A Cashless Society

Going cashless shouldn’t bother anyone, but it will probably bother most people quite a bit. Most people seem to value those little green rectangles of paper, but paper notes have no real value. They are a liability since they can be easily stolen and the cost of maintaining and policing the physical currency is astronomical (both points are made in the SGU episode segment) Digital currency has all the benefits of physical currency, without the need to carry it around. It is a win-win.

I used to be a hardcore numismatist. I was all in on silver and gold currency, coin collecting, etcetera. Then I tried bartering for goods with silver as a test to see how well it would be received by businesses. Most businesses were not interested. They wanted to deposit their earnings in the bank at night and the bank only accepted federal money, “the coin of the realm.” The test was a failure, as was the silver currency that I was using as my test at the time.

To individuals, the physicality of the money is what makes it valuable. To volume businesses, the physicality is a liability. This is why credit cards took off and why businesses gladly gave four percent to the card issuers in exchange for not having to deal with cash. It makes their jobs easier and safer and the analog or digital nature of the money being traded on the card system makes no difference as long as it can’t easily be stolen or have to be stored.

The value is in the goods exchanged, the location maintained, not in the money that made the transaction possible. Money has no value because you can’t eat it, it won’t keep you safe, it doesn’t make you live longer. The things that do can be traded for money, so long as the person who has those things has them to trade.

The future’s cashless society will look almost exactly like the one we live in now. The government will have to maintain accounts for each and every one of us in order to make it work; otherwise the poor will be shut out of participation in the economy to the detriment of us all and to the eventual destruction of our societies. In the US they may even make us all banks so that the fed can just issue us money directly. You’ll be able to go to the Post Office (most likely) to conduct your federal banking business. The better off will move their funds to private banks, but the poor will have to rely on government issued cards to buy their necessities. Life will go on pretty much as before.

Black markets will still exist. They’ll go to the barter system and commodities like gold and silver. They’ll create bot nets of dummy accounts that will mask the crypto-currency transactions. The buyer will need to show up with the commodity the seller wants in exchange. Currency is irrelevant.

Bob talks about the briefcase full of cash and that magical moment of imagination towards the end of the segment as a reason for preserving the greenbacks. Remember the scene in Pulp Fiction? You never see what is in the briefcase. You only see the golden reflection on Pumpkin/Ringo’s face, but that’s enough to make you understand the immense value of what is in that case. The money in his wallet is irrelevant. The money in your wallet is irrelevant. The money in my wallet is irrelevant. The commodities. They have value.

Standoff Scene from Pulp Fiction (Prime Video)

Based on an email sent to The Skeptic’s Guide to the Universe in reference to the segment in episode 844.

Postscript

I have apparently been nominated to be the Jesus of monetary policy. Not quite sure how to take that. Run and hide before the Pharisees send the Romans to crucify me, or stand and accept my fate? I’m thinking I should decline the nomination now that I’ve spelled the conditions out for myself.

This article was test-posted to Reddit in two places; here and here. In both places the upvotes did not equal the downvotes which proves my original assertion. Most people are afraid of the idea of going cashless. The commentary on the two different thread also proved out my suspicions that a good number of people don’t even understand what going cashless would entail.

The Delusion of Money

This is an affliction that most people in the world suffer under. Anyone who says the phrase my money as if money is personal property. Anyone who thinks that working is how you earn money. Anyone who thinks that money has value beyond what it can buy at the moment you need to purchase something. Those people all live under the delusion of money. Anarcho-capitalists, libertarians and fiscal conservatives all suffer under this delusion. Their ideals of what money is precludes them from ever understanding what will solve the recurring economic crises we’ve suffered throughout history. Until we understand what money is, we cannot hope to fix the problem of the boom/bust cycle.

