Saturday, October 11, 2008

Money

This is a repost. I originally took it down due to its flaws, but someone wanted it back up. This is a long, vaguely futurist rant.

I've seen this video a few times, now. It's informative, but... there's an irritating undercurrent. Here, watch it first: Money as Debt.

Once you've watched the video, you'll probably understand a lot more about the weirdness of modern money. And, if you think about it a bit, you can see why capitalism and consumerism are core aspects of modern economy. This isn't the only reason that alternative methods fail, but it is a major reason.

However, the video itself is painfully... mired in its own views? It is not so much a description of what's going on as an advocacy for a specific kind of sustainable economy. I have a few problems with this particular form of sustainable economics.

First, a more logical issue: he takes affront to the idea of interest. The fact that banks loan at interest means that banks will have control over an ever-increasing fraction of the money, even if they aren't allowed to manufacture debt. Unfortunately, banning interest is not going to stop this. Instead, what we'll see is banks turning to alternate methods of making money. Methods which will serve the exact same purpose.

Banks not allowed to charge interest will not be able to pay interest, and therefore we would have to return to a system where the bank charges a fee from your account to keep your money safe and easily accessible. This would give them control over an ever-increasing percentage of the money.

Loans would need to make money in some other way, so the bank would, instead of charging interest, have to charge in some other way. "Service fees" are likely, which would have the same exact result as interest. Also likely is disguising loans as investments, which would have particularly disastrous effects on student loans.

The problem isn't with interest: it's with the fact that banks are a creature of money. They don't deal in anything else. So they inherently break the system. Lemme describe:

When you charge money for an apple, you get an apple. Next year, if apples are more plentiful, the same amount of money might buy an apple and a peanut. In this way, the money serves only to grease the wheels of the economy. However much money actually exists is secondary to the goods and services being distributed: if there's more money, goods cost more. If there's less money, goods cost less. Whether an apple costs a penny or ten dollars is almost irrelevant, so long as everything scales at the same rate. 'S why Japan can get away with their "dollars" (yen) being worth so little individually: just print a bigger number on your coins and bills.

However, banks are charging money for money. They are completely immune to that growth: a dollar will never be worth more or less than a dollar, and although they can dabble in currency exchanges and investment, at worst a dollar is always worth a dollar. And they charge money for money. There is simply no way you can fail to gain more and more money if you can keep doing that. A bigger cut of the pie with every month.

The problem is that banks will ALWAYS accrue more and more money. It's the nature of the beast.

The video suggests that money should be a public service.

However, I'm not a fan of his ideas. Let me argue against them:

The core of his ideas are to create money as value rather than debt. The government creates real money and spends it on, say, infrastructure. Thus paying a few thousand blue-collar workers and letting their money trickle into the economy.

This is a flawed idea for a few reasons, one of which being that it would simply create the same situation (a rapid growth of money supply) because there's no government on the planet that could resist printing massive amounts of new money. The new Democratic line would be "why tax when we can just print cash?" and the new Republican line would be "of course we can afford two or three more wars, we'll just print the cash!"

Again, the flaw is not in the fact that the system is based on debt/interest. The flaw is the fact that the system is governed by human beings, who will happily destroy it to make a bit of cash. If humans could be trusted, then a debt-based economy would be perfectly fine anyway.

... but, believe it or not, that's not my big problem with the video.

My big problem is the idea of a sustainable economy.

I hate to burst your bubble, ladies and gentlemen, but a sustainable economy (in this sense) is impossible. Physically, technically, and socially impossible.

Lets look socially: a sustainable economy means a specific set of resources are constantly being cycled/provided. Unfortunately, however nice that might sound, specific humans would take control over those resources (solar energy arrays, plastic recycling plants, etc) and use them as leverage to gain further control over the economy. We would be like dogs fighting for scraps.

Let's look physically: it's physically impossible to recycle everything.

More than that, it seems obvious to me that opportunities arise every day - bounties and dearths and accidents and ten thousand other chaotic day-to-day details. Claiming to keep the economy at a specific level is a polite fiction at best: what happens if a major city is destroyed by earthquake or flood? You'll need to rebuild, which will require you to build up your economy. To the precise same level? How? That's not going to happen without artificially crippling your economy. "No, you can't make it any better than it was before!"

Let's look technically: science is always advancing. We can't have a sustainable economy because I'll invent a better strain of wheat, even if nobody else wants to. Now what? Do you insist that those who grow the new wheat grow LESS, even though it means leaving unnecessarily fallow fields?

What a waste: technology creates new wealth every day, and I would never see that stop. That would be stagnation of the worst kind.

Investing in research and development creates wealth. It makes the world a better place to be. A lot of people argue that new technologies are the problem with the world, that they are hard on the ecosystem and blah de blah blah. These people haven't actually looked into the matter.

The vast majority of new technologies use LESS resources than old technologies, with the exception being when a new technology becomes so widely adopted that it uses more resources because people demand more of it.

Computers require way fewer resources than rooms full of secretaries and pneumatic message tubes! That's why we all have computers, but in the 1800s most people did not have dedicated rooms of secretaries and runners.

The argument is that we should be content with a lower quality of living so as not to disturb our precious sustainability. Even if that were acceptable, it's impossible: try arguing that only giant corporations should be allowed to have a laptop, and not more than one or two laptops per headquarters. You think we'd be in a better situation?

No! Technology creates and creates. Ever more wealth, ever cheaper.

And this will continue. Every new advance creates more wealth at less cost. Better living. Even automation, which "costs jobs", actually creates more wealth in the long run as it allows for a dramatic reduction in price.

People seem to forget this. They seem to forget than our standard of living has increased a thousandfold in the past three hundred years, most of it in the past fifty years. That's because of technology.

I think it's really silly to try to plan out an economy without taking the rapidly increasing increase in technology into account.

For example, let's assume we do everything that video suggests and we magically get a perfect sustainable economy with everyone joining hands and dancing from coast to coast, singing the Smurfs theme.

I will break that.

I will release a web-distributed video game for $10 a pop. People will buy it.

This costs me nothing. I just get money. And, if my game is any good, people will buy it in sufficient numbers that I will make a profit above the cost of the time investment. IE, I will get free money.

Whoa! I just destroyed that carefully balanced economy!

The only way to prevent that would be to come down on me like a hammer. "You're not allowed to make a profit! You have to eke out a living just like everyone else!"

No, that's crap. It's impossible to sustain even if you wanted to. It's easy to create a second money and use it for goods and services that the government does not moderate. I can name fifty of them, but here's the simplest: World of Warcraft gold coins.

When you're designing your future, you need to take this into account. This new and bizarre development where I can distribute information for free to any number of people, and charge them money, and everyone feels like they got a great deal.

It's only going to get more common. It's already putting a strain on our old-fashioned economy...

The way forward is not to turn around and go back to printed cash only. There's no question things are going to change, but they're not going to go back to a government-prints-the-money system. It wouldn't work very well in this era: too much interconnectivity.

No comments: