live to come back and dig it up again.
Gold and silver are speculation commodities, and around 1980 goldbugs who believed the myth lost billions of dollars.
We’re all pretty much at the mercy of the national and world economy. The gold standard might give people an illusion of security, but it doesn’t protect against economic decline, and gold hoarding slows economic growth.
Food and shelter are what’s valuable in a complete political collapse.
Circa 1974, one of Bruce Lee’s student-instructors asked his students, “Where would you get food without Safeway?”..
It doesn’t take much leap of imagination to comprehend what
such a rapid transformation as valueless “money” would bring
this society..
Agreed. In an anarchic society, what do you think has greater value: a roll of Krugerrands, or a grass-fed feeder cow?
The faulty logic is that gold does not work at all well in economic collapse. Nothing does. Women in Vietnam used gold much as Indian women do, as a store of wealth, often in necklaces of gold beads. When Vietnam was war-torn, they’d trade their gold for far far less that it “ought” to have been worth to obtain food and medicine. The idea that gold will have some sort of stable, reliable value when an economy is reduced to barter is nuts.
The best protection against that outcome is to be a doctor, the general practitioner type. Seriously.
And as an additional bonus, the 1/4 million in student loans you take out won’t be owed after the collapse.
No doubt about that. However, how did they do with the folding type of money? Lit their fires, stuffed their mattresses? because it had NO value, having seized to have any way before. Most likely some food coupon or a tin of sardines could be more valuable.! If a drought, water is most valuable, in a famine food is, in a case of governmental international fraud, gold is.
Let’s compare apples with apples.
I hear if you polish it with attentive loving care…you can see your self…in its reflection.
“There will be a huge re-regulation backlash.”
Only in your dreams kemosabe. The current rules are there to cause the transition from republic to empire, from capitalism to feudalism, from freedom to slavery, and to funnel all accumulated wealth into the hands of the financiers.
…only if the money grubbers can keep the whole thing from
crashing-history shows us they can’t..perhaps especially in nano-second computerized transactions…
“That is the world we are now in. It is why such huge distortions are appearing in areas like quantitative easing, extremely low interest rates, an ailing cost of capital, the hankering after something solid in precious metals like gold and silver, equity markets whose pricing seems strange. Governments have given up oversight of the financial markets, handing it over to the traders. We must now suffer the consequences as the traders try to outdo each other in an infinite game of pass the parcel. Or, more accurately, taking out bets on who will pass the parcel to whom.”
What is taking so long is the G20 expansion of sdr. A different world in October when banks deleverage?
http://www.bloomberg.com/news/2011-04-16/draghi-sees-european-banks-raising-capital-within-a-year-1-.html
Blame it on the traders and ignore the agency of one. Obama should wear a habit.
Does Deutsche Bank get a special dispensation?
http://www.marketwatch.com/story/germany-wants-concessions-for-backing-draghi-2011-05-01
While there are patterns, it is, in fact, always ‘different this time.’ There is no reset so total we have to reinvent language, or farming, or the wheel. Wisdom accumulates, haltingly, blindly, but it does accumulate, including setbacks which are also instructive. As Buckminster Fuller said, you can’t learn less. We do not and cannot snap from one ‘era’ to another with a clean sheet, including all evolution, and everything that has ever happened. Reality is a continuum, and money does not exist outside it.
This is a very important article which, sadly in my view, does not address Perpetual Growth, a key component of the challenges facing humanity. There is this sort of unquestioned faith in The System that Things Have Always Been This Way, only recently, heaven knows why, derivatives came along and all hell broke loose. What to do?
I agree with those who contend that this stage of ‘free’ market capitalism has always been inevitable, for the simple reason that growth cannot go on forever. This is obvious but we don’t want to deal with it, because it requires changing almost everything about The System. Nevertheless we have in fact reached the limits of what this paradigm can do for us, hence the hall of mirrors (great metaphor) and self-referential, acceleratingly exponential regression of wealth, as forced-growth mechanisms (all based ultimately on usury) oscillate to breaking point. The longer we refuse to deal with this, the higher the risk we pass the point of no return and doom ourselves to extinction at our own hands.
You’re right, Yves, that value cannot be objectively measured, and it is a very important point. Value is of course a relative, emergent phenomena, as is beauty, and lies similarly in the eye of the beholder. What value does gold have for a dog, for a man dying of thirst in a desert? What value complex finance if we cannot restore soil fertility and water tables, or when we run out of oil? Interdependency is inescapable. We are part of the fabric of the web of life, regardless of how much this irritates our models and threatens our cultural sense of ourselves as separate and somehow above nature.
We have mistaken money for value, for wealth itself. But money, as we have it now, is in fact rules, the rules of ‘elitist’ control more than of commerce I believe. As I see it we need to demote money and promote wealth, which would entail a decoupling of the two things such that money can no longer make more money but merely enable a wise and sustainable handling of real wealth, that is society, environment, culture, technology, etc. Professor of economics Franz Hoermann puts it like this (from “Das Ende des Geldes”):
“Debt-money has no independent physical existence, is neither scarce nor valuable material, has no substance whatsoever. It is simply a method for controlling human behaviour, for shepherding people into unpleasant activities, performed for others, activities which then produce numbers on paper or in computers, numbers we then call money. If there is no provable material substance present in the debt-money system, and this system only functions for as long as all of us believe in it, then this system cannot be said to be scientific.
Any system which does not rest on physical foundations and relies, for its functioning, on the belief of all its adherents, is in fact a religion. And when a religion is forcibly prescribed by the state – the use of debt-money as legal medium of exchange – then we are dealing with a state religion.
But, since the general public has been explained none of this, the people of so-called free market economies find themselves in a secret state religion, which, without their knowledge and agreement, shapes and determines their lives in perpetuity.” [My translation.]
Toby said: “….value cannot be objectively measured…”
I believe that to be a partial truth.
In Western Civilization, unlike late Classical Civilization, we pay obeisance to both the spirit and the flesh. Martin Luther King’s thinking evolved so that he stood squarely in the center of this tradition, which is thoroughly Christian in origin, rejecting both the extremes of Pelagianism and Plato’s Pythagorean Rationalism.
In King’s first rendition of “My Pilgrimage to Nonviolence,” published in Fellowship in September, 1958, he articulates his rejection of Plato’s Pythagorean Rationalism:
But in spite of these shortcomings Rauschenbusch had done a great service for the Christian Church by insisting that the gospel deals with the whole man, not only his soul but his body; not only his spiritual well-being but his material well-being. It has been my conviction ever since reading Rauschenbusch that any religion which professes to be concerned about the souls of men and is not concerned about the social and economic conditions that scar the soul, is a spiritually moribund religion only waiting for the day to be buried.
In a later rendition of “Pilgrimage to Nonviolence,” published in Christian Century on April 27, 1960, King rejects Pelagianism:
I also came to see that liberalism’s superficial optimism concerning human nature caused it to overlook the fact that reason is darkened by sin. The more I thought about human nature the more I saw how our tragic inclination for sin causes us to use our minds to rationalize our actions. Liberalism failed to see that reason by itself is little more than an instrument to justify man’s defensive ways of thinking. Reason, devoid of purifying power of faith, can never free itself from distortions and rationalizations.
Neuroscience and the demonstration that our feelings and emotions are the result of chemical and electrical processes within the brain may forever lay to rest the Classical ideology that ended with the dualistic ideas of Plato in which he saw the universe as an evil material world opposed to a good spiritual sphere.
And thanks for the quote by Franz Hoermann. Great stuff! I would just add that, in the case of the United States, we are dealing with a criminal state with a criminal religion.
Charles Eisenstein wrote in an email to me that “matter is what we can see of spirit.” I reject the Platonian/Cartesian split of spirit and matter utterly, but do not believe this lands me squarely in the rationalist camp. A totally new world view is emerging that upends almost everything we think we know. This time it is as different as ever, and more so. To be corny, subjectivity is becoming the new objectivity. As the coming century unfolds I strongly suspect we will see a growing readiness to accept, and relieved acceptance of uncertainty. We cannot build a tower to heaven, because we are already there. The ignorant striving to reach heaven and purify us of all ‘muck’ is creating the very hell we think we’re escaping. And so on, and so on.
(I expect to be flayed alive for this waffle, but what the heck! It’s a beautiful spring day here in Berlin.)
Toby said: “….subjectivity is becoming the new objectivity….”
I was thinking the other day about how to visualize this.
Recent research has found that, quite contrary to Neoclassical economic dogma, that human beings fall somewhere along an altruism-greed continuum. As Ernst Fehr and Urs Fishbacher explain in their discussion of the nature of social preferences in their essay “The Economics of Strong Reciprocity” which appears in Moral Sentiments and Material Interests, at one end of the spectrum are the “unconditional altruists” and at the other end are the “purely selfish.”
Dan M. Kahan makes a similar observation in The Logic of Reciprocity: Trust, Collective Action and Law:
It makes more sense, then, to envision a distribution of cooperative dispositions across the population. Some, relatively small fraction of the population (consisting, perhaps, of those who’ve been trained in neo-classical economics) consists of committed free-riders, who shirk no matter what anyone else does, and another small fraction (maybe those who’ve read too much Kantian moral philosophy) of dedicated cooperators, who contribute no matter what. But most individuals are reciprocators, who cooperate conditionally on the willingness of others to contribute. Moreover, some reciprocators are relatively intolerant: they bolt as soon as they observe anyone else freeriding. Others are relatively tolerant, continuing to contribute even in the face of what they see as a relatively modest degree of defection. And a great many more — call them the neutral reciprocators — fall somewhere in between.
So in order to visualize what I believe you to be talking about I can create a graph. The horizontal axis is the greed axis, with the unconditional altruists being on the far left and the purely selfish on the far right. The vertical axis is the materialism axis, with the Pelagians being at the very top and the spiritualists being at the very bottom. And upon this field we can locate various individuals. Plato and the Pythagorean Rationalists would be at the far bottom right-hand corner—-spirituality in the service of greed. The flagellants and Nietzsche’s “crucified” would be at the far bottom left-hand corner—-the flesh (material) sacrificed on the altar of altruism. St. Francis would be in the extreme upper left-hand corner—-materialism in the service of altruism, or “good works.” And Ayn Rand and Milton Friedman, along with people like Jamie Dimon and Lloyd Blankfein, would be at the extreme upper right-hand corner—-materialism in the service of greed, or “bad works.”
It’s important to realize is that even though Plato, the Pythagorean Rationalists, Dimon, Friedman, Rand and Blankfein all fall along the far right-hand portion of the graph, they want everybody else to fall along the far left-hand portion of the graph, that is they would like everybody else to be unconditional altruists or unconditional cooperators.
“human beings fall somewhere along an altruism-greed continuum”
How? I agree with you, but how does this come to be? And how fixed a situation is it?
Not only can you place people on a graph which represents the full gamut of human moral behaviour, but every person can shift their behaviours from day to day, moment to moment, circumstance to circumstance, and each person’s judgement of others’ behaviours would be difference, necessarily. The data set you could produce would be infinitely complex, as is life. There would be no noise, only signal, yet even so you could only produce subjective and shifting interpretations of virtually no use except interest. And I do find it interesting. I accept the mystery.
Humans are probably the most complex animal on earth. We have had many millennia coming to all sorts of conclusions about ourselves and All That Is, conclusions and musings that are, taken together, the springboard for everything we can imagine right now, and much of what we ‘know’ is false at the foundation. If people like Charles Eisenstein are right, then we are in the middle on an unprecedentedly profound paradigm change, which will take us to a place we cannot imagine from here, except in the crudest outline. The humans of that world will be so socially different to us — assuming we make it that far — as to find us bewilderingly backwards.
(What are free riders, seen evolutionarily? Are they an aspect of the ‘lie back and enjoy life’ type? Or (also) of the sociopathic type? Everything is, looked at from a certain perspective, an experiment, a risk. Nature throws up all sorts of prototypes which can only be of unknowable cumulative ‘value’ towards no goal in particular. And out of this experimentation arises wisdom. At least, it seems that way to me.)
Toby said:
Not only can you place people on a graph which represents the full gamut of human moral behaviour, but every person can shift their behaviours from day to day, moment to moment, circumstance to circumstance, and each person’s judgement of others’ behaviours would be difference, necessarily.
That’s what makes it so incredibly exciting to be alive and to be part of this huge mystery, and to try to figure it out.
“Humans are probably the most complex animal on earth. ”
No, they’re not. Where it counts, humans are as simple as the lowly squid.
The illusion of humanity’s complexity arises when you try to map human behavior to some kind of two-dimensional grid or continuum. When you focus on how humans decide, they’re extremely simple and, therefore, easily controlled. Humans compare what they see to what they expected and react accordingly. You can control how humans react by controlling either what they see, what they expect or both.
Tao,
Instead of minimalistic assumptions such as the utility maximization of rational choice theory or the blank slate of behaviorism and social constructivism, we need to discover a complex psychological architecture that evolved by genetic evolution and that causes small groups to self-organize into coordinated units. Tocqueville got it right in 1835 when he wrote, “The village or township is the only association that is so perfectly natural that…it seems to constitute itself,” but modern science has yet to even remotely take his conjecture seriously. Conscious intentional thought is just the tip of an iceberg. The rest of the iceberg operates beneath conscious awareness and must be discovered scientifically, like vision, despite the fact that it takes place within us every moment of the day. Even more strangely, it takes place without us, in our social intercourse in addition to our neuronal interactions. The idea that we play a role in group-level mental processes without any conscious awareness will take some getting used to, especially against a background of individualism, which has dominated the intellectual landscape for the last half century.
▬David Sloan Wilson, Evolution for Everyone: How Darwin’s Theory Can Change the Way We Think About Our Lives
Tao,
An excellent documentary on the failings of behaviorism is Scott Noble’s psywars, which can be seen on the internet here.
Highly recommended, and well worth the time it takes to view it.
How does matter (form) relate to essence? Spirit defies contextualization. ‘We’ labor to appease the appetite and neglect harmony.
How can matter ‘and’ spirit be unrelated? They would have no way of interacting were that the case, an expression which notionally splits that which is one. That said, I have no good definition either of matter or spirit, in the same way I can define neither life nor death, I know only that ‘they’ are not split as the classical tradition would have it. That underlying assumption about reality is as false a dichotomy as we have.
Would your views be subjective or objective, Toby? I merely asked a question: I have no idea on the subject. It seems that placing deeds on a cartesian plane hardly defines essence: and I think we agree that essence is what transcends.
frances snoot,
subjective, of course.
I think I would say everything emerges, rather than transcends. An expression I’m very fond of right now is “Mind and world arise together.” It’s very hard, but I try to weed out any part of my thinking that rests on uncaused causes. Very, very hard.
I agree with “Tao”-humans are not so terribly complex. I have it on very good authority (hand to hand) that there are only 36 or so different “sorts”…same number as plots in literature..of course.
One could view Federico Fellini’s, “Satyricon”, as what it is-travelogue of Rome, circa 1000 b.c.? Then view his “Roma”-travelogue of Rome cerca 1945. Man hasn’t become
much different…
“As the coming century unfolds I strongly suspect we will see a growing readiness to accept, and relieved acceptance of uncertainty.”
That would be nice, but it won’t happen. Human beings are too frail to accept uncertainty. They must construct all sorts of myths and lies about their world and themselves just to function within that narrow band of behaviors we call rational.
There is sliver of humanity that has shown that it can accept uncertainty, and it is that sliver which creates false certainty in order to prey upon the vast majority of us who cannot abide uncertainty.
There is no “subjectivity”..there is TRUTH. The argument
there is only “subjectivity” is still subject to objective
TRUTH..
This is a wonderful post, and reflects some of my own ponderings about the nature of money and where it might be going. It seems humanity is new territory with fiat money on hyperdrive! MONEY rules and money RULES… here do we go from here is a great question?
It’s been a struggle figuring out where to insert a comment since there are so many good ones here. I picked Toby’s as I have been thinking along these lines as well though using slightly different language.