When I take the time to listen to conservatives and libertarians these days, to read their arguments, I’ve started posing this counter question. What is Libertarian Socialism? They generally short circuit like a drone android calling for Norman. You know, Libertarian Socialism, the political movement that dismisses notions of taxes as anything other than the monetary recapturing tool that taxes are, sees Guaranteed Minimum Income as a necessary function of living in large groups? If my antagonist of the moment can manage a reply, then it is generally a denial that Libertarian Socialism is a real thing. But Libertarian Socialism is real, and it is just one more movement afoot to bring economic freedom to the problem of worldwide poverty. A real solution to a real problem, not hidebound ideology and wishful thinking.

The process of discovering what money is and what its functions in human society are has lifted a veil from my eyes. The punishment of poverty that is meted out most vengefully by the middle class, egged on by the wealthy who know just how much of a delusion the middle class labors under, is unwarranted. People are not poor because of some failing of theirs. People are poor because the system forces them into poverty.

I have struggled with how to present the ideas that seem so clear to me, present them in a way that will be understood by others. Understood by others who have not dropped their preconceived notions about money. How to have the ideas understood by them, and not simply have the argument rejected out of hand.

Year after year, when I was a libertarian, I promoted the World’s Smallest Political Quiz (WSPQ) as the way to illustrate, concretely, just how libertarians were different from liberals or conservatives. I wish I had spent that time studying economics rather than promoting fringe ideology now. The WSPQ is a variation on the Nolan chart, a political spectrum diagram created by American libertarian activist David Nolan. The WSPQ slims down the questions asked by Nolan to ten yes/maybe/no questions, and then places people in their political quadrants based on their answers. I never understood the pushback offered by people who suggested that financial freedom wasn’t what the diagram described while I was out stumping for it. Now I can see the problem more clearly.

The Nolan chart and all it’s minor variations don’t deal with the reality of economics; and consequently, these attempts to measure political beliefs do not measure economic freedom as they claim to do. This fact makes all libertarian ideas that deal with economics flawed at the precept level, shattering the entire structure of libertarian philosophy. The flaw shatters not just libertarianism, but any philosophy that includes the ideals of money as an individual possession. You cannot define libertarianism as different than the same flawed left/right and/or liberal/conservative political lines without a measuring stick that is separate from social freedom, and economic freedom enables social freedom more than any other kind of freedom one can imagine. The two go hand in hand (Four Freedoms) Understanding what money is, conceptually, is the first step to understanding how the systems we live in can be improved.

Money is not a thing; or rather, money isn’t just one thing. Money is not a possession, although physical representations of money can be possessed. Money is not a commodity even though it is currently traded like a commodity. If I had the last glass of water, you could have all the money in the world and you couldn’t buy that last glass of water from me. That is the difference between a commodity and a currency. Money isn’t even a set value as my previous writing on the subject of money skims over. So what is money?

I’ve been bashing my head against this wall and several others for the last decade and more. It’s part of the overall arc of EPHN, my languishing work on Emergent Principles of Human Nature. The work languishes because I lack the depth of knowledge to deal with the questions posed by writing the work, not by my ability to express the ideas contained within it. The accumulation of information takes time, and so the work languishes, in a general sense. At the same time, my understanding grows about certain subjects that interest me, and one of those subjects is the delusion of money.

Money = Lubricant

Any mechanical part that moves in relation to another part of a mechanical construct, like a motor or an engine, has to be protected from the friction present when any two parts come in contact. This protection can take several forms, and even several forms at the same time. Motor oil. Hydraulic fluid. Ball bearings. Grease. Money is like these things in many ways. It reduces the friction between one side of the economy, supply, and the other side of the economy, consumption.

If you provide sufficient funds to each household to allow them to meet needs you will see how much of each product needs to be produced based on the value assigned to the product by the consumer. Thusly, money eases the acquisition of goods and services for the people who need them. Without money we are forced to barter one good for anther one, and that system has never functioned in a way that the average human found acceptable, which is why we invented money in the first place.

Then you, the money issuing authority, sit back and wait. You wait to see where the money goes. When you notice that money is pooling in areas and not being spent, you tax those pools that don’t enhance the economy, the economic backwaters that don’t serve the purpose of lubricating the system generally. You tax them because money hoarding is a corruption of the intent of the system. Money is for spending not for hoarding. Property is what you keep. If you want to hang on to wealth, invest it.

