Satyajit Das: The Power of Money

Posted on by

By Satyajit Das, a former banker and author of Extreme Money and Traders Guns & Money

Vivek Kaul (2013) Easy Money: Evolution of Money from Robinson Crusoe to the First World War, Sage Publications

Vivek Kaul (2014) Easy Money: Evolution of the Global Financial System to the Great Bubble Burst, Sage Publications

Vivek Kaul (2014) Easy Money: The Greatest Ponzi Scheme Ever and How it is Set to Destroy the Global Financial System, Sage Publications

Disclosure of Interest:

In one of Jorge Luis Borges’ late stories The Bribe, Ezra Winthrop, a specialist in Old English, must select between two academics, to send to an important symposium to present a paper. The choices are Herbert Locke, Winthrop’s faithful colleague who has been of great assistance in his work, and Eric Einarsson, an insolent Icelander. As the old man grapples with his choice, he comes across a piece by Einarsson which indirectly attacks Winthrop’s work and teaching. Winthrop nonetheless selects Einarsson.

Before leaving for the conference Einarsson explain his actions to Winthrop. He confesses that the conference is a pointless waste of time but important to an immigrant seeking professional advancement. He confesses that he published the attack to ensure his selection. It played on Winthrop’s passion for impartiality. The only way that Winthrop could avoid the accusation of reprisal would be to select the Icelander.

The reason for the story is that I know the author Vivek Kaul. I contributed the foreword to the first volume and he saw fit to draw on my books. Borges’ point is that bribes take many forms and do not always have expected outcomes.


Any history, especially of money, must negotiate complex cross-currents.

After all, history, according to Henry Ford, was “bunk”, rubbish. Historians like Oswald Spengler and Arnold Toynbee discerned patterns which might prove useful in understanding the present and providing guidance for the future. Philosophers, Georg Hegel and George Santayana concluded that the lessons are different: no one understood or took heed of history.

Money too is ambiguous. The Beatles only wanted money because nothing else paid the bills. What money couldn’t buy was of no use to them. Pink Floyd wanted to grab the cash, preventing others from getting their hands on their stash. They saw it as the root of all evil, though they thought their status demanded at least a Lear jet. Michael Jackson confessed that he was prepared to lie, spy, kill or die for money. Baron Rothschild once observed that only three people understood the meaning of money and none had very much of it.

The history of money is a well traversed field. Glyn Davies’ A History of Money: From Ancient Times to the Present Day, John Chown’s A History of Money from 800 AD, Jack Wetherford’s The History of Money and Georg Simmel’s The Philosophy of Money, to name just a few, all cover the subject from different perspectives. Easy Money presents an up-to-date history.

Mr. Kaul, a journalist, was motivated to write the book, at the height of the global financial crisis. He describes walking into his office wondering what to write about. Perusing the dense jargon of modern finance, he pondered whether anyone, especially ordinary citizens, really understood any of the terms or what was really going. He confesses that he himself did not understand many of the acronyms, which perhaps ironically put him in the company of a large number of regulators, ratings analysts, and bankers who actually were involved in the transactions Mr. Kaul was writing about. Displaying unusual journalistic courage, he started to write about what the terms really meant. The positive response of readers encouraged him to keep going, a process which eventually led to this book.

Easy Money is really one book, which has been divided into three volumes. Volume 1 Evolution of Money from Robinson Crusoe to the First World War focuses on the history of money until the early twentieth century, covering the experimentation with different forms of money, the evolution of banking and the development of the modern monetary infrastructure. Volume 2 Evolution of the Global Financial System to the Great Bubble Burst covers the twentieth century, especially issues such as gold standard, Bretton Woods and the dollarized economy until the events of 2007/2008. The final volume The Greatest Ponzi Scheme Ever and How it is Set to Destroy the Global Financial System focuses on the global financial crisis and its aftermath.

Well researched, in Easy Money, Mr. Kaul, a fine storyteller, has constructed a seamless and cohesive work. At three volumes and spanning around 900 pages, the series is comprehensive and detailed. The author weaves his narrative around events from around the world, both ancient and modern, and a varied cast of characters, ranging from Leonardo Fibonacci, Kublai Khan to more modern marauding financiers.

