Hoisted From Comments: Decoding the Misleading Metaphors of Money and Banking

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ReaderOfTeaLeaves made an important observation yesterday on a post by Bill Black, in reply to a comment by another NC regular and sometimes guest blogger, Clive. It describes a set of seductively inaccurate metaphors used to depict banking, money, and finance. Needless to say, some of the recent coinages, like “sharing economy” are downright Orwellian yet taking hold, but the older ones, by being well worn tropes, are so routine that the implicit messaging gets nary a thought.

By ReaderOfTeaLeaves

Clive, FWIW, I’m increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ‘fuel‘ as a central tenet: ‘the money supply fuels the economy’. Economics seems drenched in outdated, antiquated metaphors where ‘fuel‘ is always and everywhere a good thing, with no polluting externalities, and no downside costs.

Hence, what matters is ‘efficiency’: it’s  moneyAsEngineSpeak, so to speak.

Lordy, it’s all petrochemical: from a time when chemical and mechanical engineering (and physics) were in their relative infancies and whaling schooners were sailing out of Nantucket.

Fuels don’t lie, cheat, or steal — continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl “La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!” After all, calculus had been invented by the 1820s — so math + moneyAsEngineSpeak = economics.


In that paradigm, Bill Black is a mere scold, an oddball, a scruffy prophet in the wastelands, so to speak.

If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane’s observations would be met with “Doh, you betcha!”

Then, also, Bill Black’s observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore.

Timmy Geithner is probably not a fan of: (a) Bill Black or (b) the idea of money as inherently social. Fuelis an emotionally sterile construct to work within; it enables one to avoid moral qualms, or any sense of personal responsibility when ‘engines blow up’, or when they ‘run out of fuel‘.

The fact that Haldane’s observations and analysis are not more widely embraced suggests that somehow the business schools, economics departments, and bankers all still use thought processes shaped in the era of whalers seeking blubber for lanterns and lamps. Also, they probably still receive endowments from the Kochs, Exxon, and other fuel obsessed interests.

Until the metaphors move to biology, with a concomitant recognition that some kinds of ‘fuel‘ (aka Coke, Fritos, Doritos, donuts) work for short-term energy bursts, but carry extremely negative longer term costs, I doubt that even the best attempts to muddle through will get us out of this mess. Without amendment, this system is going to do one of two things: (1) implode (not too violently) or else (2) blow up (social unrest).

I have no idea what the banker equivalent of ‘chard, lettuce, and celery’ would be, but some bright mind ought to be thinking about it. (You distinguish yourself as such a mind; I hope that my metaphor is not too offensive…)

I interpreted Brexit as a ‘tea leaf’ that the banks could no longer be made fine-proof without triggering social unrest. Then I read your comment, esp:

the U.K. government is stuck with its vast holding in RBS. The only way it could ever be rid of the RBS albatross is for RBS to have some vague hope of (eventually) earning its way back to being something other than a complete basket case. Apart from, ironically, the central banks’ own ZIRP policy, the biggest threat to this is endless redress for wrongdoing.

The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine ‘melts down’, so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction.

Banking needs to be completely rethought, using the social sciences, which include the realities of criminal conduct corroding the system to such a degree that it is threatening to implode. I’m moving toward being agnostic as to whether this is a good thing, or not. Either way, the present systems as I’ve read you describe them do not seem even remotely sustainable.

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  1. John Merryman

    The metaphor I think applies is that we use money as both medium of exchange and store of value. While the first is inherently dynamic, the second is static, so a good analogy is that in the body, the medium is blood, while the store is fat. The trick has been how to store extreme amounts of notional wealth and that is largely by having the government borrow it back out and spend in ways which support the private sector, but don’t compete with it in the hunt for profits. So are all those pallets of money going to fund our wars really about war, or is it about keeping that money flowing in one end and out the other? Consider all those super secure US savings bonds are mostly just being poured down various rat holes, rather then building a sustainable society.
    This probably goes back to Roosevelt, who borrowed a lot of unemployed capital to put a lot of unemployed workers back to work.
    Money is not a commodity to be mined or manufactured, whether gold or bitcoin, but a contract. Every asset is the other side of an obligation. It allows a large economy to function, but it also reduces community reciprocity, creating atomized societies.
    Like blood, the economy needs very regulated amounts of money, as it functions as a voucher system and storing lots of excess vouchers eventually causes the system to collapse, when everyone tries to dump them at once. If government threatened to tax excess out, people would have to find other ways to store value, like in stronger communities and healthier environments, aka the commons. Most people save for the same general reasons, housing, healthcare, retirement, etc, which are ultimately community functions anyway.
    Finance as a public utility doesn’t have to be subservient to government. Much as government is analogous to the central nervous system, finance is to the circulatory system and the head and heart are separate organs.
    Government started out as a private business, institutionalized as monarchy, before becoming a public utility. Now is the time to do the same with finance. Never let a good crisis go to waste.

    1. OpenThePodBayDoorsHAL

      I have a gold coin in my hand, and try as I might I can’t seem to figure out whose obligation it is. Precisely whom do I have a contract with again by possessing it?

      1. Edward Morbius

        I’m leaning strongly to the idea that money is information. More specifically, it’s information about general claims on national commerce. That gold coin in your hand is a bidding right. The obligation isn’t to any one person, but your possession of it means that there’s one less gold coin’s bidding power throughout the rest of the economy.

        I’m still sorting out my thoughts on this, but Frederick Soddy, the Technocrats (a short-lived 1920s – 1930s US movement), and the ecological economists (Georgescu-Roegen, Daly, Boulding, etc.) seem to make more sense to me.

        The more I read of traditional / classical / neoclassical / post-Keynesian monetary theory the more I suspect nobody has much of a clue.

        1. Skippy

          Demand signal thingy…. tho that does not cover the entire aspect that humans do stuff without regard to money at all….

          I fear monetary theory will never be able to incorporate that or describe it in such a way that it can be used in some methodology.

      2. Yves Smith Post author

        Gold is not money. It’s property, just like a diamond or an investment-grade painting or real estate, that you cannot readily use for the purposes of commerce but has some market value and that market value is specific to the time and place. For instance, in Vietnam, middle and upper middle class women were often given gold beads as part of their inheritance, dowry, or wedding gifts.

        In the war, they would trade beads for food, medicine, or to buy off being raped. The gold went for way way less than world market value at the time.