Money=Contract

Money is a third-party contract that is carried along with every other financial contract that is agreed to. Money is the underlying agreement between the people who are giving over goods or services and the people receiving said goods or services, that the compensation will be in X currency at a particular value. Anyone who has read a financial contract should recognize this language. The value of money, that money will have value at all, is an agreement between every working and consuming person on the face of the planet. When that agreement breaks down, commerce breaks down. Goods rot in warehouses. Families starve.

Money=Narrative

On the Media – Full Faith & Credit – October 12, 2018

Ten autumns ago came two watershed moments in the history of money. In September 2008, the bankruptcy of Lehman Brothers triggered a financial meltdown from which the world has yet to fully recover. The following month, someone using the name Satoshi Nakamoto introduced BitCoin, the first cryptocurrency. Before our eyes, the very architecture of money was evolving — potentially changing the world in the process. In this hour, On the Media looks at the story of money, from its uncertain origins to its digital reinvention in the form of cryptocurrency.

Money is a collective belief in the value of a thing, a story we tell ourselves about buying what we buy and what we buy it with. Bitcoin is the essence of this narrative. It only has value because calculating entries in the blockchain is currently rewarded with bitcoin, funding all of the Bitcoin mining centers all across the world. What happens when the last Bitcoin is minted? Where will the value in maintaining the blockchain ledgers come from then? No one who invests in Bitcoin wants to know what the answer to that question is. In the meantime the story of the value of Bitcoin continues. But any currency is only as valuable as the people who trade in it think it is. If you can’t buy anything with the currency, the value of the currency is zero.

Money=Debt Obligation.

How can you make money to spend if there is no debt to create money from? This was the problem that faced the world after the crash of 1929. There was insufficient money in circulation. No one had money, and the reasons for this defied explanation according to the rules of the time. Europe needed gold to create money. Europe did what the gold standard required of them and raised taxes on their poor citizenry to the brink of starvation in an attempt to create gold reserves, creating backing for government spending that they needed in order to dig out of the holes that World War One left them in. The hordes of gold that the US held in reserve profited the American people not one bit, even though the rules of the gold standard dictated that America should be swimming in cash. Why was there no cash? Because the rules of the gold standard did not accurately describe how economics works. (Lords of Finance) FDR had to create new, insane rules, by the standards of economists of the time, to justify creating money that did not already exist, so that he could hand it out to people who wanted to work but could not find work.

Making sure that everyone has money to spend simply shortcuts the requirement that incomes will start at zero. Work is not required to generate debt, to create money. Work is how you pay off debt, and government generates money to make these transactions possible. But money is more than that, too. It is more than a lubricant that makes nearly frictionless exchange of goods possible. More than a contractual obligation that we all agree to every day when we buy or sell anything. More than a story we tell ourselves and more than a debt obligation that we must dig out from under.

T-shirt political humor. What different governments would do with your cows.
Amusing, but not true.

The disconnect over the subject of money really isn’t the fault of libertarians, they are nothing more than my target of opportunity because of their culpability in promoting the ideas that have come to dominate most thinking about money and economics in the US these days. Classical economics itself deals with the individual rational actor the homo economicus as he is occasionally referred to. Economics was set up at the outset to create the delusion of the supreme individual modifying the market with his rational demands. This has proven not to be the case, but most economists who come from the Chicago school are still caught up in the delusion. Capitalism, as classically taught, was at war with a socialism that eschewed profit. The Marxist utopia of communism. Like most utopias, Marxist communism is a dystopia that we would be better off not pursuing. However, in a general ideological sense, capitalism and socialism aren’t even in conflict. Authoritarianism and democracy are in conflict, and authoritarianism is in ascendency.

