The Alchemy of Money
The Economics of Good & Evil [Part 2]
There has never been a clear and simple answer to how money is created.
My attempt is as follows.
The four main takeaways from the Alchemy of Money Part 1 are:
Money creation is an alchemic process.
Commercial banks can create money or destroy it with this process. New money is created by commercial banks when they extend or create credit, either through making loans, including overdrafts, or buying existing assets. The problem with our economy today is that banks decide where to allocate credit in the economy. Their incentives lead them into property and financial speculation instead of small business and manufacturing, with profound negative economic consequences for our society.
The low-interest rate environment we enjoyed from 2009-2021, has become a weapon of mass wealth destruction.
Our modern economy is built on a corrupted relationship between central banks, commercial banks, and governments.
The most important question that continues to confound economists, policy makers, and financial analysts is: Does money influence the economy or does money respond to the economy?
The Western Hero Myth
Several myths have driven economic policy for the last American century. The invisible hand, deregulation, the free market, and globalization–all under the guise of neoliberalism. Our policies abroad have bred terrorists, genocide, ethnic hatred, and failed states. In desiring our own good, we seem to have accomplished evil. We now know these myths to have been overly simplistic, severely flawed, and misguided. Lobotomizing our global logic.
Rational optimists will tell you that we’re experiencing unprecedented material wealth, health, and prosperity. And we are. By all narrative accounts, infant mortality is down, incomes across the board are rising, and there are incredible opportunities everywhere. But at what cost? How many screaming skulls needed to be thrown into the furnace for our ability to order food from an app? And why does it feel like we’re tip-toeing around extinction-level tipping points all the time?
Neoliberalism is essentially an intentionally imprecise stand-in term for free market economics, for economic sciences in general, for conservatism, for libertarians and anarchists, for authoritarianism and militarism, for advocates of the practice of commodification, for center-left or market-oriented progressivism, for globalism and welfare state social democracies, for being in favor of or against increased immigration, for favoring trade and globalization or opposing the same, or for really any set of political beliefs that happen to be disliked by the person(s) using the term.
– Phillip W. Magness
The Economics of Good & Evil
Tomas Sedlacek is a Czech economist that helped me answer, at least for myself, the confounding question of: Does money influence the economy or does money respond to the economy?
The author of The Economics of Good & Evil points out:
In lore and mythology, if you disjoin the body and the soul, you get horror (i.g. Frankenstein).
Economics and morality are actually one and the same. The problem with our modern economy is that we cleaved the two. Because economics is viewed as a technical state craft, we view it as a machine.
The role of economists was never to increase GDP growth.
This impersonal, technical, rational, mathematical, ideology of the free market that runs like an an engine is inhuman. Since it doesn’t have a soul it produces results that we don’t like.
Credit and Debt cycles should match the seasons. Stimulating the economy during famines and tightening during times of feast. We’ve traded cyclical time for chaotic time.
The Death of the Homunculus Economy and the Rebirth of the Ouroboros
The economy we have now is a monstrosity. From rising inequality and permanent financial crises to the infinity wars and the depletion of natural resources. The world is facing many complex challenges. The global economy demands infinite growth on a finite planet. Locking us into a path toward ecosystem collapse. A bastardized homunculus economy where money goes to die because we aren’t measuring GDP in terms of real productivity, and when accounting for the financial sector, banking and real estate in its form today, is most likely a net drag on the economy since it is rent-seeking and nonproductive.
The purpose of the global modern economy should be to continue the game of economic prosperity and financial stability while allowing all polities, ideologies, nationalities, cultures, ethnicities, and races to co-exist and collaborate with each-other on a non-violent basis.
Today’s form of money binds sovereign states, institutions, and individuals together in order to make trade, investment, and growth more difficult for the younger generations. The money is being distributed to the priorities of the banking sector, and the assets of the old, not the priorities of society.
The best way to describe our times is the ouroboros. An alchemical symbol that expresses the unity of all things, material and spiritual, which never disappear but perpetually change form in an eternal cycle of destruction and re-creation.
The only economy that’s going to collapse is that of the old world. Our generation’s task is to re-create and renew civilizational thinking–realigning the wheels of time to sync with our clock. Making the old forms of wealth and power irrelevant and redundant.
As in most periods in history, older generations today run or control all key institutions worldwide. They are better organized and politically powerful. In the United States for example, the AARP is perhaps the single most influential organization in politics. Within the current structure of the global economy, older generations can, and do, borrow unconditionally from the future at the expense of the young and the yet-to-be-born. But unlike most periods in history, young people today do not have to either “wait their turn” or directly confront a social order that is systematically stacked against them. Operating in the margins by a hacker ethos—a problem-solving sensibility based on rapid trial-and-error and creative improvisation—they are able to use software leverage and loose digital forms of organization to create new economic, social and political wealth. In the process, young people are indirectly disrupting politics and economics and creating a new parallel social order. Instead of vying for control of venerable institutions that have already weathered several generational wars, young people are creating new institutions based on the new software and new wealth.
— Venkatash Rao
My next piece will be about how time has collapsed, and what we need to do build a civilizational clock that works for all of us.