Mr. Kaul does not assume that his audience is versed in economics or history, targeting ordinary readers who wish to gain familiarity with the subject. But the book also offers something for the more knowledgeable reader. The author’s fine eye for a quote or anecdote provides the more experienced with interesting detail, unexpected affinities or sometime novel insights.

Few histories of money include particulars about King Henry VIII’s waist size: 54 inches. It is interesting to learn that coins are round because the Chinese “believed that money is meant to roll around the world”. The special status of gold, Mr. Kaul writes, is due to its actual limited usefulness. Malleable, ductile and an excellent conductor, gold’s softness and limited availability make it practically useless for other applications, making it ironically suitable for monetary purposes.

Easy Money also has shortcomings. It is derivative, relying on secondary sources. It does not cover some emerging topics, such as modern monetary theory (“MMT”) and the current vexed issue around the real role of money in economies. The attempt to distil complex structures into simple prose is not always successful, in terms of accuracy or technical detail. The structure, three separate volumes, is also not ideal. It results in repetition and cumbersome cross references, some of which could have been eliminated with better editing. But for someone with a general interest in money, these three volumes provide a fascinating reference work on money and its evolution.

The most striking thing about the history of money is its relationship with power. Max Weber, the father of social science, defined the state as the agency that successfully monopolizes the legitimate use of force. But increasingly, allied to explicit force is the power of economic coercion embodied in the control and manipulation of money. Baron Rothschild once boasted: “Give me control over a nation’s currency and I care not who makes its laws.”

This power has increased with time. At one time, an individual could at least try to exist without money. Anyone could, theoretically, obtain shelter, water, food and clothing through their own direct effort, provided they were willing to accept the hardships, risks and the primitive standard of living. Exchange intermediated by money combined with the inevitable shift away from subsistence economies and specialisation of labour subtly reduces freedom as it increases reliance on an artificial medium which can be manipulated.

The movement to fiat money accentuates this. Connection to a real commodity, such as gold, is illusory. History shows the linkage, a human creation which is an exercise of state power, can be altered at will. The post Bretton Woods separation of money from any tangible real object provides the state, through its monopoly over the printing presses, ever greater control of money and economic activity.

American dollars still bear the words: “In God We Trust.” But God is not directly responsible for control of money; it is governments and central banks. Money has become a matter of pure trust in the state and its agencies. Increasingly, that trust is being betrayed.

Following the Great Recession, extraordinary measures (zero and negative interest rates and quantitative easing (“QE”)) have been implemented to seek to restore prosperity and make unsustainable debt levels manageable. As the policies have failed, bringing stability but not generating growth or inflation, increasingly desperate policy makers have explicitly targeted inflation. There is no consideration of the morality of their actions, which disadvantages smaller savers and retirees, benefitting borrowers. Keynes recognized the risk: “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

Impotent governments and central bankers have resorted to financial repression. A punitive combination of higher taxes, public spending cuts, negative real interest rates and devaluation of currencies is now used to debase the value of money and reduce living standards. Indirect or direct confiscation of savings is routine. Governments exert control over deposits, directing it into government securities. Capital controls, such as those in Cyprus and Iceland, may be used to control outflows of funds. In a number of countries, the government has seized pension fund assets to finance government activities.

In order to strengthen their control over money, governments are increasingly trying to eliminate physical or paper cash altogether. In several countries, banks must already report large cash transactions. Increasingly, some limit the amount of withdrawals and require information on how the money is to be used. The initiative is justified on the basis of preventing tax avoidance, crime or terrorism as well as increasing efficiency and lowering cost. But eliminating the freedom, privacy and anonymity of cash with digital or virtual equivalents also allows greater control over the lives and wealth of individuals.

The conjunction of an increasing digital world and the ability to control money allows authorities to exert almost unlimited power over knowledge, information, and economic activity. The control over the life of citizens is analogous to the world of Winston Smith in George Orwell’s 1984. Perhaps, the most interesting thing about this evolution is that human beings have allowed this to come about.

Winston Churchill noted that: “We shape our buildings thereafter they shape us”. Money is one of the human race’s most important creations. It has allowed development. But it also enables manipulation and abuse on a large scale. Perhaps, that is the true lesson of Easy Money.