      3. solublefish

        You are confused by the name you have given it, perhaps. As ‘coin’ it is money and represents an obligation. But good luck finding a place where a gold coin is actually recognized as a COIN – as money – rather than as a commodity – a mere lump of gold (or as valuable artifact – another commodity).

      4. Adam Eran

        Answer: Any society that accepts it in payments for goods. Imagine no such society (you’re Tom Hanks’ character in Cast Away)… what good is the gold coin?

        Money is a social construct, not a commodity. Period.

  2. PuzzleMonkey

    Excellent and original points that make a tremendous amount of sense. Thank you.

    One tiny quibble. It’s hard to work out how “1. Implode, not too violently” could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but “2. blow up, social unrest” anyway.

    1. Jeremy Grimm

      I much agree. ReaderOfTeaLeaves has written a comment of great penetration and flowing beauty. It’s a pleasure to read.

  3. scott 2

    US Grant rode in a horse-drawn carriage from his inauguration to a White House lit with coal-gas, while oil or candles. Medicine, sanitation, and agriculture was hardly different than it was in Roman times. The railroad and the telegraph represented technological progress.

    A little more than 30 years later McKinley rode in an automobile to a White House lit with electric lamps, that had running water and sewage. Steel framed buildings could rise more the 3-4 stories off the ground. The causes of many diseases were known and somewhat preventable. The first radio transmission was months away, and the first powered flight was 3 years away. The standard of living of an average American doubled during that period. And it was all done under the gold standard.

    DGP per capita of the US peaked in 1973, the same time Bretton Woods formally ended. A dollar today buys what 3 cents could buy when the Fed was formed. Do these FACTS escape the Krugmans of the world or are they merely inconvenient and in conflict with what seems to be the true nature of academic economics, to provide pseudo-science cover to political policy?

    1. BecauseTradition

      By all means let’s go back to worshipping a dumb, shiny metal rather than, for instance, removing all priviledges for the banks. And let’s replace theft by inflation and deflation with theft by deflation alone. And let’s confuse correlation with cause since the massive gold and silver strikes during that period greatly increased the money supply and indeed, in some places, caused huge price inflation. And let’s forget that it is the government’s authority to tax that gives value to fiat and give gold owners a huge bonanza by making fiat needlessly expensive.

      1. Tinky

        Setting aside your implied straw man, that it’s a binary choice between unconstrained credit creation, and “worshipping” gold, would you argue that today’s society is better or worse than that of 1970, just before the final (golden) constraint was broken?

        1. Pespi

          Does the answer to this question answer the question? Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they’ll grab the money creating buttons in various spreadsheets, unless opposed by all.

          1. craazyboy

            Or both. Hitler thought Chartalism (grandfather to MMT) was a great idea, then invaded France and stole France’s sizeable gold horde too!

            These greedy people want it all!

        2. BecauseTradition

          just before the final (golden) constraint was broken? Tinky

          The central bank should not be allowed to create fiat for the private sector (e.g. Open Market Purchases) AT ALL so no constraint is needed there other than absolute prohibition.

          As for the monetary sovereign, price inflation is a restraint wrt fiat creation since the voters hate it.

          Also, please note that the demand for fiat is greatly reduced via other privileges for the banks. Eliminate those and the demand for fiat shall greatly increase – greatly increasing the amount of new fiat that can created without significant price inflation. This will be especially the case when government provided deposit insurance is properly abolished since a huge amount of new fiat should be required*.

          *For the xfer of at least some currently insured deposits to inherently risk-free accounts at a Postal Checking Service or equivalent.

          1. Tinky

            Sounds good in theory, but how do you imagine that we might get to the point at which central banks are prohibited from creating credit for the private sector?

            1. JTMcPhee

              How much of that fiat creation gets done via electronic means? Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure? I mean, “they” can leverage and disappear and derivatize “capital” and ZIRP and NIRP with impunity, and steal people’s homes and garnish and change contract terms on personal accounts unilaterally. Is there a turnabout, or are “we” so terrified of “instability” (where no “stability” really exists, “disruption ” and all that, not to act? As well demonstrated in many posts in this very blog, it’s not like the Fortress of FIRE’s walls are any stronger than the foundations it is “coded” on…

            2. BecauseTradition

              By replacing such creation with equal fiat distributions from the monetary sovereign to all adult citizens – if they are needed beyond ordinary deficit spending to, say, lower interest rates in fiat.

      2. glm

        I have never understood or had explained to me the fascination with gold as the base value of anything. Gold is produced by gold miners who control its value by restricting supply. Who do you trust to determine the value of “money” the gold miner or the government who backs a fiat currency? If people controlled the government they could vote out those who mismanaged a fiat currency. How does a citizen control a gold miner in a distant land? Their elected government could conquer the gold miner and take the gold thereby controlling the supply but then gold becomes the fiat currency.

        1. Adam Eran

          The standard answer is that commodities for money (or money backing) prevents inflation…which ignores history. Imagine the European inflation when the Spaniards brought all that gold and silver back from the New World.

          …And that’s why Spain is such a powerhouse economy today…oh, wait!

    2. John Zelnicker

      @scott 2 – “A dollar today buys what 3 cents could buy when the Fed was formed.”

      That something is true does not make it relevant; it can also be misleading. The real (domestic) purchasing power of a dollar is determined by the amount of labor it takes to earn that dollar. With the gains in labor productivity since 1913, it takes much less labor to earn today’s dollar than it took to earn that 3 cents 103 years ago. Comparing the nominal cost of a loaf of bread in 1913 with its nominal cost today tells us nothing useful.

      1. BecauseTradition

        Adding that deflation rewards risk-free money hoarding – a self-defeating strategy since progress requires taking risks.

        1. OpenThePodBayDoorsHAL

          Yes isn’t it awful when the prices of goods and services go down, I hate it when I have to spend less money to eat and obtain shelter and all of the other necessaries of life.


          Agricultural productivity rises so food costs less; industrial productivity rises so goods cost less; and these are what is known as “progress”. Increasing productivity is what raises our standard of living.

          But ah, there’s a fly in the ointment, we have a debt-based money creation system. Problem 1.): Banks can print the principal but they can’t print the interest. This leads to Problem 2.): people borrow either because they think they can grow money faster than the debt service, or because they are desperate and have no other choice. Problem 2 (a) is that debt pulls demand from the future to the present, and when enough demand is pulled forward people will no longer feel they should borrow for future growth because there is none in sight. This leaves only desperate people borrowing to service existing outstanding debt and that prophecy fulfills itself.