Authoritarianism has been in ascendancy since Vladimir Putin started trying to dismantle the democratic West, and China decided to help him. When there is one party, and you control that party, knowing who your enemies are makes controlling that government child’s play. Consequently these rising authoritarian regimes (including the United States under Trump) have a lot of political prisoners. Removing them into the slavery of the prison system is the best way to clear your path. This is one of those facts that should have been obvious to us in the US for a very long time. We’ve been growing the prison population since Nixon was in office, and we now have the largest prison population per capita. Most of those people are there because of crimes that were invented in order to criminalize Nixon’s political opposition, and it has proven prudent for each president since Nixon to leave those people there.

Capitalism and socialism are not in opposition. Capitalism and socialism can be present in the same mixed system because they deal with different parts of human interaction. Profit is not evil. Profit, when properly managed, is the reward for the entrepreneurial spirit. Profit, when held as an inviolable sacrement, leads to worship of the wealthy, what Objectivism has turned into over the last half-century. The Trump administration is laboring under this delusion of money. This holy profit-taking. Trump has started beating the drum of red baiting. He is promoting the same old schtick that Nixon and McCarthy did so well with two generations ago. I’ve said this from the moment that he announced his candidacy and he’s proven it daily since the broken system we live in delivered him into office. Trump believes in the zero-sum game and is right now rigging it to favor the wealthy who currently own our country.

Subscribing to the delusion of money as Trump and the average American thinks of it today is to go back in time to the days of the robber barons, when monopolies ran roughshod over Americans and the the world at large, when the simple fact that you had money meant that you had the right to rule. We don’t want to go back to those days. This is why Make America Great Again is the chant of mouth-breathing idiots. The America that they think was greater than it currently is was an America where they would have died young of a preventable disease, probably at the hands of someone like Don Jr.

To paraphrase what I said to Trump Jr: Never too earlier to teach her about conservative capitalism either.

Put her in an orphanage that sells her out to work in a coal mine. Kid that size can get into spaces an adult can’t, business can find all sorts of uses for them. You don’t have to pay them. They don’t need safety equipment. You hardly have to feed them. And if they die, fuck it, you can always get more.

Meanwhile, the Robber Baron she works for gets 99% of all the candy in the world and she and all the other kids get to split 1%.

Oh, and while you’re teaching lessons, Junior, make sure she knows her lady parts belong to you.

Jim Wright, Stonekettle Station

The reason why those of us who live in the great post-WWII dollar hegemony can be so secure in our delusion of the value of our money is explained in this episode of Planet Money.

Planet Money – Episode 553: The Dollar At The Center Of The World


If you combine the dollar being the world currency with the results of moving off of the gold standard as detailed in Lords of Finance you can create a money background for yourself to muse about the current perilous status of the dollar against. Or you can be like the libertarian that I was trying to enlighten today who called out for Norman before locking up in the illogic of money being a social construct. Pick one.

Addendum

If you need further examples of just how confused the problem of money is, here is another one. TED Radio Hour, The Money Paradox. I did get one response from a libertarian after writing this piece. He informed me that I wouldn’t be taken seriously on the subject of money unless I looked like a rich man. People who are wealthy don’t bother with trying to look wealthy. They don’t need to convince anyone of their wealth because they are reassured that they have wealth in simply living their lives.

Frugality is how you establish wealth. The richest woman in America ate cold porridge every morning because she was too cheap to heat it. Doing well with less is how you illustrate monetary wisdom. Not paying too much for clothing is bedrock for doing well with less. Fooling stupid people with nice clothing that you pay too much for is nothing more than a confidence game. Red ties are a dead giveaway for a schyster. Never take a man in a red tie seriously. Words to live by.

Star Trek was an attempt to say that humanity will reach maturity and wisdom on the day that it begins not just to tolerate, but take a special delight in differences in ideas and differences in life forms. […] If we cannot learn to actually enjoy those small differences, to take a positive delight in those small differences between our own kind, here on this planet, then we do not deserve to go out into space and meet the diversity that is almost certainly out there.