Print Friendly, PDF & Email


  1. Disturbed Voter

    I would hope that such studies cover the monetization of the many new financial instruments, including derivatives, CDS and mobile mortgage paper … these are money too, after a fashion, if they are quantifiable, and easily traded in large amounts. Among organized crime, stolen art serves as currency between drug lords.

    Hopefully, the more they attempt to control things, the more things will react by escaping their grip. Omnipotence is the ultimate hubris.

  2. Rosario

    I haven’t read the entire book(s) but I have to admit after looking at the contents and reading a bit into Robinson Crusoe and “barter” I became disinterested. Why does the barter myth persist? As if all of human history involves quantitatively measured interactions in a formal, regimented economic exchange. Barter is a blanket term for economic exchange outside the nation-state or some formal civil structure and its use is pervasive because I sense many economists don’t want to acknowledge the mostly informal components of economics (relations, symbolic or virtual debt, verbal agreements/contracts, etc.). Unfortunately, this “blind spot” also tarnishes any critique of money as it is currently used because its development is devoid of a complete cultural and historical context.

    1. Macon Richardsonn

      Thank you for your comment. Karl Polanyi destroyed Adam Smith’s “truck and barter” myth in his 1943 “The Great Transformation”, basing his analysis of generations of anthropologists’ studies of simpler societies (I will not use the words “primitive societies”). Yet the myth lives on in economists’ minds.

  3. Chauncey Gardiner

    As Das says, Money is power, and trust in that power of creation and distribution. It is also increasingly fragile for a variety of related reasons.

    I am looking for solutions beyond financial repression, hyperinflation, a return to the gold standard, corporate equities or other artificial financial derivatives as “money”, or Satoshi Nakamoto. I appreciate historical context such as that presented here.

    1. hunkerdown

      Graeber’s Debt offers plenty of historical context. :)

      Long story short, citizens need an* economy run in their basic interest, i.e. closed, i.e. not beholden to external creditors. Thus, we must extend our own credit within human-scale spheres. The household and social economies once provided this service, until the steady downward pressure on citizen surplus has turned the concept of community service from random acts of kindness into something petty criminals do. (Remember, every time you give your neighbors backyard tomatoes or shovel their walk, you’re sticking it to the Man.)

      “This Business Serves Everyone” has been elevated to a moral commandment under neoliberalism. “Your money’s no good here”, despite its ill reputation as a means by which communities protected their in-groups against financially motivated infiltration from below (with some success, it is never observed), is so vilified because it is also quite effective against financially motivated infiltration from above.

  4. impermanence

    Money, as the abstraction of labor-value earned, is the first step on the short path to Hell.

  5. Susan the other

    Das disappointed me with this one. He is always so fluid and readable; but here in the last 3 paragraphs he switched from an analysis of what money is to an analysis of what hysteria is. He sounded like a Libertarian if there ever was one. Das could do better than this. I’m offended. He talks about gold as if it were something special. I’ve got news for him: gold is pure fiat. And besides this, ironically, the value of gold is based on the perceived value of some currency in relation to gold. It might help the concept of money to eradicate the vestigal emotional-hysterical dependence on the value of gold. Gold is nothing. So just go ahead and get your existential crisis over with. I’m tired of it. Das refers to fiat as running off the tracks because it is “not connected to a real commodity” – dear Jesus. Is Das just a clever nitwit? Gold is the fiat of last resort – but that’s after everybody is dead and dying. Remember George Schultz: trust is the coin of the realm. Money is trust. Gold is distrust. And it will never be “money”. To his credit Das points out that this trilogy of hysteria does not even discuss MMT. Gee, why? When you leave out the most sophisticated thinking about money and economix, you can write any fucking thing you want. That’s why.

    1. Bobbo

      You are right when you say that gold is not money. But you are wrong when you say gold is nothing. Gold is wealth.

        1. Bobbo

          One asset class out of many, to be sure, but the ONLY thing that can recapitalize and reboot the global monetary/financial system. But that’s a consideration only for the paranoid, for those who have studied history, for those who think in terms of decades rather than trading days, those who think that the system might actually be more fragile than it appears.