“A totally new world view is emerging that upends almost everything we think we know. This time it is as different as ever, and more so. To be corny, subjectivity is becoming the new objectivity. As the coming century unfolds I strongly suspect we will see a growing readiness to accept, and relieved acceptance of uncertainty.”
RE: “totally new world view emerging”
Throughout history groups of humans have gone through periods of time where worldviews have changed considerably, of which perhaps the most researched is the transition from hunter-gatherer to farmer.
If anyone wants to get a more clear and precise idea of what transitioning into a new worldview encompasses, I highly recommend the short (only 150 pages) but excellent “The Struggle for Stability in Early Modern Europe” by Theodore K. Rabb. The approx. time period is ~1520-1670 and during this time people in Europe moved out of the medieval mindset and into an “early modern” one. Rabbs explains the purpose of the book here: “The chief subject of this essay is thus a change in perception: it’s nature, causes and consequences.” He discusses changes in thinking and the nature of knowledge/education, power and authority, religion, culture, political structures,and more. The multidimensionality of his approach is commendable given how narrow historians can be. Many, many parallels to today, at a higher octave of the spiral.
RE: “subjectivity is becoming the new objectivity”
Or as I would say it… ‘The meaning of life is the meaning YOU give it!” The increasinging personalization of meaning vs. meaning as given by a group, collective, or authority/establishment (be it religious, academic, political, etc) dogma/belief system.
RE: “we will see a growing readiness to accept …uncertainty”
Agreed this is very important… was just talking with my husband about this last night and it’s something I’ve been ‘practicing’ mentally for some time now. It comes more naturally to me than my husband. He still feels more comfortable with black-white/hyper-defined thinking but has been working on increasing his grayscale.
This concept of “certainty” strikes me as very Christian/monotheist in basis. In the ancient pagan/shamanic/animis beliefs and in eastern philosophy, the principle of uncertainty is woven into the thinking. I think the mental need for certainty can be unlearned and replaced with soemthing more useful and relevant. My own perspective on uncertainty is flavored with a mixture of Zen and taoist thought, as well as my own relections.
This idea, so widely spread today that the ‘Summa theologica’ was a final, complete, and permanent presentation of its subject, was not held at the time by anyone, least of all by Aquinas himself…
This attitude, to which I have referred by the maxim about the social unfolding of truth, is the basis of the Western religious outlook. This outlook believed that religious truth unfolded in time and is not yet complete… The fundamentalist position on biblical interpretation, with its emphasis on the explicit, complete, final and authoritarian nature of Scripture, is a very late, minority view quite out of step with the Western tradition.
▬Carroll Quigley, The Evolution of Civilizations
Valissa,
Or in other words, the insatiable desire for certainty is something that was a product of the period 1520 to 1670 that Rabb’s book covers: pre-modernity and the beginning of modernity.
As Michael Allen Gillespie explains in The Theological Origins of Modernity, it began with “Luther’s theocentric and apocalyptic vision” that challenged “Erasmus’s more moderate and moral Christian humanism”:
Erasmus suggested that a Christian should adopt a skeptical stance because he had doubts about how to interpret Scripture. Luther discounts this view because in his mind a real Christian simply cannot doubt.
The quest for certainty was then taken up by Descartes, as Gillespie goes on to explain:
Descartes sought to construct a bastion of reason, …a bastion that could provide not only individual certainty and security, and not only mitigate or eliminate the incommodities of nature, but also bring an end to the religious and political strife that were tearing Europe to pieces. Descartes aimed to achieve this and make man master and possessor of nature by developing a mathematical science that could provide a picture of the true world underlying the phenomena.
[….]
His science seeks to employ theory in the service of practice and to ground all thinking and action in certainty.
Valissa,
And when it comes to the social sciences, according to Gillespie it was more Hobbes than Descartes who provided the impetus for the quest for scientific certainty:
This science is similar to Descartes’ ‘mathesis universalis’ but broader and more ambitious. As we saw in the last chapter, Descartes sought to develop an apodictic science that would enable us to understand and control the motions of all bodies. Since human processes are only partly bodily, this science could only understand corporeal human processes and had nothing to say about actions deriving from the free will. Descartes’ system of science thus included only an abbreviated anthropology (‘The passions of the Soul’) and did not include social or political science…
Hobbes too seeks to make man master and possessor of nature, but in contrast to Descartes, he denies that human beings have any special status. They are no different than all other beings. A science that seeks to make humans masters and possessors of nature by revealing the causes of motion thus must necessarily consider the mastery and possession of other human beings. Hobbes therefore had to consider the motives of human action and the means to regulate and control such actions. Anthropology and political science are thus a necessary part of Hobbes’ system. While Descartes hoped that his new science might indefinitely extend human life, he had little to say about how such long-lived beings could live peacefully with one another. The idea of generosity he developed in the ‘Passions’ points to something like a humanist notion of friendliness, but it does not deal with the desire for property, the longing for preeminence, or the preference for one’s own that have been enduring sources of human conflict. It is thus hard to see why Descartes’ scientifically empowered, freely acting human beings would peacefully co-exist, sharing the mastery and possession of nature rather than using their vast powers to kill, dominate, and exploit one another. Hobbes, by contrast, confronts these questions directly, leaving no doubt about the importance of his science for the political and theological struggles of his age.
interesting articulation Valissa.
But since everyone here is a way-out-of-the-closet Moralist, one has to concede that certainty and absolutes are pre-requisite for moral codes that we take for granted. I am not sure so-called “human rights” would be possible without the notion of absolutes, which were nourished perhaps in monotheistic thought forms that morphed, losing the God-like anthropomorphism that decorated ceilings, but retaining the forceful certainties that accompanied it.
The shamanistic and animist world, as interesting as it is, did not have certainty about the sanctity of the individual. And not even a moral relativism, but a fatalism in the face of unrestrained nature and instinct and/or a containment of all-out anarchy only through (in Freud’s lingo) totems and taboos.
I doubt one person who comments here would wish to live in that kind of a world, only tour it for a few weeks. Each system has its own demons.
But what seems totally transcendent to me is humanity’s capacity for debauchery and beastiality no matter what thought system is ascendent and dominating consciousness. It’s a slow, slow crawl to grace. And I think money has played an interesting role in fueling that crawl, as I’ve commented from time to time, but I’m too fried now to rehash it.
“But since everyone here is a way-out-of-the-closet Moralist, one has to concede that certainty and absolutes are pre-requisite for moral codes that we take for granted.”
Hey craazyman… I beg to differ on that statement, and do not consider myself a Moralist though I have observed that many here are (which I admit to finding annoying at times as being lectured at is a drag). NO, I don’t concede your points about absolutism. Personally I have come to believe that absolutism limits the powers of the mind and imagination. I became an ex-Christian and and ex-monotheist many years ago now, though it took quite some time for me to unlearn those ways of thinking. I don’t see why one can’t have moral codes and uncertainty… no reason why moral codes have to Absolute rather than relative, or conditional.
If it is true that the idea of the Individual is relatively modern then of course in the pre-literate time period when paganism, shamanism and animism were the dominant worldviews there was no role for individual destiny. They also lived with many fewer options than modern humans and surely this effected their worldview. But there is no reason one can’t pull out some of the still useful philosophical threads of those ancient worldviews and weave them into a more modern (or post-modern) pattern of belief/perspective. In fact, many (including myself) are exploring such possibilities. Not sure where that will lead but it has to be better than the suffocating academic-intellectual mindset, IMO.
Craazyman, I’m no moral absolutist, far from it. This transition cannot be guided by absolutes nor by leaders, is not guaranteed to ‘succeed’, and as it embraces uncertainty will also be happier with increasingly ‘compassionate’ and scientific attempts to arrange a far more open society than today’s.
Valissa, in case you haven’t read it, Julian Jaynes’ “The Origins of Consciousness in the Breakdown of the Bicameral Mind” is well worth a read. It discusses the possibility, with plenty of fascinating circumstantial evidence, that we were all schizophrenics prior to 2,000 years ago. We were guided by gods, literally, in that our ‘inner voices’ were interpreted as gods. Our brains then evolved better communication between the hemispheres, and the modern ego was born. The modern ego loves control of course, and fearfully needs certainty.