          We are told this is somehow a “steady state” system but that is mathematically and obviously incorrect. Even with unnatural acts like interest rates below zero (how can time preference be below zero, and what does that say for the prospects for growth?) the system winds down and needs to be completely reset. The percentage of times that debt-based currency systems have failed in the past and gone to zero = 100…leave it to alchemists economists to insist they can pull it off though.

          1. OpenThePodBayDoorsHAL

            Like the Soviet Union we now live in an era of centrally-planned price fixing for the most important price of all in the economy: the price of money.
            It’s true that in eras where the price of money fluctuated wildly there were also wild fluctutaions in the economy, booms and busts.

            But someone made the statement: “The Fed makes the economy more stable. But I do not think that word means what you think it does”.

            So no more busts…and no more booms, either. So put the periods of fastest economic growth and fastest rises in the standard of living out of your mind, those are history. And given the mathematics of “unlimited” debt creation, we’ll get the bust anyway.

          2. craazyboy

            There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It’s the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course.

            Some people seem to have this idea that x amount of money was created to buy a car, but none was made to pay the interest. This causes the world to end. Not so. Money circulates and we know that around a trillion or so in circulation seems to be enough to support our $18 T in annual GDP. What is does mean is to pay off the 5 year car loan, you spent 4 years paying off the car and another year paying the interest.

            A benefit of interest is it may allow people to live past retirement age – but there there is little economic focus on this phenomena.

            1. Vatch

              There is nothing wrong with interest, as long as the rate is reasonable.

              In principle this is true, but it leads to a paradox in an economy in which money is based on debt. You start your second paragraph with an acknowledgement of this, but then you back down. In such an economy, money is created when it is loaned — this money is the principal of the loan. When the money is paid back, the money disappears. But wait — the debtor must also pay back more than the principal of the loan; he or she must also pay back the interest. How is the interest created? The same way as the principal, but it is created by someone else’s loan. So in a debt based economy, the amount of money in existence is less than the total amount of people’s debts. If everyone is thrifty, and pays back their loans promptly, some people will never be able to get the money to pay their interest. It’s a game of musical chairs.

              1. craazyboy

                Pretty close, but consider this. The loan got paid back, the “money” disappeared, but the bank gained it as new loan capacity. The bank makes a new loan. So far I think I’m repeating what you stated. One minor problem is you say money is less than debt – it will be – debt is the contract for the entire amount. But not everyone pays it all off at once – we just need the liquidity to be there so the payor’s personal bank account, or the one of their employer, doesn’t run dry.

                So at this point it’s a matter of the banking system and the Fed managing liquidity. But the size of the Fed balance sheet and reserves steadily increases over the years to account for growth and any other liquidity needs the banks may have. It’s either done directly with banks – buying treasury bond assets or loans to banks, or they buy Treasuries in the market, the money goes somewhere, then there is interbank lending to make it go where it’s needed. (all in theory, of course. But the theory seems sound, when uncorrupted.)

                1. OpenThePodBayDoorsHAL

                  You make it sound like a steady state system, but it’s not, debt is *always* issued in excess of people’s capacity to pay whether for political, psychological, or other reasons. The Fed knows this. So they desperately want to reduce the total indebtedness by inflating it away, and this puts everyone on a giant rat race treadmill, working two jobs trying to outrun the rise in prices. Given the rise in productivity we’re all supposed to be living like the Jetsons by now but Oh No gatta keep running to stay in one place.
                  The Fed has forgotten that there is another way to reduce serial overindebtedness and that is B-A-N-K-R-U-P-T-C-Y. It has the added advantage of being an actual capitalistic endeavor, and not the inverted hyper-socialism we have today.The Fed keeps putting out brush fires so the dead wood keeps building up, eventually there is an unholy crowning conflagration that takes the whole forest with it.

                  1. craazyboy

                    Firstly, I said there is nothing wrong with interest. If you want to shift to “could something go wrong with principal_plus_interest in a fractional reserve central banking system”, then, why yes! Plenty!

                    No, the system is by no means steady state – the economy has ups and downs and there are those occasional “credit crunch” periods where banks get spooked over some such thing and stop lending completely and then it seems like all the money disappeared. But that’s why we have the Fed and everyone furiously managing liquidity.

                    1. craazyboy

                      Fun Fact:

                      When we had the Great Recession, which after a respectable period, I decided was the biggest credit crunch the world had ever [not] seen, Siemens forced the ECB to open a account at the ECB, a first for a non-financial company, deposited a very large amount of Euros(can’t remember how much) and told the ECB it was in case they needed it someday.

                      Then they say the Germans have no sense of humor.

            2. Adam Eran

              As Michael Hudson frequently reminds us: Interest compounding is a geometric progression. The graph looks like a parabola.

              A=future value, including interest
              P=Principal invested
              r=annual interest
              n=compoundings per year
              t=number of years


              The real economy, particularly in ancient, agricultural societies, was linear. Debt therefore exceeded the real economy’s ability to pay it with regularity.

              This is why ancient societies prohibited usury and had (bankruptcy equivalents) debt jubilees.

          3. BecauseTradition

            Even with unnatural acts like interest rates below zero OpenThePodBayDoorsHAL

            The MOST sovereign debt should return, being risk-free, is 0% else we have welfare proportional to wealth, not need. And obviously, the shorter the maturity of the debt the more it should cost; hence negative interest rates on sovereign debt are perfectly natural.

            (how can time preference be below zero,

            Because in a poor economy, return OF principal becomes a more important concern than return ON principal.

            and what does that say for the prospects for growth?)

            Negative rates are a result of a poor economy, not the cause – not that they ever should have been positive for sovereign debt in the first place.

            1. BecauseTradition

              Because in a poor economy, return OF principal becomes a more important concern than return ON principal. BT

              I.e., a small certain loss of principal (negative interest) becomes preferable to a potentially much larger loss of principal.

  4. Skippy

    As I am want “whaling schooners were sailing out of Nantucket” is a slice of American PIE when one reconciles Moby Dick….

    1. Sluggeaux

      Since we’re on a terminology thread (and my grandfather was a whaler), the whaling vessels out of Nantucket tended to be square-rigged — barques, brigs, etc. Schooners were coastal vessels used by fishermen more often than by whalers, who travelled long distances to launch their hunts.