          1. Skippy

            Hate to be the one to break it to you bobbo, but, bimetallism first use was to provide liquidity to fund war, even then it has a dismal track record, ask the Spanish or the countless indigenous peoples and cultures wiped off the planet, Just because some pathological savages thought you could imbue a physical object with supernatural powers.

            Well in all honesty, from a historical point, divinity is what bequeathed gold and silver special sociological significance, per the Egyptians, gold the sun and silver the moon or gold the spirit and silver the bones.

            Anywho your – ONLY [thing] – “pontification” just goes to show how mentally stupefying such psychological conditioning can be.

            Skippy… Decades roflol…. hell we have millennium of data wrt bimetalism, yet even with MMT we have those that bastardize it – in the name of bimetallism… worship problem methinks….

            1. Bobbo

              Skippy, gold is the ONLY thing that can recapitalize the system because it is the only real thing already on central bank balance sheets. Not because of any magical properties, but because central banks have already made that decision through their actions. Second, what does bimetallism have to do with anything?

              1. Skippy

                Physical objects represented in numerical form suffer the same problems as all other valuations, prostrations of – real – aside. As noted above gold only gets its value from authority, whether in antiquity though divinity backed authority or recent history of government setting its price.

                If you think banks have already made a decision to recapitalize via gold now’s your chance, bet the house and send a post card… down the road. That banks have a basket of assets as reserves or hedges w/ gold as one component does not support your desires.

                Skippy… And – desires – are a woeful analytical took wrt operational reality’s imo.

                PS. you might get better traction over at zero heads where the answer always proceeds the question.

                1. Bobbo

                  Skippy, gold is the only asset already on central bank asset sheets that is not printable, or a derivative of something that is printable. If there is a major black swan reset-type event, I can assure you that the system will be recapitalized by the gold that is already on the balance sheet. There will be no major conference to debate and vote on what the next system will look like. The decision has already been made. If the central banks start buying another finite thing as a reserve asset (Picasso paintings anyone?), then all bets are off. But until then gold is the ONLY reset button in the cards. That is not an ideological statement. That is an objective fact based on a study of the balance sheets.

                  I do not expect any “traction” on this board. When it comes to monetary matters I realize this community tends to the top down approach, and tends to have faith that the world turned the corner for the better — once and for all — in 1971 (and in some ways I agree, but that’s for another post). However, I tend to think of 1971 as very recent history.

                  As for your suggestion that I “bet the house and send a post card” — I think that is utter foolishness. I think I can see the big picture, but I have no confidence in my ability to time anything. If anything, I tend to be really really really early. I lost big money buying Countrywide puts too early in the early 2000s before the bubble burst. In my mind it is wiser to take a more measured and moderate approach (~5-10%). What I cannot understand is the mindset that gold is “nothing” and has no place at all as part of one’s savings. To me, that requires a lot more ideological commitment to a principle.

                  I expect no traction here as I suppose most here have made up their minds, but I think it is healthy to be exposed to a contrary view from time to time. Cheers!

                  1. skippy

                    “I can assure you that the system will be recapitalized by the gold that is already on the balance sheet”

                    What you can’t seem to wrap your head around is gold as a “physical object” is just a mental anchoring point by which to attach a – feeling – about numbers.

                    It does not in any way, shape, or form grant those numbers some sort of atomistic Newtonian validity, only Law can do that, in the first order of acts, even for gold.

                    Hence your “That is an objective fact based on a study of the balance sheets.” is more than a wee bit wonky. Firstly is not objective nor factual and unless you can produce your study for peer review, its a completely throw away statement. You might as well use the distinction of – REAL – as some are wont.

                    Skippy… If banks or sovereigns wanted to go back to scarcity based philosophy, potable water would be a much more intrinsic tool.

                    PS. gold does not stop corruption or fraud… the key features of our currant sociopolitical malady.

                    1. Bobbo

                      skippy, the issue is one of logic and reason, not a study to be submitted for peer review. Let me simplify it for you. Imagine 7 balance sheets for 7 central banks. Each entity has a quantity of $€£¥ on the balance sheet (to keep it simple, currencies or currency derivatives) and a quantity of Au on the balance sheet (gold).