And the book that has been most eye-opening to me of late is “The Ascent of Humanity” by Charles Eisenstein. I plug it when ever I can. I think you’d find it very rewarding.
DownSouth, wouldn’t it be fairer to say that the lust for certainty began with the diminishment of faith in the bounty of nature that was set in motion by the transition to farming? Farming is about control, control is about ensuring desired outcomes, outcomes upon which our lives depend, hence the need for certainty. Also, the paternalistic escape from mucky Mother Earth, with her moods and blood and frenzies, away into the clear blue eternity of the sky, is far older than the Renaissance. The feminine is coming back, and with it uncertainty and acceptance of limitations. Modern androgyny seems one sign of this.
I might add that I disagree with this statement by Hoermann:
…and this system only functions for as long as all of us believe in it, then this system cannot be said to be scientific.
It seems to me the proper role of science should be observing why religion, whether it be traditional or one of these new stealth secular ones, works, and not making these pronouncements that it ought not to work.
What if we never find or if our minds senses are inadequate, to find, the anchor point of all reality[s. What if the quest of such a thing, in fact, is the root of all our madness, induces madness in its seekers acutely.
What if there are those that, at the end of the day, will expend all they have, in order blind every one else…lest they loose their grasp on the focus’s ring.
Skippy…Charity’s virtue reversed is their greatest triumph.
Hoermann is not dismissing religion, he is saying economics is not scientific. There’s a difference. Religion is essential to humans, I agree, and so would Hoermann I feel, but secret, criminal, state religions are not. That is Hoermann’s point.
“Religion is essential to humans”
Religion is just one manifestation of the lies humans tell themselves so they can function in the face of uncertainty. It’s not religion that is essential to humans, but the self-delusion.
Toby,
I don’t see how any system, religious or otherwise, can be “scientific.”
The Pythagorean rationalists were able to…destroy science because the scientists of that day, like many scientists of today, had no clear idea of scientific method and therefore in no position to defend it. Even today few scientists and perhaps even fewer nonscientists realize that science is a method and nothing else. Even in books pretending to be authoritative, we are told that science is a body of knowledge… Science clearly could be a body of knowledge only if we were willing to use the name for something that is constantly changing. From week to week, even from day to day, the body of knowledge to which we attribute the name science is changing, the beliefs of one day being, sooner or later, abandoned for quite different beliefs.
▬Carroll Quigley, The Evolution of Civilizations
DownSouth,
“I don’t see how any system, religious or otherwise, can be “scientific.””
Indeed. But economics the ‘discipline’ unjustly claims the mantle of science and uses this deception as one part of its attempt to pull the wool over the eyes of the uninitiated. For its part The System currently uses economics as one part of its ongoing efforts to sustain itself (at all costs).
All the social sciences are deception.
Economics, like philosophy, was once preceded by the adjective “political.” By allegedly describing the way the world works, philosophers and economists implicitly describe the way the world ought to be and thus perpetuate the status quo.
Downsouth;
“religion” “works” historically…it evolves-devolves, but
historial reality reveals. Man simply desires leaders to follow…
Nature, our true “leader” is not in man’s own image or interest-witness Taoist reference; “Man is before nature like STRAW DOGS”..(straw symbols used seriously during the ceremony, then cast into the dirt from whence came..)
This philosophical alternative finds no real basis in the west, though existentialism is an attempt..
“criminal state with a criminal religion”=”American Theocracy”
Plato=student of Socrates-Socrates made no such error..
Thank you for a very illuminatng discussion Toby and Downsouth; I always look forward to your posts.
Whew! It’s a heady thread, like sitting at a great philosophers’ round table.
It’s a bit head-spinning, but it’s crucial for understanding how much economics really is political, resting on an ethereal and ephemeral foundation of social trust. And that can evaporate instantly when everyone finally sees the emperor’s little ding dong, but Toby’s and others’ sense that this time really IS different feels right. This promises to be a more exponential transition than those of the agricultural or industrial revolutions.
I agree with those who contend that this stage of ‘free’ market capitalism has always been inevitable, for the simple reason that growth cannot go on forever. Toby
Wrong. Growth can and must go on forever. What is unsustainable is usury, not growth, since the debt compounds faster than the real economy can.
well well. that is a thoughtful and imaginative post.
but it’s not true to say even now that this is different. 50,000 years ago money was everywhere. if we can consider money to be an abstraction of the nourishing life force and possessing a duality where money = property like wave = particle.
the “money” was fruits on trees, fish in streams and lakes, natural herbs, natural vegetables, wild game, etc. etc. it was eveywhere and infinite. and then barter arose as a way of exchanging the labor that transformed money into work, and property arose as a way to “regulate” the distribution of the life force where money and property are inverse waves of phenomenazation
and then they tried to organize and magnify the life force through agriculture and technology. that brings us up to the present. but the life force still something that pours into the 3 dimensional world from n-dimensional space/time, immeasurable and infinite.
so now they’ve taken money and magnified it with imagination and tried to fit it to the life foce, making it immeasurable and infinite. we are where we were 50,000 years ago, facing the same dualities and infinities. it’s always like locks on doors.
oh yea and i forgot.
sun and moon = illumination and mystery = logic and mysticism = male and female = life force and life force = gold and silver, which contain the sun and moon energies more than any other objects.
it all just makes sense :)
I won’t disagree that you are not making sense, of course. The wave-particle theory of life force almost demands parsing through a confusing world of double negative logic represented by double negative speech and math.
Which is how we arrived at this juncture where we are trying to determine if “This time is different” is indeed different or not.
To keep track, we need to know how we got here, and the implications for Portfolio Management Theory. I agree that even though most of us, if not all of us, don’t really understand wave-particle theory, it is an useful analogy, or model, to represent the money-property duality and by simple mathematical substitution, it should also approximate the wealth effect-life force duality, assuming power held constant, as we always do.
Throughout our history the rich have always been plagued with the problem of a way to simply describe their wealth at cocktail parties, Royal Balls, or other social merrymaking activities. If one had to drone on about how many apples, cattle, pigs, chickens, goats, horses, slaves, soldiers, castles and wives one owned, one would quickly become known as a “bore”. This may even limit ones’ ability to acquire additional wives, even if just for a short period of time! So “money” was invented as a separate entity so that rich people could easily “score” their Life Force and easily describe its size to friends, peers, enemies, and wife targets.
Whether life force is created infinitely in n-space and flows to our 3D space at the proper point in time is something that was not really well understood in ancient history, and scientists still are arguing this point today. However, with the discovery of the electron, this lack of concrete understanding can be adequately circumvented in Modern Portfolio Theory. It can be represented by the following simplified model:
Life Force ->matter->wave-particle duality-> electron -> portfolio -> wealth effect
The actual math gets much more complicated, of course, but that’s why we have economists, financiers, scientists and quants working on it for the benefit of us that can’t figure it out.
In a previous post you mentioned you suspected Energy Insects may play a role in the development of Modern Portfolio Theory. I certainly agree you may be on to something there. It’s hard to tell what exactly, because no one has figured it out yet, but there are some theories along this line. The “This time it’s different” folks say in ancient times we had Demons, Dragons and Gargoyles. Although we did not understand why, the creatures, for safety reasons, were tethered somewhere in n-space as a consequence of Divine Design. It is not really necessary to know where in n-space they are tethered. Just that the tether is of fixed length, kind of like a dog leash, before they invented the kind that spool in and spool out. Then, as the Universe ages and expands, these creatures, and the magic they possess, are drawn from our 3D space. This is from the perspective of an observer here, of course, which is the way ancients liked to think of things. This theory does conveniently explain why we have no fossil record of these creatures and their existence is only recorded by monks, scribes and other kinds of artistic people.
Others just maintain that an Energy Insect is an Energy Insect.
But in spite of some theoretical rough edges, Modern Portfolio Theory has progressed and now one can easily quantify one’s life force on the storage medium of a computer. For all intents and purposes we are no longer limited by any constraint from n-space, and our potential to enjoy the wealth effect is unlimited.