      Great post — I want to puke every time I hear Wall Street referred to as an “economic engine.” More like “social engineering” — of fraud schemes.

      1. uncle tungsten

        Ah! a new term is coined (pun intended):- fraudgineering always included in any sentence where the words “Wall Street” or a named bank is used.

  5. Moneta

    A couple of generations ago most people lived on farms. Many would trade grain to pay the miller. In essence, hard cash was needed for goods at the general store.

    Debt was used to finance big projects that were based on hard assets, land, commodities.

    Fast forward to today…. banks still favour collateral based on hard assets yet services are a much bigger part of our economy. I would venture to say that banks lend on soft collateral when it is fed by sectors that have hard asset collateral or with a government guarantee.

    IMO, get government out of everything and watch the economy drop to an economy of sustenance based on hard asset collateral which will get increasingly constrained with world population going from 7 to 9B. Exactly what rentiers LOVE!

    1. Moneta

      Services are a bigger measured part of our economy. Family members on farms would do all kinds of work or services but these were not recorded.

    2. scott 2

      Debt was used to finance increases in productivity. Unless you have a sweat shop in your basement, a house is not a productive asset. It’s a slowly appreciating consumer of capital, real and financial (utilities, maintainance, and taxes). In distorted markets like California, it can make a lucky few a lot of money while turning the area into a feudal system of land owners and serfs.

      A side effect of financialization has been to turn the US economy into one that lives, temporarily, on housing speculation. When people realize that spending $2 million on a bungalow that should only cost $40K is the TRUE mis-allocation of capital, let’s hope they don’t realize that all at once.

    3. lyman alpha blob

      A couple generations ago land in many places was still relatively cheap. Asked my father once how our family of dairy farmers managed to have as much land as we do and was told that my grandfather often received land as payment. He’d give someone an animal or a side of beef and they’d give him an acre they owned abutting his property that they weren’t using for anything anyway. I’ve seen some of the old ledgers found in his attic and as you noted, cash was not just in essence but in fact used for goods at the general store. The barn itself was built with the help of the community although I’m not sure how that was paid for but I’d wager that any financing was minimal.

      The economy was a few steps above just sustenance but the population was a lot less and there weren’t nearly as many rich people from the city coming in looking for second (or 3rd or 4th) homes in the country driving up the cost of real estate. Two generations later land is much more dear to the point where our family likely wouldn’t be able to afford to purchase property if they needed extra acreage.

      There are far too many economists who seem to think that money actually does grow on trees in the sense that it’s a naturally occurring resource that human beings can’t control – it’s all determined by markets. In that sense I’d describe money not so much as a fuel but as a weapon. I believe Jon Perkins had a similar description in his Confessions of an Economic Hitman. Weaponized war is no longer the first option among advanced economies – first they’ll try to bleed other countries dry with economics. It’s only when the victims won’t cave that the bombs start dropping now.

      But money does not occur naturally and it should not be considered a fuel or a weapon. As noted in the article it’s a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few.

      1. John Zelnicker

        @lyman alpha bob – “As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few.”

        Adding: The Big Lie that the federal government needs tax revenue in order to operate, so we “can’t afford” the social benefits that help the non-rich, must be constantly debunked and rejected.

        1. solublefish

          “The Big Lie that the federal government needs tax revenue in order to operate, so we “can’t afford” the social benefits that help the non-rich, must be constantly debunked and rejected”

          Can you point the way to a couple of resources to that effect – for the layperson?

      2. TheCatSaid

        Weaponizing money. That’s a valuable concept.

        It reminds me of the end of David E. Martin’s (true-story-called-fiction-to-avoid-lawsuits) book “The Apostles of Power”. And this was the reason he wrote the book, actually–to fend off a major play to steal all the electronically-stored reserves of the Fed into their own accounts, and destroy the evidence of their actions by triggering a nuclear explosion of the precise nuclear power station that provided the power to the NYC/NJ computers that stored the data. By telling enough about the plan in process (only the minor, human-created fake “earthquake” at the Santa Ana reactor occurred, as the charges had been set before the book was published; the book predicts the “earthquake”), a nuclear disaster and major financial theft were averted.

        Martin spoke about this, and the other real events described in the book, in a number of radio interviews he gave in 2012, the year the book was published.

  6. Steve H.

    Not sure if this is meta or not:

    “Here’s the [Machine] trick:
    Design the machine that will produce the result your analysis indicates occurs routinely
    in the situation you have studied. Make sure you have included all the parts – all the
    social gears, cranks, belts, buttons, and other widgets – and all the specifications of
    materials and their qualities necessary to get the desired result.”

    Howard S. Becker

  7. JTMcPhee

    Well, great! That part of the great discourse has been decoded and unpacked and all that, I feel much better for the personal increase in awareness of how fokked things are.

    Now, how are “we” going to get billions of other humans to the same state of awareness, to stop talking about “fuel” when talking (using a gazillion other “terms of art” and memes and tropes that are similarly opaque and whitewash and FUD-laden) about “the economy” and “economics” and while generating ever more momentum for those same deadly (but profitable for the few) terms, tropes, memes and shorthands? “Profitable” being one of them, “profit” being part of the disease process, because after all, for the individual or the firm s/he belongs to, “profit” (ignoring externalities, of course) is the summum bonum that lets you buy stuff and experiences galore?

    Other Juggernaut words, just a very few: “bonus”, “healthcare”, “entitlement”, “MArket”, “free trade,” and a personal favorite, “donor” meaning very simply “BRIBER/corrupter” but hey, those very few squillionaires who own everything including the “political process” are described millions of times a DAY on the intertubes as “donors,” “donors” to political candidates and PACs and “think tanks” (??another fave). Giving a kidney to a person with terminal kidney failure, “donating” one’s corneas and body parts or those of deeply loved ones suddenly deceased, those are “”donations.” Not Koch or Adelman or Soros or Gates etc. billions to “Foundations” or operas or art museums.

    “We,” who are Aware, perceive some of this, often argue and debate and cavil over nitty bits of those perceptions. That is so very effective, isn’t it, the few hundreds or thousands of “us” who participate in or observe the Flow in NCspace, in bringing about any kind of regression to a mean that is hardly defined or maybe undefinable, a mean that might actually be “kind” and “decent” and “fair” and “just” (whatever those terms are taken to mean)?

