The largest mistake in human history
“It ain’t what you don’t know that gets you into trouble. It’s what you know for SURE that just ain’t so”
Most of us are familiar with that quotation that Josh Billings gave us, just as we all know for sure what money is.
Except it ain’t
Most of us suspect, but Henry Ford was right; if we really knew the truth about money there’d be a revolution before breakfast tomorrow.
OUR money is based on debt-with-interest; limited by gullibility and greed.
REAL money is based on work done; limited by the laws of thermodynamics.
Money is the commodity, real or synthetic, that is accepted in exchange for every other commodity in a society. It represents our work when we exchange it for those other commodities.
THAT is the philosophically real definition that eludes our economists. We have been using what philosophers call descriptive definitions for millennia, and they accurately describe our money including the errors.
When we force money to represent debt, the thing owed is still our work, so it still represents work.
This is the largest single mistake in human history; a mistake our civilization has evolved over thousands of years1.
We are about $300 TRILLION in the hole, digging like maniacs, and that does not even include the environmental debt as we unsustainably consume resources 1.7 times faster than nature can replace them.
Don’t you wonder why we can’t ever solve problems we all know about?
One of the clues that we haven’t found the root cause of a problem yet, is when the problem can’t be solved. Inequality, homelessness, environmental degradation, overpopulation; government capture by corporations, and wealth.
A baker and a fisherman meet on the road and swap 5 loaves for 2 fish and both are happy with the exchange. No money changes hands, no market sets the price. How do they decide on 5 loaves? How do they agree to two fish?
Clearly, there doesn’t have to be a market or societal money for there to be “trade”. Values can be calculated, compared, and agreed on without any “coin of the realm” being involved. All trade is, at its root, barter, because all trade can occur without money or debt. Only the values underlying all functional forms of money and trade are visible.
What values?
What causes us to value the things we do?
Let me submit to you that the thing we ALL do is work. We work to catch fish or bake loaves; it is work to breath, move, learn, and grow. The Fish and Wheat capture work in growing. We use our work all our lives, and it is our work that is naturally valuable to us. We measure our time, but the meter stick with which we measure value is our work.
The Fisherman calculates the value of the bread in terms of the work he would have to do to make bread, and the value of the fish in terms of the work he’s done to catch them. The baker does the same calculation, except he has the bread and would have to catch the fish. The work done in the barter exchange exists in the present.
When money is used to pay for fish or loaves, it is taking the place of the work done by the baker or fisherman in that barter exchange. Our subjective values are thus always based on our personal work done, and the values in the barter exchange aren’t money but instead are the unbreakable basis of money. The way we value our own work done is valid no matter how broken our societal money becomes.
Work done, not debt – for they are not trading uncaught fish and unbaked bread.
BUT Work is already defined in physics. It’s measurable in Kilowatt-Hours and Joules and it IS constrained by the laws of thermodynamics.
The first law, in terms of money, becomes: “Ownership cannot make money.”
(see Henry George)
The second law becomes: “Money cannot be a store-of-value.”
(See Silvio Gesell)
These are laws that cannot be broken. We can only break something else, somewhere else, and probably belonging to someone else.
So, where does our existing economy seem to break them?
The ownership of money cannot make money, so the banks are not permitted to charge interest on loans. Holy Shit!? Exactly! Interest is wrong according to Islam, Judaism, and the Bible.
Our existing money ignores all those AND the laws of physics.
Oops
Capitalism is based on that ignorance
Oops
Renting things we own to other people for profit – that’s just as wrong as making money in the stock market. Ownership, which is a legal condition, cannot be converted into work of ANY kind. This is obvious on its face because ownership is unlimited – one person can own everything, while work is always limited.
Engineers automatically see an additional “feature” of the system. If all the money is debt, the interest is money that doesn’t exist. This requires infinite growth – impossible on our finite planet.
At a growth rate of 4% per annum, the volume of a 1-meter cube of stuff 3000 years ago would be larger than the solar system, larger than a BILLION solar systems. And our solar system is largely empty space. Our economic system must have collapsed many times as it “reset” the monetary distributions, and looking at our boom-bust economic history, with banks, nations, and entire cultures collapsing, we can easily verify that feature. We also see a feature that we eliminated only recently – the debt jubilee. The owning class doesn’t like that one; our “debts must be paid,” but THAT rule only applies to principal when the laws are obeyed, never to interest (which should never be paid), and it is far weaker than they’d prefer.
This is potentially a civilization-ending error, and it is much larger than any other in our species’ history, and I won’t even get to the second law today.
To change our definition of money is, tautologically, a revolution. It isn’t Communism or Capitalism, or even Georgism - I call it Mahinism based on the te reo Māori word “Mahi” (work).
Ending the share market, the interest on loans, the business model of banks, and the free ride given to the owning class isn’t an easy thing to do. So, let me suggest that we start with the form of reset we’ve forgotten: the debt jubilee, which cancels debts and frees slaves.
While we do that, we can also start taxing ownership income. We can call it an Ownership Income tax, or OINC tax, and use it to replace some of our taxes on work. We will gradually increase this tax over time until it becomes confiscatory, but this will severely impact banking profits long before it reaches that point. We, therefore, also arrange contracts with the bankers to develop the infrastructure we need for the next step, which is sovereign money, MMT, and an end to taxes on work.
It IS a revolution we need now.
Our environment and our planet demand one, and the Extinction Rebellion already exists.
The obscene injustice of our current system of wealth inequality demands a similar revolt
But this time, we have to do more than merely OCCUPY Wall Street.
The book is now available. You can follow this link to my website.
https://www.amazon.com/dp/B0CQRKGPCZ
In the meantime, tell your friends!
Graeber, David. 2011. Debt - The first 5,000 years. Melville House