But that has raised the issue of diversification and Portfolio Risk Management. We now know in a post-quantum world that the atom is divisible and into many more things besides just protons, neutrons and electrons. It also contains things like light, energy, and sub-particles like quarks and other things. This means that if we could model the atom accurately enough using derivatives, we can get our Modern Portfolio Theory model to properly point backwards, as so…
wealth effect -> portfolio -> electron -> wave-particle duality -> matter -> Life Force
…and be able to diversify our portfolio so that it does have the characteristics of a medieval feudal village.
We have made a great deal of progress along these lines. I don’t want to study it too much, either the physics or the portfolio model, because it looks like a lot of work.
But is does seem more work is needed by the experts in this field. Notably, the part about risk management. Some noted that liquidity might as well come from n-space when you need it. Others pointed out the fallacy of using anti-matter as a matter hedge or portfolio model stabilizer. Didn’t work that way in the model stress test, they claim.
I’m certainly not the one that is going to figure all this out, which is why I appreciate reading about it in the financial press. But that’s not to say we shouldn’t discuss things as we go.
Cedric, I think you’ve found the answer. The ultimate exchange of value will be regulated by the International Quantum Exchange whereby all settlements may or may not have occurred at any given time. But for the sake of efficiency, we will simply say they have occurred if we can observe the result.
Dear Craazyman;
If you haven’t already, you will love Aldous Huxleys “Doors of Perception” and “Heaven and Hell.” I did.
Susan,
the tree has fallen in the forest AND noone was there to hear it?
Cedric I have some work-related editing to do today and don’t have time to reflect on all your thoughts, but Energy Insects are something I’ve seen in a hypnogogic state.
And they are part of the vast infinity of life that exists in varying degrees of incarnation and form outside space and time and that “laps against our shores” as the Poet says.
http://www.youtube.com/watch?v=N8xVf_X-Ou0
I saw a spider once that seemed cut from obsidian, whose legs moved with a strange pulsing symmetry of motion, crawl down a thread right over my pillow. And as I rose up in bed and watched it with astonishment and some degree of fear, it dissolved into nothing. But it was there. It was.
srry should be “lap against our sides ” . . .
“Let’s swim to the moon, uh huh
Let’s climb through the tide
Surrender to the waiting worlds
That lap against our side”
-J. Morrison, Moonlight Drive
Yes, I think the reason music sucks nowadays is because all our creative people are going into finance.
But, be that as it may, if you want to study the literature on Energy Insects, a good place to start is Perdido Street Station by China Mieville. He has a very big spider from n-space in it and a bunch of other kinds of Energy Insects too. Some suck you brain stoopid without even leaving a hole! In China’s case, he claims it’s because an n-space space ship collided with this planet and opened up a rift between here and there and this stuff just leaks in, including thaumatological forces causing physics as we knew it to be bent all out of shape.
Could be true, or maybe he just made that up.
I’d also read Valis by Philip K. Dick.
Dude, you nailed it. :)
…but..midievil feudal villages were proposed and maintained in order to gather artisons and skilled laymen
to attract citizens in close proximity, to maintain ease-opportunity of taxbase..
“we are where we were 50,000 years ago, facing the same dualities and infinities”
Unless the earth is expanding at an accelerated rate or you’ve found another habitable planet as well as a means of mass transit to and fro, I’ve got 7,000,000,000 reasons why we are 50,000 years from where we were 50,000 years ago, the bulk of which were born of the last three centuries.
The US alone:
1700 250,900
1720 466,200
1740 905,600
1750 1,170,800
1770 2,148,100
1780 2,780,400
1790 3,929,214
1800 5,308,483
1810 7,239,881
1820 9,638,453
1830 12,866,020
1840 17,069,453
1850 23,191,876
1860 31,443,321
1870 38,558,371
1880 50,189,209
1890 62,979,766
1900 76,212,168
1910 92,228,496
1920 106,021,537
1930 123,202,624
1940 132,164,569
1950 151,325,798
1960 179,323,175
1970 203,211,926
1980 226,545,805
1990 248,709,873
2000 281,421,906
2007 301,139,947
2010 309,162,581
I can’t grow or eat gold, I can’t run my car or tractor on gold, and it’s too soft to make a plow from. Gold is nothing but a soft metal.
Gold is nothing but a soft metal that the vast majority of people believe is valuable. That makes gold valuable. Period.
I’m not happy about it, either, but I accept it and own some gold as a result.
..no wonder I believe my sailboat more important than gold,
which I own none of…
Huh?
And all of that you can do with fiat money??, or what are you getting at?. Can you do it with foot, fruit, shelter?
This is about the least relevant argument I can possibly think about, even if I try hard.
We are comparing where to store your money in a crisis and you chose —– iron??? :-)
Huh? Money = fruit on trees, fish in streams? Not hardly!
I think you’re confusing money for wealth. That’s humanity’s root problem, in my opinion. As Soddy said, “Money now is the nothing we get for something before we can get anything.” Money is a medium of exchange which has only utility value, and that only at the moment of exchange. Assigning it the role of storing ‘value’ places too heavy a burden on it and seduces us into believing wealth resides within it. The truth is both more complex and simple, and until we wake up culturally to this problem we will continue to threaten our existence on earth, pursuing growth4ever in the false belief that numbers in bank accounts are stores of wealth.
Crazyman,
Tao is accurate-there is “beyond duality”..
Given the amount of space and number of words for explaining common sense, I’d say hot air is the tody’s currency.
LeeAnne,
“classical” argument can lead to?..as noted, can one “learn
less”?..sometimes it can lead to “nonclassical”…none of which is “hot air”..
Wow, I have to say, this has been both a very thoughtful post with very relevant and point on discussion. Thanks everyone.
Agree. Economic semiotics, indeed.
Money as meta-discourse.
And in that environment, whoever talks smoothest and seems most ‘trustworthy’ captures resources. This is quite a different thing from actually creating value and/or sustainable resources.
The tulip industry recovered from the collapse of the bubble:
http://thebesttraveldestinations.com/wp-content/uploads/2010/09/Holland_Tulips_05.jpg
Best posts and most thoughtful commenting community on the Internet!
This blog should be included in every student’s core curriculum.
Or better yet, we need a Naked Capitalism University.
Ya got a great faculty gathered right here!
A brief thought:
Aside from all the particulars of the current pathologies in the financial sector which are legion… there stands one overriding, all-encompassing disease:
Its size!
At root (and in theory) its purposes are for making decisions regarding the allocation of the resources and energies of a society towards ends that better the society.
When those decision mechanisms become bloated… and disconnected from core purposes, when they metastasize…
(rather than being lean, quick and viscerally concerned with the welfare of the group as a whole)…
They come to more resemble a brain tumor in the social body… a separate organism usurping its blood supply and eventually consuming it entirely killing both its host and itself.
I’d suggest surgery.
Stoplights slow down reality so law can prevail..through social agreement=to establish-gain “control”…
speed kills…
Great post and comments.
We begin to circle around the question of ‘what is money?’ here.
Only with a general recognition that money is “rules”, or at least a legal construct operating under a set of rules, we can never move on to the proper role of a money system in a national economy in meeting the changing needs of society.
My favorite pamphlet on the subject was written by Nobel prize winner(Chemistry) Frederick Soddy, titled simply ‘The Role of Money”.
Soddy went on to found the concepts of social science and the earliest foundations of ‘ecological economics’. This is an important field of thought as we make the transition to more rational and scientific resource-limited, socio-economic structures.
Unless we understand the difference between what Soddy later wrote about in “Wealth, Virtual Wealth and Debt”, we will never transition from this flawed, debt-money cyclicality in which we presently falter, not of economic growth and decline, but of re-regulation and de-regulation of this system.
Congratulations.
A financial “system”. Not exactly a closed system, thus malleable. A hammer or a heavy finger can cause 10,000 to starve the next week, but it will be for the system, because it has been done before and why worry?
I think comparing it to the world of fantasy is more appropriate. Lets use Disneyland as an example. Many different sub worlds, borders to cross. Everything is distorted and unreal, controlled and dictated because you pay for your ticket.