                      A: 1000 $€£¥ + 35 Au
                      B: 2000 $€£¥ + 3 Au
                      C: 5000 $€£¥ + 1 Au
                      D: 2500 $€£¥ + 10 Au
                      E: 4000 $€£¥ + 0 Au
                      F: 1500 $€£¥ + 50 Au
                      G: 1200 $€£¥ + 5 Au

                      Now let us suppose the unthinkable happens and all of the $€£¥ collapses to 0 and the whole world declares bankruptcy. Impossible, right? Maybe so. But bear with we. What happens next? Does life come to an end? No. Do all the buildings, roads, ships and farms in the world disappear? Of course not. What are they worth now? Impossible to measure, right? They will be revalued in the new system. How do you recapitalize the system? What’s left on the balance sheet?

                      A: 35 Au
                      B: 3 Au
                      C: 1 Au
                      D: 10 Au
                      E: 0 Au
                      F: 50 Au
                      G: 5 Au

                      A and F become wealthy countries. Does this mean gold goes back to being a currency? Of course not. We will still have (new) fiat currencies. But it terms of establishing the value and credibility of the new fiat currencies, gold will be the reference point. See the difference? There is nothing magical about gold except that it’s the only thing in common on all the central bank balance sheets that cannot go to zero. As everything else goes to zero, gold has to go the opposite direction.

                    2. Skippy


                      Your still not getting it or just playing dumb.

                      Its just numbers, nothing more and nothing less, what is at play is the agency behind those numbers e.g. geopolitics.

                      So pray tell when will that condition be receptive to your beliefs i.e. bias seeking is bad methodology – see last few decades of economics.

                      Skippy…. plus there has been zip from rumor control.

                    3. Bobbo

                      Skippy, why insult me? I only offer the reason gold is still on the balance sheets of central banks: because at the end of the day gold is the only way to reboot the system if that ever becomes necessary (which I am not suggesting is imminent at any time in the foreseeable future or even in my lifetime). For a verifiable fact, gold is the only thing qualitatively different from everything else on the balance sheet because it’s the only item that does not represent someone else’s promise or obligation. That’s why it’s there. Are bankers paranoid? Is the risk so infinitesimally small that we can ignore it for all practical purposes? Perhaps. Maybe the system will never need to be rebooted. But that is why the gold is there, and I think that is worth thinking about YMMV. For a fact, China is buying a lot more gold than MMT economists.^^

                    4. skippy

                      You attempts at being coy w/ stepping down from your original statements is dishonest dialog, that will promote disdain.

                      “gold is the ONLY thing that can recapitalize the system” – “Gold is wealth”

                      Your espousing closure where there is none, unless you write the laws – yourself – personally. Both examples are at the end of the day – philosophical / spurious conjecture.

                      Which you have now walked back too –

                      “I do not suggest that we will go back to a gold standard, or that gold will ever circulate as currency again. We won’t and it won’t. Instead, it will just be a wealth reserve held on balance sheets”

                      This is something that is already operational as a item – within – a basket of assets. That you foresee it as the singular asset by which all other values stem from is nothing more than a gold standard hypothecated.

                      Yet no one or combination of assets caused our currant predicament nor would the former fix our problem set, that distinction is a factor of corporatist political agenda dressed up as ideological advocacy.

                      Skippy…. so until the lunatics can come down out of their tree and admit they were grievously wrong… nothing will be fixed, gold or no gold, banks recapitalized [????], marry go round political antics….

                    5. Bobbo

                      I have walked nothing back. The first entry was intended as a provocative statement, and it obviously got your attention. From there I tried to explain a concept to you, which I do not think you have grasped yet, and which you are free to accept, or reject, or just think about or dismiss or simply ignore. And you respond with a series of insults, perhaps intended tongue in cheek, but insults nonetheless. Sigh.

                    6. skippy

                      Your statement was not provocative, it was a declaration [as from above] , as is your opinion about gold being the only thing capable of “recapitalizing” banks [what ever that means].

                      The only thing you have explained is your desire.

                      Skippy…. fetishes are a poor substitute for productive capital.

      1. MRW

        Gold is wealth.

        Whose value goes up and down like a toilet seat.

        US$1900/oz in 2011. US$1208/oz today.

        A treasury security for US$1900 wouldn’t have caused you to lose over 1/3 of your wealth in four years.