    What is to be done about it? “We” ain’t either powerful or certain enough to do something like a “global search and replace” across the entire internet, with a burning of all the books and papers, and a quarantine of all the GeithnerDimonGreenspanKrugmans and their myriad of citers and followers and extenders, that carry the infection forward into the label minds of future “policy makers” who like most humans who (I am assured by others) are wired to seek dominance and pleasure and reproductive success? And who obviously are the dominant, successful vector and segment of the “political economy?”

    The plagues that Pandora was tricked into loosing on “humanity” have been out there probably too long to be re-packaged. Nice effort for those who try, try and try again, but that effort seems to me mostly pissing into the wind…

  8. griffen

    TINA. Sadly it’s true, we appear somewhat stuck in this mode of what’s working. I personally appreciate the credit union / co-op model of accomplishing financial intermediation but that is also a continuation of what we have.

    Biggest problem in the US, no one competing with the FED.

  9. B1whois

    I am reminded of Star Trek, where they didn’t appear to even have money. They had replicators that produced everything that people needed and people worked for personal fufillment.
    I was born in 63 and I watched shows like Star Trek and thought that was our future. :(

      1. Jeremy Grimm

        Maybe we are the replicator thingies — at least those of us (not me) still in the workforce. The problem is that we are replicator thingies for somebody else who didn’t learn to share with others.

    1. Vatch

      They had something called “credits” which functioned as a form of money. I don’t think it was ever clearly spelled out how credits work, but I think if someone didn’t have any credits, he or she wouldn’t be able to use the replicators.

  10. Dave

    “some of the recent coinages, like “sharing economy” are downright Orwellian”
    Yes, but that phrase can be and is easily replaced in casual conversation with “the sharecropper economy”.
    (Be prepared to deliver a short explanation what a sharecropper is to the youg ‘uns.)

    Another valid word out of the past is “the man,” as in the giver of overpriced credit to the sharecropper who often ended up with zero profits and thus was kept in perpetual debt. Central bankers?

    “The company store” is another one. Applepay?

    “Papal indulgences” another. Hillary?

    Word substitution is a fun game.

      1. diptherio

        Everybody talks about “thought leaders” but no one ever talks about “thought followers,” much less actually claims to be one. But without “thought followers” how can you have “thought leaders”? I’m suspicious….

        And anyway, wouldn’t “thought leader” be applicable to anybody whose thinking ends up being followed by others, for good or ill? Wouldn’t Charles Manson be a “thought leader”? He certainly was for the Manson Family….just a thought…

        1. Jeremy Grimm

          I always thought the exhortation to be thought leaders was a ruse for encouraging people to speak up and try to act as thought leaders. That way those who worked us could identify the taller daisies and thereby identify which flowers to top.

  11. Steven

    Seems like some combination of Frederick Soddy and Michael Hudson is called for here. Soddy is apparently a tough slog even for otherwise intelligent people. So at the risk of over-simplification here is my attempt to convey his ideas about money and wealth:

    Money is not wealth. It is a claim on wealth, i.e. debt.

    Wealth. Soddy provides both a practical and a more abstract definition of (the ingredients of) wealth:

    “But economics, in a national sense, is concerned with wealth as what is produced by human beings to maintain their lives.

    Discovery, Natural Energy and Diligence, the Three Ingredients of Wealth

    For Discovery, think research and development (R&D) and of course education so R&D is even possible. For Natural Energy, think, for most of the Industrial Revolution (IR), fossil fuels. (Pretty obviously we need to do something different if we want to keep the machine the IR built functioning, sustainably producing the wealth which sustains our civilization.)

    One of my favorite passages from Soddy’s “Wealth, Virtual Wealth and Debt” is:

    “As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science.”

    But without a science-based definition of wealth, i.e. continuing to use profit and money as a measure of ‘productivity’, just ‘printing’ more money (even Hudson’s MMT) will solve nothing. Put these observations together and you get an idea what should ‘back’ money – wealth not gold or as Hudson puts it “Debts that can’t be repaid (and) won’t be.”

    Hudson’s ‘clean slate’ provides the other part of the solution. As Hudson notes, the ‘miracle of compound interest’ is not sustainable – particularly when the West’s ‘financial engineers’ are busy cranking out money (as debt) at rates well in excess of going interest rates. Just continuing to use profit and money as a measure of ‘productivity’, ‘printing’ more money (even Hudson’s MMT) will solve nothing. Probably by the middle of the 20th century, the West had ‘enough’ wealth its people could begin to find other purposes in life than creating ever more of it (to make ever more money, i.e. acquire ever more debt to be paid by someone – the unborn?). Again from Soddy / Ruskin – real “Wealth rots.” That’s what’s happening to the West’s ‘culture’ as its ruling classes mindlessly attempt to acquire ever more money.

    It isn’t just the 1% who are going to have to take their lumps, to stop playing games with the world’s future so they can, as candidate Trump put it, ‘run up a bigger score’ with money for which they have no immediate need. It is those of us in the 99% who do not possess the skills and aptitudes required for the genuine creation of wealth, wealth the world needs and can sustainably afford. Those numbers are going to grow as the Industrial Revolution succeeds, with human labor and rote intelligence replaced more and more by machines powered by “natural energy”. But, even if we can’t find our niche, I take it as a given that we are all born with a right to life.

    1. Moneta

      Wealth is hard to define because what we view as wealth might be a money pit that guarantees our decline…

      For example, instead of injecting money directly in the faculty of medicine, a university might have decided to fund a football team to attract the capital and end up building a stadium… Instead of just funding the faculty.

      All these activities related to the sports team contribute to GDP. The bankers might have been productive and efficient in raising capital, the coach might be productive and make a winning team, the builders of the stadium might have been very productive building a fine structure but all these activities sucked up resources and energy that could have been used by other sectors to better serve the future of the country. Maybe these activities are totally unsustainable. They might appear as wealth currently but will lead to poverty over time.

      Since ou basic needs have been met, we have been investing in a forever greater number of non-essential resource intensive activities which show how disconnected we have become from the earth supporting us.

      1. Steven

        Wealth is hard to define because what we view as wealth might be a money pit that guarantees our decline…

        Wealth really isn’t hard to define, particularly if you take a look at how it has been produced for the last 3 or 4 centuries. You could almost supply a ‘values free’ definition – something like ‘wealth is the application of advances in knowledge of how the physical world works, mainly by employing machinery powered from inanimate energy sources, to reshape the material world for human (life-affirming) purposes.