Finance is primarily the same. It is fictional, built on desire, either for greed or stability, has no rules that all are required to follow. You can bet on anything like a casino. You can bet on a country going bankrupt and win money if they do. You can corner the market on a product that will cause benefit and suffering to a part of the planet. You can bet on the energy that drives change into the future, complete destruction due to lack of planning for any future where fantasy land is not the end goal.
When the bread isn’t a gamble, when the milk isn’t radioactive any longer, when the water is clean because more than just the people that drink it will want it to be so….. Perhaps then our presidents won’t be Donald the duck or another creature spawned from the fantasy land that those that gamble with the lives of others have created for their own amusement and profit.
When we realize we are being overly kind calling ourselves human and still looking at the title as complimentary, things may change.
Where’s F. Beard with the stone tablet? Mustn’t neglect the stone tablet! It’s rather the helio in the sphere, right?
Who needs the entire stone tablet? “Thou shalt not steal” is apparently too much of a challenge for this generation.
Dear Beard;
I’m sorry to say it but this generation seems to be down in “the cities of the plain” worshiping at the shrine of Moloch.
«The logic was, as Alan Greenspan argued, that because everyone was acting in their self interest then nothing could possibly go wrong.»
——————
Well, everyone inside Alan Greenspan little world of global finance DID act in pure self interest, kept the profits and dumped the risk on everyone not inside that world of global finance.
Seems he forgot the bigger picture because he was focused too much on his narrow worldview?
which accurately describes the facts regarding “subjectivity”=Greenspan’s conception of individuals+markets..therefore the conflict appears to actually regard objective truth=what has actually happened..
Yves appears to have outdone herself with this post IMO..
this goes to the heart of the matter, within my studies, though I am PolySci-Philosophy-Lit guy..studying econ for only the last 10 years or so.
From my reading of Geisst’s, “Wall $treet-A History”, and as
I have stated prior, only when there is total collapse do the (phoney?) money guys give up their irrationale..
I thought THIS article from NYT business section was informative, especially regarding nano-second trading by computer, and how one can (infer) drive=monopolize futures markets through technology=”high frequency trading”:
http://www.nytimes.com/2011/05/06/business/economy/06commodities.html?_r=1&ref=business
Things are never, ever, ever the “same.” They are at best similar with one or more dominant, easily identifiable factors that inevitably lead to a similar result.
Nothing is ever the “same.”
“δὶς ἐς τὸν αὐτὸν ποταμὸν οὐκ ἂν ἐμβαίης.”
–Socrates quoting Heraclitus in Plato’s Cratylus
You can not step into the same river twice
Dear Hugh;
Then why are we constantly wiping malodorous substances off of our shoes?
“Little wonder that people are attracted to gold, because gold seems to be a tangible, solid measure of value, something we can rest on in an environment where everything seems relative. Yet this, too, is an illusion.” MacroBusiness
True.
The yellow metal only has value because it has a history of being deemed to have value. MacroBusiness
Partially true. Some gold-bugs are attempting to remonetize gold (by government fiat!) which would boost golds’s value and stabilize it too.
It is no more an objective measure of value than the pieces of coloured plastic, notes, that make up legal tender.” MacroBusiness
Except the mining rate of gold is small, about 2% a year, whereas the creation rate of fiat can easily be very much greater.
It may already have been mentioned by someone else but this article is basically describing the paper economy (meta-money). I am not sure when we began making the distinction between the real economy and the paper one, probably sometime around the 2008 meltdown, but it was years ago.
“Eventually, I suspect, GFC version 2 will come along, and the rules will finally collapse. Governments will have to come in and re-set them. There will be a huge re-regulation backlash. But how is it that governments allowed it to get to this stage? What ever happened to governing?”
Actually this is what we were saying needed to be done after the meltdown. It should have happened but did not. There is no reason to think it will the next time. Whatever happened to governing? Well, kleptocracy happened. It’s been happening and growing for 35 years now. It’s a little late to bemoan its effects and more than a little blind still to fail to recognize it.
As I pointed out to some MMT people recently, most of this meta-money is going to have to be destroyed and most of the rest will have to be taxed away. You see MMT people say that inflation can’t happen under conditions of capacity underutilization and high unemployment. But what this does not take into account is the paper economy. Even with money chasing itself there, it is having a massive distorting effect on the real economy, but there are no walls between the real and paper economies. So if more of the money from the paper economy should, possibly as a reaction to another meltdown, move into the real economy, it could overwhelm it and cause inflation even with capacity underutilization and high unemployment.
What you have pointed out is that the ‘casino economy’ of ‘money chasing money’ has to be shrunk and regulated, so that the actions of Leveraged speculator cannot massively distort the price expecations of the parties that engage in acual transactions for the good or service, such as what is happening in the oil and grain prices.
As for the fiscal spending of governments and MMT theory, governments can still control inflation via credit/debt polices( It is debt fuelled investment and speculation which has caused the present real estate bubble world wide, and caused the bulk of asset price inflation), and taxation.
The paper economy is a function of wealth inequality. Like capacity underutilization and high unemployment, it currently soaks up inflationary pressures in the real economy by redirecting large amounts of money into itself. As I said, the paper economy and the real economy are not divorced from each other. So the paper economy can still have devastating effects on the real economy even while it is primarily occupied with itself. And some of these effects can be inflationary. We, in fact, are seeing this in commodities. This is what I have described as inflation inside of deflation. The larger pattern is deflationary but inflation can still happen within certain sectors. It is just that if the money in the paper economy suddenly moved into the real economy, we would not have sectoral effects but extremely large systemic ones.
This is what MMT does not see and the reason it does not see it is because like all other current economic theories its advocates refuse to see our economy as a kleptocracy and revise their theories accordingly.
Ding!
And just earlier today, I was scoffing about a young man who works in the banking sector: a bright, sociable, bold young fellow who has the world on a string. He read graphs and charts on computer monitors; his economic well-being is based in the paper economy.
He was a business major.
He believes that he knows how ‘money’ works, and he brings a kind of New Agey Protestant perspective to the expectation that ‘money should work for you’ — and if your money isn’t working hard enough, then your money is a lame, pathetic financial slacker that should be sharply disciplined into behaving itself!
He doesn’t need a Protestant work ethic, because evidently he’s tasked that off to his money.
Indeed, in his view anyone who has to work hard has something deeply wrong with them; if they had the brains and fiscal discipline to harass their money out of its slovenly laziness, then they too would be able to kibbitz at the nicer ski venues.
I can’t see that he makes any distinction between the paper economy and the ‘real’ economy; I think he would claim that there is no distinction. Such a distinction is invisible to him.
He can drink his morning lattes without ever once seeming to wonder where the ingredients come from, or whether the people who provide them have any decent sort of life — he seems to miss the fact that it would be in his own self-interest to ensure that we have sustainable practices so that he has a better chance of enjoying lattes indefinitely.
Yet he will buy or trade shares of Starbuck’s — AS IF buying and trading of shares somehow ‘produces’ or is responsible for the lattes. As near as I can tell, his assumes that buying and trading shares is equivalent to actual economic production.
I honestly believe that paper is more real to him than the ‘real’ economy; it’s what he knows, it’s what he knows how to manipulate, it’s what he can do.
If this likable young man were confronted with a cow udder, he’d be helpless. But put him in front of a console with buttons to click, and he’s fine. He couldn’t function in the ‘real’ economy: he has no skills for it, and no sense of it. (He’s a smart guy, and he’d adapt; but initially, he’d have a tough adjustment because his current life is quite pleasant.)
He is educated and trained for the money economy, he loves it, he thinks it matters, he is rewarded for it. Anyone who implies that he enables kleptocracy is to be shunned, derided, marginalized, ignored, and deplored.
So far, that view has worked mighty fine for him.
So the distinctions that Hugh is making in this comment are important, but if my young acquaintance ever manages to grasp them fully, it’s going to be a long, bumpy ride for him. And he’d have to develop a different sense of his own importance in the cosmos, which would be far and away the roughest bit.