Gene Roddenberry

This article was posted when it was because of a conversation that was evolving on a Facebook group I was part of. A conversation between people convinced that their personal beliefs are somehow manifested in a show they love, Star Trek in this instance, and then argue that their political beliefs somehow are justified in the show. Star Trek represents a post-scarcity economy, as several people went to great pains to explain during that evolving conversation. As expected, the notion that there could be a society where everyone gets enough to eat and has a place to sleep that protects them at night from predation, that notion is conceptually beyond the thought processes of your average Stormtrumper. This fact doesn’t change what the show’s creator set out to do.

Keynes Economic Theory

If your idea of You Tube rabbit holes involves animated histories of economists, then this should scratch that itch. An animated history of John Maynard Keynes from Alain de Botton.

Planet Money on Facebook
The School of Life, POLITICAL THEORY – John Maynard Keynes

Just FYI, Keynes never said what he is famously credited as saying. At least, as far as we can tell he never said it.

I have been rolling a blog post around in my head discussing just how clueless most people are when it comes to the subject of money. I spent my entire life collecting coins and the last decade championing hard currency, only to be taken strange by my fellow hard-currency promoters when they all decided they wanted eSilver and eGold (don’t get me started on bitcoin) because it was easier to deal with than carrying hard money around with you.

I had a mini-history of the metallic monetary standards play out right before my eyes at that point. How do you know the gold and silver is there if you aren’t holding it in your hands? That exact instant, when the gold wasn’t in the owner’s hand when he spent it, was the birth of fractional reserve banking way back when, when people accepted that paper saying the gold existed was the same as having gold in their hands. Every bank run in history was caused by the gold not being where the paper said it was. I wasn’t going to sign up for that. I wasn’t going to give it all away, then, there for electronic promissory notes anymore than I had believed that a greenback was the same as a silver dollar when it comes to value. They are two completely different things.

There is a lot of writing that I’ve been squirreling away over the years on this subject. Here’s hoping I get the chance to put it all in order and publish it.

Facebook

Vanishing Dollar Value

The inflation that I’ve long been expecting has finally reared it’s ugly head. Oh, it’s been around for awhile, but now the average American can’t avoid seeing it:

Is the American dollar no longer a good investment? Consider, first we had a stock market crash between 2000 and 2002. The American stock market lost nearly 38% of its value. Then there was the housing bubble, followed by the housing bust.

The housing bubble began in about 1996, but the balloon really started to inflate at about the same time the stock market was deflating. It certainly looks like money sloshed out of the stock market and into the housing market. It looks like people have been trying to find a safe place to invest their dollars.

But if the stock market and real estate turn out to be unreliable then it stands to reason that some money would then go to things like gold or to other currencies. This would explain the retreat from the dollar, but it doesn’t necessarily account for rising prices for food and other goods.

There is actually one thing that explains all of these phenomena: the size of the money supply.

When the Federal Reserve expands the number of dollars certain sectors get the new Fed money first. Those sectors are . . .

* The government, and those who do the most business with the the government
* The banking system, and those who do the most business with banks

This means that you would expect to first see the impact of an expanded money supply in the Big Business and Big Banking sectors. And what did we in fact see? We saw a stock market bubble (Big Business) followed by a housing bubble (Big Banking).

Eventually the new Fed money has to work its way through the entire economy, raising prices for everything you buy. We might call this the Consumer Bubble. And what are we in fact seeing? We are seeing rising prices for consumer goods like food.

downsizedc.org

The Cox News service reports that food prices are up 37% from a year ago. This isn’t a minor hiccup, this is massive inflation, which is just another word for the government stealing from you by creating a surplus of dollars in the market.

The raid on the Liberty Dollar conducted at the end of last month (and the raids on e-Gold earlier this year) begins to take on new meaning in this light. Can’t have any alternative currencies out there for people to easily exchange their dollars for.

Which brings us to the latest tidbit from Ron Paul:

Congressman Paul has hit upon the easiest way to end inflation, and the booms and busts that follow in its wake. Simply repeal the legal tender monopoly enjoyed by FRNs, and allow monetary competition. Not only would this help to end inflation and recessions, it would also limit the ability of politicians to hide the true cost of government through the inflation tax. But that’s not all . . .