        1. Bobbo

          Funny how that doesn’t seem to bother the rising economic powers all that much, particularly China. They must have other considerations in mind when they decide to buy gold rather than stocks and bonds.

          1. LucyLulu

            When there is panic in the global markets, the gold bugs may add a few ounces more gold. However purchases of gold pale in comparison to the flows of money into the US dollar.

            Buy the gold for the lady in your life, and you may also get the returns you’re looking for.. Or then maybe not. Life is a crapshoot, don’t ya know?

          2. MRW


            And what are China’s choices? It had $1.7 trillion in payments from Walmart and Best Buy, etc, in treasury securities in 2008. Sitting in its account at the Fed.

            All it could do was exchange some of its American $ for Yuan, and wire them home. What for? It creates the Yuan.

            Or it could buy something American. What? Boeings? The shit it sell us? What for? It already has the technology.

            So it bought gold. Big deal. At least it could take delivery.

            1. Bobbo

              You seem to think it inconceivable that the present system could crack and crumble. Maybe you are right. But if you are wrong, all that gold will make a big difference.

              1. MRW


                But if you are wrong, all that gold will make a big difference.

                Why? Gold is just another fiat. There isn’t enough of it to handle the transactions being made globally today. Don’t forget that Great Britain did very well for 400 years using tally sticks, which are just matching pieces of wood.

                In this country, at least, the issue of what constitutes legal tender was argued before the Supreme Court in 1871 in the case of Knox v. Lee over the issue of Greenbacks, aka: United States Notes (1862-1971). The court decided that United States Notes / Legal Tender Notes / Greenbacks were legal tender and constitutional. So we have over 146 years of precedent where the value of our currency was established by law alone.

                1. Bobbo

                  MRW, I think you are mixing up concepts. I do not suggest that we will go back to a gold standard, or that gold will ever circulate as currency again. We won’t and it won’t. Instead, it will just be a wealth reserve held on balance sheets. You are right that there is not enough gold in the world — at present valuations — to play that role. There will need to be a revaluation. Not a big bull market, but a one time banking holiday type revaluation. The legal tender issue is irrelevant. I agree with you that gold is never coming back as a currency.

    2. larry

      Susan, Your critique is “on the money”. Do excuse the cliche; I just couldn’t resist.

  6. John Merryman

    While the effort seems honest, it does serve to create an impression that money is a difficult concept for anyone to understand and that only serves those who seek to manipulate the mechanism.
    Basically money is a contract, which society treats as a commodity. It serves as a socially accepted medium of exchange to efficiently integrate economic activities across broader relationships than is organically feasible. Think of it as the blood flowing through the body, carrying notational value to and from the other organs.
    What all those trade deals seek is to effectively create a global economic medium, to replace all other forms of exchange.
    The inherent difficulty here is a saying my father, a cattle dealer liked to say, “You can’t starve a profit.”
    Banking systems are a rent extraction device for their proprietors, yet in order to do so, they have to provide a service which creates more value than they will extract. When economies are growing, even if it entails using up non-renewable resources, the economic process is producing enough value for the monetary medium holding it together to skim some off the top.
    Yet as this process becomes more evident and constrained, the more it seeks to siphon the value actually needed by the system and the more those in control loose control over this process, as both rules and structure are weakened and more people and unscrupulous people, seek to join the gravy train, making it top heavy.
    The result is akin to a heart attack, as the vessels break. What we have now is similar to clogged arteries, as the central conduits collect fat that would otherwise be dispersed. The response of the central bank, quantitive easing, is like high blood pressure, as it tries to push more circulation out to the extremities, but mostly more fat is collected in the arteries.