It’s not that he doesn’t want to see kleptocracy: he’s simply kind of mind blind. Why would he want to see something that suggests that he’s not entitled to his cushy life? That’s the last thing he wants to see.
He has never, to my knowledge, had to do any kind of physical labor. I don’t recall ever hearing of him putting a lot of his time into Science projects, nor does he ever construct or build things. He plays video games, follows sports, makes his living through social activities and looking at charts.
Dear Reader of Tea Leaves;
One of my friends from high school was exactly in that cocoon you described. This was in the early 80’s. Before that crash Peter was worth nearly a half a million USD. All of it was “on paper.” After the crash his net worth was in a similar negative range. Pesky margin calls and such. I remember seeing him a bit after that because he’d had to move back in with his parents. The Moral: When you live in a gamblers economy, it’s easy come and just as easy go.
I haven’t seen him in years, but I can perfectly visualize him sometime in late ’08 going, “Oh no! Not again!”
“Fichtelius and Sjolander suggest that all “intelligence” reside outside the individual, and in traditional knowledge
of the society”..
It’s not so much “intelligence” at play, as society organizing..take a woman out on a sailboat, weather gets really snotty, and she prefers to go back to buttons she can push…nasty feeling when environment=nature dictates reality. Does this place the individual in “organized despair”?
Our society teaches each what buttons to push, how and when. Parachute into a desert “society”, and one is not likely to survive.
I bid 50, no 500 Quatloos!
I’m reminded of the scene in Mary Poppins, where the bankers talks about “Railways through Africa.” But, no, no, that’s too risky. No, now the financial system is self-sustaining, it doesn’t need the physical economy any more. It’s a great casino, and the Fed keeps pumping more chips into the barrel, so everyone seems to be making money. But, nothing real is actually happening. It’s the brains betting on quatloos.
Meanwhile the physical economy slowly crumbles.
You know, there must be nothing worse than being disadvantaged and reading the froth of the advantaged set to advantage the advantaged by disadvantageous measures: especially if you (being disadvantaged) know the difference.
It’s all so quintessentially British; this method of categorically administering the butterfly pin.
Francis,
I have an East Indian brother-in-law=Yogi. I once asked him
how his people could have such depth of perception, albeit such self-centered behavior…Deeq told me after little consideration, “200 years of British rule”..
Friends;
This sounds like that oft quoted dispute over the origin of the “social diseases!”
What’s to be hoped is that when ‘the time comes’ (which I assume is why we inhabit these regions) the bandaide that is covering the oozing sore will be removed quickly so as to illicit the least-amount-of-pain.
Yes, Skippy, it’s meant to be elicit, but illicit works smoothly there.
“But in global finance there are some things happening that are genuinely different. Dangerously so. It is becoming a hall of mirrors, money referring to itself in an infinite regress.”
Oh yeah? How different…
“With the development of interest-bearing capital and the credit system, all capital seems to double itself, and sometimes treble itself, by the various modes in which the same capital, or perhaps even the same claim on a debt, appears in different forms in different hands.” — Karl Marx. das Kapital Vol. III. Written in the late-1890s (we’re not too sure when)
All history… a repetition? To an extent… probably!
Whoops. That should read ‘written some time in the late-1800s’. It was published in 1894 but written years before.
Actually, I was going to leave this to Herr Marx… but I want to chime in here, because this argument is so fundamental.
This time is not ‘different’. Money is an illusion by it’s very nature — Marx, who clearly understood these things, called it a fetish; how apt.
To think there was some time when money was anything more than it is now is to chase nostalgia. It echoes the grandad that sits by the fire and tells little Johnny what it was like “in my day” — all the while concocting glowing stories that idolise the past.
Money and debt was always as unstable as you make it out to be in your article. Yes, we got a brief respite in the era of New Deal regulation but this was an exception and certainly not the rule.
This was Minsky’s key point: people are always going to try to push debt arrangements into Ponzi-land — and it’s only effective and vigilant regulation that stops this from happening.
However, to paint chaos as anything but the norm is to instill fear into people. If people start to think that stability rather than chaos is the norm then they start thinking that the world is going to end. And then we know what happens… they start listening to Glenn Beck and buying gold.
“Fairly innocuous,” you might think. Not so. Buying gold is only one step away from buying into Austerian school theory. Which is, and I say this with no exaggeration, some of the most distorted way of thinking about the world that this (last?) century has produced. Scientology included.
Money is an illusion by it’s very nature Philip Pilkington
No, it is not. I can think of two counterexamples of money that are no illusion:
1) Government fiat allows one to pay his taxes. Taxes are no illusion and thus government fiat is no illusion either.
2) Common stock is a private money form backed by the assets of a corporation. Since those assets are typically real then common stock is typically no illusion either.
@ F. Beard
I completely sympathise with your point insofar as I completely agree with the MMT paradigm. But I think this paradigm is founded on the fact that money is, in essence, an illusion (I was less than surprised to find out that Wray was a student of ‘instability’ Minsky and Bill Mitchell had come from the Marxian tradition).
Here’s why:
“1) Government fiat allows one to pay his taxes. Taxes are no illusion and thus government fiat is no illusion either.”
This ensures that money is inherently valuable — BUT it does not set the value of money; which is implicitly what we’re talking about here. So, even in a fiat money regime with strong government tax regulations, all money may, in Marx’s words, “seem to double, even treble” as debt contracts are extended and re-extended.
MMT does show that money is not worthless. But it does not — as gold standard theory does — assign it any specific value. ‘Value’ is allowed to float — and in that sense I call it ‘illusory’. Like a magician, people can conjure the stuff out of thin air (hence why MMT doesn’t adhere to a fixed money multiplier).
“2) Common stock is a private money form backed by the assets of a corporation. Since those assets are typically real then common stock is typically no illusion either.”
Common stock is valued in money — not vice versa. This is a common mistake. I like using any example I find lying around to demonstrate this.
As we speak I’m drinking a bottle of Miller. It is worth approximately €0.94. Now, does that mean that we can say that the Euro in my pocket is worth 1.064 bottles of Miller?
No, of course we can’t. That is absurd. Miller is priced in terms of Euros — Euros are not measured in terms of bottles of Miller.
Why? Because — once again to return to Marx (people should really read Marx closely, he was a profound thinker) — money is a commodity like no other. It ‘mediates’ between other commodities. So, money (€s) dictates the value that my bottle of Miller will have vis-a-vis a can of Coors — insofar as both are denominated in money (€s).
However, once money becomes this common measure it takes on an autonomy of its own. Then we can start speculating on bottles of Miller — or causing their prices to inflate due to too many €s being in circulation vis-a-vis bottles of Miller.
To come back to your example, it’s essentially the same for common stock.
(P.S. Regarding MMT we could say that were an employment buffer stock ever put in place, we might actually be able to give currencies a ‘labour-theory of value’ insofar as we’d be pegging currency values to ‘labour hours worked’ at the minimum wage. While I don’t think this gives money any ‘real’ value [wages will have to climb with inflation etc.] it is an interesting point. I ran it by Wray once, but he was busy and he dismissed it…)
“1) Government fiat allows one to pay his taxes. Taxes are no illusion and thus government fiat is no illusion either.” FB
This ensures that money is inherently valuable — BUT it does not set the value of money; Philip Pilkington
The value of fiat is set by supply and demand. Government spending is the supply and government taxation is the demand. By adjusting these, government fiat can be set at any value.
So, even in a fiat money regime with strong government tax regulations, all money may, in Marx’s words, “seem to double, even treble” as debt contracts are extended and re-extended. Philip Pilkington
Without government privilege for usury – a government enforced monopoly money supply for private debts – I doubt there would be much debt. Why should anyone rent someone else’s money supply when he might create his own? And without government privilege for fractional reserves then leverage would be very limited, about 2 to 1 or so I’ve read.
“The value of fiat is set by supply and demand. Government spending is the supply and government taxation is the demand. By adjusting these, government fiat can be set at any value.”
No… the government does not set the supply and demand of money. That is generally set by the foreign exchange markets.