Forcing FRNs to compete with gold would also confer one other benefit. Over time the prices you pay would tend to fall as increases in economic efficiency (for example, technological improvements) lower the cost of production and increase the supply of goods and services. A stable money supply tends to become more valuable over time, unlike an inflationary currency that constantly loses value.

Ron Paul’s Honest Money Act

Which would clear the way for currencies like the Liberty Dollar or eGold to compete in the money marketplace, holding the government’s feet to the fire when it comes to the real costs of government.

It’s time to end the fed’s monopoly. It’s time for real money to re-emerge and take its rightful place. Go here and agitate for Honest Money.

Postscript

What we know, in hindsight, is that the inflation and market instability were signals of the imploding real estate markets. Not the effects of hard money and cryptocurrency efforts to destabilize the US dollar.

When you need the system to collapse in order to confirm your beliefs, any signal you get will be used to confirm the belief whether that is what the signal means or not. The entire Liberty Dollar fiasco is a cautionary tale built around the desire to see the status quo ended. When you desire the destruction of everyone around you, you will lose track of the real harm that the people you love will go through. You will lose track of it until they start collapsing along with everyone else, and you can’t help them because you are strapped into the same mess that they are.

Attrition will clear the playing field and leave only the strongest standing. Are you sure you are one of the strongest? Based on what insight?

Declining Dollar is Only the First Symptom

While this story is a year old already, Why the global financial system is about to collapse remains scarily accurate in its analysis of the problems faced by fiat money systems around the world:

The global financial system is about to collapse because the US dollar is about to collapse. The US dollar is about to collapse because of a simple economic fact that no one has the power to change or conceal. The fact is that the spontaneous remonetization of the precious metals is a Nash equilibrium.

Why the global financial system is about to collapse

I don’t know who John Law is (He isn’t this guy) but he made some interesting points. Good luck finding him if you have questions for him.

Postscript

Money, money, money. What is money?

That is the question that really needs answering. It is clear to me now that money is not any of the things that it has been proposed to be up to this point in history. It most certainly isn’t the thing that the author calling himself John Law said it was back when I first ran across that article. How do I know this? Because his predictions turned out to be false, like so many predictions have done over the years. We humans are poor predictors of the future.

I temporarily gave a home to the ideas he voiced in the article because I thought the ideas were worth discussing. In 2019 I decided that time had passed and I removed the bulk of the article from the blog so as to frustrate the delusions of others who might be reading the article here (there were a suspiciously high number of hits on the article while it was live on Blogspot) Follow the link if you want to read the rest of the article. It is still there on Archive.org, in the same place where I rediscovered it after the blog the article was written on was deleted.

I’m no longer convinced that John Law understood economics better than I did at the time, and I’ve learned a lot more about economics in the decade since stumbling across that article. Average people like the idea of gold as money, want their money to be valued like gold is, but they aren’t willing to carry the stuff around in order to trade with it, they aren’t inclined to pay the costs of maintaining the systems and the costs of maintaining reserves simply to protect against the debasement of the currency that they want tied to the value of gold.

Humankind needs to come to some new understandings about what money is and why we need it, but I don’t see a return to gold as the bulwark behind the value of money anywhere in the cards. It just isn’t practical to have huge troves of precious metals sitting around gathering dust in treasuries around the world. This is especially true when electronic systems could be created that could do the same job without taking up the real estate gold requires while doing the job.

When I say, electronic systems I’m not talking about cryptocurrencies, at least not any of them that existed in 2019. They have their own downsides including the energy costs of mining for the currency itself. Blockchain technology is interesting and could possibly be made to serve the purpose we need in controlling the hoarding of money, but that proposition hasn’t been proven yet.  In the meantime I may drag out a few more snippets of John Law’s Why the global financial system is about to collapse as examples to rebut in future articles on the the subject of money. Like all predictions, only time will tell.

(October 2007 archive)