    There was a time when banks did create their own bills and money, but also had to sustain its value and legitimately deserved the rewards for providing a necessary service. Yet now with the current system, with money largely based on public debt and the Federal Reserve able to muscle the government into supporting the system in times of crisis, the responsibilities have become public, while the rewards remain private.
    Even the Keynsian/mmt notion that governments can never go broke because they issue their own money is a deeply flawed assumption that only further serves this process. Remember that dollar bill in your pocket is a tiny credit on the entire system and it came into being by the central bank buying government debt. If the government did not run a deficit, this system would not be possible, but if someone is able to accumulate large numbers of these bills, not only can they use them to acquire public assets, but access to control over the system as well. Ultimately a government going into debt is no different than a farmer going into debt and losing his farm, or a sub-prime borrower having his car repossessed. Think of that, the next time you hear about so many public services and eventually properties being privatized. If this continues, just about every road will be a toll road for some corporation.
    So if we are to have a publicly backed debt, necessarily much of the rewards from this system have to accrue back to the public, in order for this system to sustain itself. This means either we go back to private banks creating their own currencies, or we move forward to turning banking into a public utility.
    Much as government used to be private, as monarchy, etc. and when those in power lost sight of this larger social function, it became a public utility.
    Now there certainly would remain private finance companies, but when he crash comes and a future form of Glass Steagall has to be reintroduced, it will have to go much further in dividing investing from banking, to the point of banking being a public function, with local, state, regional and national systems, possibly even with interlocking but flexible currencies.
    Also people will have to be educated that money is not just some form of magical commodity, but is a contractual service and as such, is not private property. Anymore than that section of road you happen to be driving on is private property. Just try printing some up and see how seriously they enforce the copyright laws.
    Then people will understand the more organic forms of connectivity and reciprocity are more important and valuable. Then wealth can be again stored as strong communities and healthy environments.
    Money is a bookkeeping device. Your asset is everyone else’s obligation.

  7. ogee

    What money is, ought to be compared to what money can well as what it has been. This essay is weak, although I would applaud anyone at least talking about what is probably the most important thing going on.
    What is money? Who gets to make it? Why can’t money just be created from thin air, without the debt involved, by “WE THE PEOPLE”. The notes the federal reserve make are only worth something, because America has been a good bet, historically. WE are America, not them.
    To try and talk about the history of money, one would be remiss to leave out the work at the American monetary institute and Stephen Zarlenga’s “history of money”.
    And most importantly, there needs to be a discussion in real time.
    The bill HR 2990 112th congress “the NEED act” :” National Emergency Employment Defense act”, which was proposed by Dennis Kucinich lays out on paper, in the text of the bill, HOW to convert our federal reserve created US Dollar, to a congressionally created US Dollar. Where the treasury creates the money to be used in the economy; just like today. Except , with no debt being created that goes to fund the financial service parasites that undermine our republic.
    People ought to talk about the history of the debate between creating a “banker’s” money system, as we have now since the creation of the federal reserve, and the attempts to create a “public” money system by progressives over a hundred years ago. The “greenback”, is an example. So was the colonial “continental”.
    There ought to be talk about the first “Chicago plan” circa 1939 where some 400 respected economists came up with a plan to wrest control of our “privately controlled monetary creation system, the federal reserve; which is prone to bubbles and busts and conflicts of interest. To a system where the treasury creates the money needed for economic functioning on every level, with no public debt.
    Lets talk about it.
    And I say the most important thing because, our money, is ours. we the people.
    We are not allowed to have a sane: energy policy, healthcare system, educational systems, enviromental defense plan, etc…… because …..WE CAN”T AFFORD IT>>>> all the good causes out there are competing to take a piece of some finite pie(the money supply/budgets), therefor, they all suffer. Yet the segment of our world that is the financial services industrial complex, seems to know monetary creation is infinite, and so is the debt that will be owed to them, for them making us our money….

    So it really is well past time for people to get a clue…. and money is the hint.

  8. Steven

    Frederick Soddy’s “Wealth, Virtual Wealth and Debt”, from all appearances, still remains the last word on money. The problems start when you confuse money with wealth, AKA ‘value’. As John Merryman says, “Money is a bookkeeping device.” But when it is convertible into legal tender or into debt backed by the ‘full faith and credit of the xxx government’, “Your asset is everyone else’s obligation.” Hyman Minsky wrote

    “Any unit (i.e. anyone who can get credit – Steven) can create money. The problem is getting it accepted.”

    Until the private money created by Wall Street and the money created by the shadow banking system have undergone one of those two transformations, it remains nothing but a financial “asset”.

    But that “asset” can be transformed into ‘real’ (i.e. public) money by threatening to destroy the ‘circulatory system’, the money supply, of any civilization characterized by industrialization and / or a high degree of division of labor if this public / private partnership is not permitted to continue abusing its money creation privilege. (This, of course, is what the US is doing at the global level with its abuse of its global reserve currency money creation “exorbitant privilege”.)