        Soddy, a Nobel Prize winning chemist, goes further stating something like “life is basically a struggle for energy”. A pretty easy conclusion follows from this: those individuals or societies (‘economic units’) that do the best job of using energy and other resources sustainably and wisely are the ‘economic units’ most likely to survive and succeed in an evolutionary sense.

        If prices, profits and ‘free markets’ were controlled by the same laws that govern the physical universe, then money might be relevant. But obviously they are not.

        P.S. Your last paragraph shows we agree about far more than we (may) differ.

        1. Yves Smith Post author

          Huh? Wealth can be as simple as storing grain as a reserve against a period of famine. There’s no basis for your claim that 1. It is only a physical product 2. created by machinery and energy and 3. is positive in its effects.

          As Michael Hudson has written extensively, one of the surest ways to get rich is to be a rentier, and that is destructive in terms of producing desirable social outcomes. The wealthiest people in Regency England were landowners, and landowners are still among the richest people in the world (see the British royal family, or the Duke of Westminster, who own large swathes of land in the best parts of London).

          People who got rich through providing services, whether rentier-ism or not, don’t fit your definition either. Start with banking and investment banking. The biggest sources of new money in America are private equity and hedge funds.

          How about entertainers, like J.K. Rowling, Oprah, and Lady Gaga?

          Or what about purveyors of products that are socially destructive, like tobacco, hard liquor, and gambling (casinos)?

          1. Steven

            I don’t believe I ever claimed 1, 2 or 3. During the era of industrial capitalism, you did indeed make money by selling physical products, i.e. commodities, made by machinery powered from inanimate energy sources. But that money wasn’t wealth. It was a claim on wealth, or from society’s perspective a debt.

            Nevertheless, the brutalities of Western imperialism aside, it can at least be argued that the substitution of machinery and inanimate energy for human labor was on balance positive in its effects. It at least created the possibility of freeing human life for more gratifying pursuits than the struggle for subsistence

            Soddy listed ‘discovery’, advances in scientific and technical knowledge, as one of the ingredients of wealth; and that is obviously not a physical product. Nor if those advances are directed towards better ways to kill people are they positive.

            I am pretty sure both you and Michael will agree that ‘getting or being rich’ and creating wealth are not the same things. In fact, a basic theme in Michael’s writing is financial capitalism, the FIRE sector, as a wealth-destroying parasite – NOT the kind that lives in a healthy symbiosis with its host.

            Science and technology are just tools. They are neither inherently good nor evil. That’s up to us and how we use them.

            P.S. If you can’t find a copy of Soddy’s “Wealth, Virtual Wealth and Debt”, 2nd edition, let me know and I’ll send you a link to a site where you can download it.

          2. cnchal

            I am going to stick my neck out, and hope it doesn’t get chopped off.

            A pure service exchange creates no new wealth. Already existing wealth get’s shifted from the person getting serviced to the person doing the service.

            The biggest sources of new money in America are private equity and hedge funds.

            New money? Pirate Equity uses already existing money that pension organizations hand over to them. The money that the public sector pension funds hand over comes from taxes which are paid for by profit making companies and employees of those companies that reside in the taxing jurisdiction. Pirate Equity then extracts the wealth those companies produce for themselves and hands a bit back to the pension funds to keep them in the rigged game. It is extractive and adds no new wealth, although the Pirates are now richer that anyone else, and everybody else is worse off. After educating us, this was a surprise.

            What is wealth? In my book, the formula is (Material Meets Tool X sales) – expenses = profit or loss. If it’s profit, new wealth. If it’s loss, hell.

            Chop away.

            1. Steven

              I really hope this subject, i.e. the definition of wealth, will be picked up in future Naked Capitalism postings – and, of course, on a societal level. In Soddy’s day, our species didn’t have to be quite as careful in how it used the natural world because there weren’t as many of us. Soddy had high hopes for nuclear energy as a game changer, a way of combating the entropy in the universe, an all but unlimited source of one of the prime ingredients of wealth, natural energy. But until proven otherwise it now seems true that the only safe source of nuclear power is our sun.

              Much better minds than mine have discussed this subject. Like Hudson’s classical economists, we ignore them at our peril. It is obviously laced with intricacies but in a world filling up with human beings it is not one we can ignore. Here is how Soddy handled one of those intricacies:
              The physical or material necessities of the body must be satisfied before any of the further necessities of life-whether sexual, intellectual, aesthetic or spiritual are even called for. A definition of wealth must be based upon the nature of physical or material wealth, in the sense of the physical requisites which empower and enable human life-that is, which supply human beings with the means to live, and, as an after consequence of living, to love, think and pursue goodness, beauty and truth.
              WEALTH, VIRTUAL WEALTH AND DEBT, 2nd edition, p. 108

              It should be pretty obvious by now that trusting this question will be answered wisely by the ‘wisdom of the marketplace’ (a marketplace constructed by and for rapacious financiers and their political hired hands) is not a good solution if we want to be around much longer as a species.

          3. Steve H.

            What is your income?

            Jack. Between seven and eight thousand a year.

            Lady Bracknell. [Makes a note in her book.] In land, or in investments?

            Jack. In investments, chiefly.

            Lady Bracknell. That is satisfactory. What between the duties expected of one during one’s lifetime, and the duties exacted from one after one’s death, land has ceased to be either a profit or a pleasure. It gives one position, and prevents one from keeping it up. That’s all that can be said about land.

            Jack. I have a country house with some land, of course, attached to it, about fifteen hundred acres, I believe; but I don’t depend on that for my real income. In fact, as far as I can make out, the poachers are the only people who make anything out of it.

            Lady Bracknell. A country house! How many bedrooms? Well, that point can be cleared up afterwards.


          4. solublefish

            As I recall from Adam Smith’s “Wealth of Nations”, wealth is most emphatically NOT ‘bullion’ (gold, cash), but is whatever contributes to the flourishing of the nation. It was rather the point of Chapter One to show this: in the context of the pin factory, the machines produce also wealth, as does the very division of labor — all these things comprising ‘capital’ in Smith’s deliberately expansive definition of the term. But in spite of Smith, the ‘vulgar’ conception of capital/wealth as “money” persists, and often makes intelligible – much less intelligent – conversation on economic matters difficult.

            Also, if I understand him correctly, Michael Hudson’s measure of wealth in terms of productivity comes more or less straight out of Smith.