Example: I am a government and I print a load of cash — or credit it to reserve accounts. What happens is that international money markets set the rate at which my currency is valued at. MMT doesn’t deal with this adequately — although I think it can when it gets away from certain simplistic (I’d say: didactic) models).
“Without government privilege for usury – a government enforced monopoly money supply for private debts – I doubt there would be much debt.”
What are you talking about? There would be no government debt, for example? No deficit? I don’t think you’ve thought this through. Even within MMT there’s always room for debt — the question is whether that debt would be public or private.
** Sorry for not replying — I had a European Law exam which I had to take…
“To come back to your example, it’s essentially the same for common stock.”
In fact, here it is in two sentences:
Money can inflate stock prices — but stock prices cannot inflate money. Therefore money determines stock prices — i.e. stock prices cannot exist ‘prior’ to money.
In fact, here it is in two sentences:
Money can inflate stock prices — but stock prices cannot inflate money. Therefore money determines stock prices — i.e. stock prices cannot exist ‘prior’ to money. Philip Pilkington
Common stock IS a private money form. To completely remove the need for other private monies, all the corporation has to do is accept its common stock for its goods and services. In a similar way, a movie theater’s tickets and a store’s coupons are private money too.
Without government privilege, it is likely that the only money that was ever lent or borrowed to any extent would be the government’s fiat and even that borrowing would be limited by the small amount of leverage that banks could get away with.
So you see, conventional private money is mostly an artifact of government privilege. Eliminate that privilege and conventional money and usury must diminish.
“Common stock IS a private money form.”
I think that’s an incorrect definition. Common stock is a commodity, NOT a money form. (Shades of Marx once more…).
The difference here is analytical — but very important. Common stock CANNOT influence the economy in ways that an actual money form can (i.e. it cannot cause inflation, it cannot be printed to run up government deficits etc).
To conflate these two things in any way is just silly.
This is not to say that you CANNOT conflate the two. I’m just saying that if you do, you’ll soon run into contradictions.
To be frank it’s like me saying that I issue IOUs and the government issues money. Then I try to convince you — in an alleyway somewhere — that I actually issue money, not IOUs. You then point out that they’re actually IOUs — and I reply that they’re just ‘private money’.
Where does it end? Well it’s simple. Neither I nor the issuer of common stock have the ability to tax. So your conflation is rubbish. Money is money — IOUs by private companies/individuals are IOUs by private companies/individuals.
Its all there in MMT.
Has the form of exchange (history’s progression) become a *word* and all ensuing debate is a fight to define it, politically / ideologically polarize it, as to breath it across the globe, in their truth.
Skippy…scared.
“Has the form of exchange (history’s progression) become a *word*”
No, it’s still — F. Beard pointed out above — a fiat issue the value of which is guaranteed (although not set) by governments guaranteeing that it can be used to pay taxes.
Actually since we’ve mentioned Marx — and since, for some absurd reason I have the floor — I’d encourage everyone and his grandmother’s cat to read Marx on money and circulation (das Kapital vol. I chap. III):
http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm
I’m not advocating Marxist theory — indeed, Marxism is rubbish when taken as a whole. But Marx was sharper than most on certain points and this is one. Read this chapter to see how commodities gradually evaporate into the ether of modern money. It’s fascinating. And, since Marx is an excellent writer, it acquires a certain drama.
Oh, but ignore all of Marx’s silly appeals to the labour theory of value. Any time he mentions ‘labour’, simply replace this in your mind with: ‘I have no idea’. Anytime he talks about labour-hours, or whatever, just read it as ‘complete randomness’. In essence, just gloss over it — because this is crap.
But ignore this and you’ve got the single finest theory of money and it’s interrelation with goods and services ever put forward, period.
Just out of curiosity, what do you have against the labor theory of value?
Transportable advantage, of low mass (electron/photon), seemingly resource unconstrained, easily hidden (can take many forms), infinitely reconstructed and deconstructed, near frictionless, too is *masters desire (*tipping point in that relationship).
Skippy…does an algorithm toil, what legacy costs does it carry, whom attends its funeral.
LTV? It’s basically rubbish — and I think Marx saw through it when he was writing the second two volumes of Das Kapital.
I wrote something on this once — a little tongue-in-cheek, but what the hell:
http://fixingtheeconomists.wordpress.com/2010/11/03/transvaluation-of-values/
But do note that Marxian macrohistorical theory does not depend on Marxian microeconomic theory. The Manifesto was written before Capital.
Marx tried to retrofit a microecon theory to more fully explain and justify his macrohistorical theory. A very ambitious project–almost like trying singlehandedly to establish a unified field theory. The results of Marx’ efforts in economic theory are unsatisfactory, but I remain in awe of the intellectual scope of the man who attempted it.
Unsatisfactory as Marxian micro might be, nevertheless, Marxian macrohistorical theory is looking better all the time.
This excellent post echoes ECONNED, exposing economists and banksters as secretive high priests issuing binding doctrines based on inscrutable circular math. This cartel’s “meta-money” is the monopolists’ “funny money”. When the rules and MMT collapse, it will be “good as a continental”, which Tim Geithner in his earlier incarnation as Alex Hamilton forced the taxpayers to honor without haircuts for the war profiteers.
Charles Hugh Smith has related thoughts in:
“Memo to Mr. Bernanke: it’s called blowback, baby, when the public finally sees through the covert ops propaganda. The institutions which are reporting the ‘proof the economy is recovering’ will lose what remains of their credibility, as will a Mainstream Media which has unquestioningly “reported” the distortions as fact for years.
“All this coordinated misinformation and distortion is setting up the delegitimization of the complicit institutions, which include the Federal Reserve, the Treasury, the White House, Congress, and all the agencies tasked with documenting the ‘recovery.’”
“Today the stock market is rallying on the wondrous ‘news’ of hundreds of thousands of new jobs created–the last of the three metrics which the Status Quo needs to complete its picture of ‘recovery.’ As the gap between the ‘good news’ and reality widens, the forces of blowback and delegitimization only coil tighter.”
http://www.oftwominds.com/blogmay11/blowback5-11.html
It’s not a gold bug, it’s a gold feature!
[rimshot. laughter]
I’ll be here all week. Try the veal pen!
“The yellow metal only has value because it has a history of being deemed to have value. It is no more an objective measure of value than the pieces of coloured plastic, notes, that make up legal tender.”
That’s astoundingly stupid.
Oh, you’re absolutely right — this guy doesn’t know WHAT he’s talking about… as my graph shows clearly:
http://imageshack.us/photo/my-images/861/goldcatfishshoe.png/
No the author is right. Any value of gold beyond its commodity value is based on its potential use as money.
It is commodity monies that are stupid; if used as commodities then they are not money and vice versa.
“Any value of gold beyond its commodity value is based on its potential use as money.”
That’s what we call a ‘circular definition’.
Why? Because if gold has a ‘commodity value’ — then what the hell is it valued in? Beans?
Gold’s so-called ‘commodity value’ cannot be based on it’s ‘potential use as money’ because it’s ‘commodity value’ has to be VALUED in terms of money… duh!
The reduction of friction, whether, with regards to this years, months, weeks, days, hours, minutes, seconds, milli seconds, nano seconds, as a multiplier, function of price discovery, tool of debt servicing, but, more likely just to enrich / entrench a few (for their design[s an no one else), further detaching fiat script (a forced contract) from any worldly thing (the need to employ dimensional bugs to give it mental capacity / weight…lolol), well all I can see is the need of a few, too infuse it with their reality.
The voice of exchange, of reality, contracts with out wet ink, decree by any other name, spat out as if from a rail gun….laying waste where pointed. The commons meager supply is no match, yet they surrender it to the cannoneers as they might point it other wheres, for temporary peace of mind, 4 years of phew, only to fret in 2, and repeat in 4 more. What was said about minds merry-go-round, what miss understanding of the universe does not accomplish, our own need to create alternatives will.
Skippy…it would not be, so bad, if it was only our minds that felt its effects, but, a world is reduced to feed their appetites.
PS. Friction is a result of epochs desire, yet we challenge it, with ours…presumptuous for such a young species methinks…Homo-Opportunitas-F = ma-Dissimulo