    The problem here is to define ‘wealth’, not money. As a matter of usage and convenience money as a bookkeeping unit has been pretty well defined for hundreds of years. Once you define wealth, the money problem gets a lot simpler. If money is to perform its two most basic functions, i.e. serving as a medium of exchange and store of value, it seems pretty obvious that it shouldn’t be created until after the wealth for it to purchase is created.

    Take a look at Soddy. He provides a better definition of wealth than that by which finance capitalism lives.

    As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science. The doctrine of energy, and the laws of thermodynamics do allow of this.

    Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 1883-1884). Distributed Proofreaders Canada.

    1. John Merryman

      Now defining wealth, i.e., actual value, is the tricky part. Gold has value because many people accept it as value, while an egg has value because it provides sustenance. Some things which might seem to have value in one context, could be a drain of value in another context. As such, it is an extremely emergent property.
      There are much deeper issues at play as well and thermodynamics is a pet issue.
      One could describe reality as the dichotomy of energy and information, in which form defines energy and energy manifests form. Proof of the elemental nature of this relationship is that as biological organisms, we have evolved a central nervous system to process information and the digestive, respiratory and circulatory systems to process energy.
      In society, government functions as the overall central nervous system, while finance and banking serve as its circulation system. Given energy naturally expands and form equally coalesces, they have a complimentary relationship. For instance, social energies push upward, as civil structures push downward.
      One effect of this dichotomy is time. We experience change as a sequence of events and so think of the point of the present moving from past to future, but actually is the changing configuration turning future into past. Tomorrow becomes yesterday. As the precipitator of change, energy transitions from one form to the next and it is these forms which our conscious perception sense as order, so it is the effect of their creation and dissolution which is time. The arrow of time for energy is thus past to future, as the arrow for form is future to past. For instance, consciousness itself acts as energy, always in the present, going from one event to the next. Which the forms it manifests, i.e., thoughts, come into being and dissolve, fading into the past.
      So what we actually measure as time is frequency and the other primary measure of action is amplitude, which we experience as temperature. Now much of thermodynamics is this relationship of energy expanding out, cooling off and dispersing, then coalescing and contracting as form/mass.
      When you try modeling much of the human activity in this thermal medium of our planet, the primary dynamic of which is thermal flows, not narrative sequence, keep in mind how the energy is flowing through the form. When form is at its most stable and defined, is when it is at the apex of its amplitude.
      Much else could be added, but it is late and the thread is fading

      1. ogee

        Sounds like you should read Soddy. What he was talking about, is really true, but financiers don’t want to admit it. But it sounds like it’s right up your alley. money shouldn’t be divorced from the world of natural phenomena /energy manifestations. He lived in a simpler time, but his; is not a simple work.
        I’m no expert, but he was an interesting person and more people should have listened.

        1. John Merryman

          It does come up as pdf, though can’t cut and paste the comment I wanted from the forward. Thanks.

      2. Steven

        Soddy for simpletons: It ain’t rocket science. Before the ascendance of finance capitalism, most ‘Old Money’ came from exploiting the scientific and technological advances of the Industrial Revolution (read coupling machinery with inanimate energy sources – along, of course, with “labouring cattle” and the environment). Finance capitalism’s great contribution to this process was removing the barriers imposed by the lack of money. Somewhere I remember reading passages suggesting Michael Hudson was onto the trick: you embezzle from the public’s money supply through ex nihilo money creation using fractional reserve banking or other more advanced forms of financial engineering – then hope like hell enough real wealth will be created to cover your little fraud.

        More Soddy:

        Though it was not understood a century ago, and though as yet the applications of the knowledge to the economics of life are not generally realised, life in its physical aspect is fundamentally a struggle for energy, …

        Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 1089-1091). Distributed Proofreaders Canada.
        Just ask Jared Diamond (“Collapse”). Using increasing amounts of energy wastefully (or for war-fully – the ultimate form of waste, “destruction” without the “creative”) so you can accommodate the need to find an outlet for the “irrational exuberance” of both ‘Old Money’ and the new ex nihilo money created by a nation’s financiers and bankers is asking for trouble.

Comments are closed.