            1. Yves Smith Post author

              All you are doing is repeating yourself and not engaging with what I said. That is called “broken record” and is an invalid form of argumentation.

              So you would rather have more pins and ball bearings and not regard a storehouse of wheat as protection against famine as wealth? Tell me exactly how you are gonna eat pins when you are hungry. You also fail to consider that the creation of material goods can and does result in environmental degradation, which leads to bad health outcomes. See China as a extreme case. Cities are generally wealthier than the countryside, yet people how live in cities in America on average have 5 year shorter lifespans (that may be reversing as a result of the opioid epidemic). And you reject completely the idea that gains in knowledge unrelated to material production or artistic output are wealth.

  12. redleg

    All the analogues to fuel and engines, yet nobody takes the next step to Power. Power is the key to both engines and finance.

    Hudson, Black, Keen and other non-mainstream people are exceptions, but is anyone listening to them besides this choir?

      1. financial matters

        That was definitely a move in the right direction. It seems that one of the biggest problems Bernie had was everyone liked his ideas but many thought we couldn’t afford them.

        He wasn’t able/willing to clearly articulate that govt debt equals wealth for the private sector. It is where the money comes from. We can decide how it’s used and who gets the wealth effect which can be in the form of social programs that Bernie was advocating for.

    1. Edward Morbius

      “Wealth, as Mr Hobbes says, is power.” Adam Smith, Wealth of Nations. It’s only the second discussion (after definition) of the term in the book.

      Smith doesn’t get everything right, but he’s considerably more savvy and left-wing, bleeding-heart liberal than he’s commonly given credit for.

  13. Katharine

    Wonderful. Thanks for the thoughts!

    The notion of fuel as having no downside costs reminded me of a Jamaican folksong I once came across in a fine probably out of print collection. As nearly as I can reproduce the patois:

    Have you yeery wha’ me yeery say?
    Have you yeery wha’ me yeery say?
    London turbine bwoila bottom bus’,
    Kill over ninety man.
    Me yeery dem los’ cyan find,
    De lickle bwoy los’ cyan find,
    De ol’ woman los’ cyan find,
    Everybody los’ cyan find.

    No downside. Right. Depends on who’s looking, doesn’t it?

  14. Les Swift

    The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the “consumers” to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives.

    One of the biggest problems people face in discussing matters financial, is that the very terminology of the system undercuts the critiques. Just as criticizing the wars invokes in some the specter of failing to support the troops and the specter of criticizing America, criticizing Wall Street’s predatory aspects invokes in many the specter of criticizing institutions we have been led to believe represent the essence of American freedom. Doing so makes you at least a malcontent or troublemaker, and maybe even some sort of subversive pinko. Either way, you’re rocking a boat many do not want rocked.

    Using analogies and metaphors to discuss such matters can outflank the loaded-terminology question to a significant degree. You can cut through a lot of the fog of jargon by describing the activities in other terms. (E.g., Dave’s “sharecropping” for “sharing economy.”)

    We are in an era in which the financial world is being downsized and consolidated, the giant speculative bubble which dominated most of our lives is being deflated and wound down before our eyes. There is still speculative activity, to be sure, but there is also a rise in the use of rentier income. This downsizing process involves shifting losses wherever possible down the food chain, including to institutions which previously were integral parts of the system. Insiders are finding themselves outsiders, jettisoned by other insiders.

    This reminds me of the situation of a pack of wolves, grown large in an era of plentiful food, but now finding that food supply dwindling. The pack must shrink to survive, the excess members culled in often brutal ways. The strongest eat the most, the rest are left with the scraps, or nothing at all. The financial system is similar, a pack in which the herd is being culled. Individual institutions, even important ones like Barings or Lehman, are ephemeral. They come and they go, just like individual wolves in the pack. But the pack lives on, and so does the financial system. To the wolves, the pecking order, who lives and who dies, is very important. But for the creatures the pack eats, such concerns are irrelevant.

    1. tongorad

      Either way, you’re rocking a boat many do not want rocked.

      Perhaps. Or perhaps the alternatives to our ruling narratives and power mechanisms have been ruthlessly dismantled and extinguished. For example, I would love to join a union. But I live in a right-to-work state.
      I would love to have representation at my workplace and have some degree of bargaining power. I guess there’s always the complaint box. Or the “freedom” to hit the bricks.

      Luckily, I went to school when it was affordable, so I don’t have student loan debt. I rent, and although rents continue to rise every year, I don’t have a mortgage hanging over my head.

      My younger colleagues are saddled with outrageous student loan debt that they will never likely repay. Unfortunately many/most of them bought into the housing market. How likely are they to even entertain the idea of speaking truth to power?

      I’m past 50, and you know what that means to my prospects of finding another job. Young and old, we just keep our mouths shut and do what we’re told.

    2. moneta

      The US represents 5% of world population but consumes a much larger share of world energy and resources.

      The 99% are concerned about fairness but if they truly cared, they’d understand that the global economy needs to shrink their share of resources to 5%. And the leveling is getting stronger by the day.

      Most people go along the big lie because of hope.

      1. Jeremy Grimm

        Question about your numbers — I think our share of resources needs to shrink but I’m not sure 5% is the right number. Are some of the resources in that 5% dedicated to our Industry? Is our industry productive? and who gets the stuff? It may be we need to shrink our use of resources to 4%. And what about the who uses how much of what resources? How do you count the resources used to support our car, bus, and truck industries while deliberately stifling mass transit. I only make these quibbles to avoid your logic of proportions. Clearly we must take/steal less from the rest of the world and share what we have. I believe there is enough to go around — once a few (quite a few) problems here and there are taken care of.

        I’m not sure how much hope continues to hold up the big lie. I think the supports for the big lie need a lot of maintenance to keep it from falling. Maybe we can simply stop using that road.

        1. moneta

          I don’t know what the number is but from my vantage point , it looks like the western work is heading for a world of pain. Americans want America to be great again but it’s based on materialism.

          To be great again would mean a different kind of greatness where the economy is based on a reduction of it share of resources.

          But the population is still very far away from the fact that its way of life depends on an unfair distribution of world resources which will probably lead to a big world struggle meaning a focus on the military.

          This is not what I want by what I see in the horizon.

          There’s a reason money and fuel are in the same sentence. It’s because the a nation’s power depends on energy.

          1. Vatch

            It might seem trite, but if an American is patriotic, he or she will try to reduce the nation’s energy use by using energy efficiently. Whether it’s transportation, home heating, home cooling, or nighttime illumination, one should use the energy efficiently. Aside from the immorality of using so much more than many other people in the world, it’s a way to reduce pollution and to avoid sending money to the Wahhabi nut jobs in Saudi Arabia. Plus, energy efficiency saves money!

          2. Jeremy Grimm

            I think you and I are on the same page.

            Our country has the capacity to help the world get through the crises of Global Warming and the end of oil. Our country has responsibility as one of the guilty parties — one of the most most guilty in taking more than our share and sharing less than we are able or should share. The meaning of riches is best enjoyed through the sharing of those riches. In ancient times — at least in some places — that was the privilege and obligation of the rich.

            I would feel deep shame for our country if it is to be remembered in the future for what it has done so far.

  15. knowbuddhau

    Great comment, ROTL! Accords very well with my understanding of the power of metaphors, to bring into being the world stage on which we strut our stuff.

    Many here at NC often comment on the quasi-religious nature of economics. I’m always struck by the conflation of the organic/natural world with mechanics. Wrongly conceiving of market forces as natural forces and so on. I think you’ve struck a blow against this wrong-headed mythos at its weakest point. If the metaphors that bring into being this world of pain we’re living in themselves are discredited, the whole edifice could come crashing down in no time.

    If anyone’s interested in a little exercise, trying paying attention to the metaphors one uses for organic systems, and society at large. Even though I’m aware of their inappropriateness, it’s hard not to think in mechanistic terms. And not just mechanistic, but weaponized, at that. You can’t even listen to a baseball game without hearing metaphors of war all the damn time. Then there are “Twitter wars” and “Facebook wars” ad nauseaum.

    I like lyman alpha blob’s mention of financial warfare, too. In 2010, forensic economists found confirmation of the “economic hit man hypothesis” by studying the effectiveness of the CIA’s overseas efforts wrt US exports.

    If we agree that we need a most fundamental and profound change to our ways of being in the world, our use of metaphors is a great place to start.

    1. craazyboy

      I have locked gas panel on my car because I worry someone may siphon my gas straight into their wallet. But I’m more of a micro-econ guy, because macro-economics is confused beyond belief.

  16. Wade Riddick

    Money is nutrition, not a snack. It’s food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits.

    Where does he propose business find future workers if not in wombs? From where will his future customers come?

    Perhaps in sharing economy of future America, companies will have to share their dwindling customers and make do with less?

    If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can’t distinguish between compensation for earned and unearned income. What’s a tax and what’s theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America?

    Money weaves a supporting web of trust, a mutual network of obligations and payments – and what happens biologically when that web inside us is broken and friends become enemies and we treat enemies as friends? Is fraud any different than autoimmunity or cancer?

  17. readerOfTeaLeaves

    Well, I was gobsmacked to see this show up when I finally logged on to the Internet today.
    Many heartfelt thanks to all who commented so thoughtfully and insightfully; and also to the remarkable NC crew (Yves, Lambert, Jerri-Lynn, the IT folks), as well of course to Clive.

    I think that we are all rooting for the time when Haldane’s insights are met with ‘Doh’, and when we celebrate Bill Black as a Nobel in Economics ;-)

  18. Oregoncharles

    “Until the metaphors move to biology,”
    I don’t think this is exactly a metaphor. Economies and markets (when they function) are feedback-regulated systems. Feedback regulation is a key characteristic of living systems, from organisms to evolution. Mechanical systems, OTOH, are not feedback-regulated unless it’s cleverly added on, most often from a human (biological) operator. Part of the seduction of electronics is that they lend themselves to feedback regulation.

    That doesn’t mean that markets are organisms; that also would be a metaphor, hence not actually true. But they are more like organisms than mechanisms. I guess this is an elaborate way of agreeing with the post: the mechanical metaphor suppresses their most important characteristic.

    1. JTMcPhee

      Interesting that what keeps mechanical systems like steam engines and gas turbines and Diesel engines from over-speeding and self-destructing are negative-feedback “cleverly engineered” mechanical or electromechanical devices called “regulators” or “governors…” with last-ditch backups by humans who can, for instance, lay a board across the air intake of a Diesel engine that has “run away” to choke off the out of control combustion cycle…

      1. craazyboy

        Swiss watches too. Also, hydraulic and pneumatic servo systems.

        But all control systems have a metaphorical foot on the gas pedal as the command input and metaphorical eyes on the speedo as feedback elements. So we could have organic-hydraulic-pneumatic-electro-mechanical metaphors of control systems, if we wanted to beat a metaphorical horse to death.

        For experts, we can have your choice of analog or digital metaphors.

        The math gets easier if you chose digital metaphors.

  19. Joe Kapoe

    I think of casinos as a metaphor for finance today. But who is the house?

    What about a money metaphor with the concept built in of a public aspect vs a private aspect. Ownership. If money can be thought of as part of an electrical or communication system (some analogies would be wires or radio waves for means of exchange; batteries for storage), one significant aspect would be if it’s a public utility or a private company. Yes there are hybrids too. Banking as a public utility? I’m at a loss for analogies. I think of state-run lotteries as a cynical form of public banking.

    1. cube farmer

      the public utilities currently are basically roads, water, electricity, sewage, trash, drainage, natural gas, and maybe telephone copper lines and dams on rivers. they all do basically the same thing, to allow objects to be more easily and reliably transported from one location to another.

      the internet is a special case. it started out as a public utility inside universities and libraries, then it became a commercial utility that is almost unregulated… but still standardized so it was not locked-in like AOL, genie, prodigy, Compuserve, or Mutiny. but it too is basically there to ease the transfer of objects. they are objects of information but still the same idea applies.

      the money system, however it is manifested in physical reality, in my opinion is just a means to transfer an object from one location to another in a speedy and reliable manner. yes it has reservoirs, transformer substations, junctions, leaks in the pipes, etc etc etc, pick a metaphor it likely applies. instead of water or photons of electricity or cars, it is transferring credits and debits. special types of information. but it is like any other public utility. i think i learned that on this website iirc.

      this is why bankers will never accept this kind of change of metaphor. because they dont want to be regulated like public utilities because there is less profit. electric companies cannot typically raise rates more than a certain percentage per unit time. water utilities cannot hoard water during a drought then sell it for a markup. dams cannot open wide during a deluge and wipe out thousands of houses by flooding. and on and on and on.

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