We are gathered here today

Well what an exciting month it has been. For all of us rather than just myself of course. Jo and I have been to Cornwall and had two sets of friends come to stay this month. The rest of us have been experiencing the highs and lows of a banking system in turmoil.

Good times for us sandwich board doom sayers. I’m sure there’s a lot of bedroom bloggers wearing out their “I told you so” keys. I am as far from an economist as it is possible to get, so I can’t say with any authority where the fault lies or what needs to be done about it. That never seems to stop anyone else from sputtering out their indignant opinion however. Since I gave up trying to be different a long time ago I better form some sort of opinion on this then and regurgitate it here while on the worst side of 3 bottles of wine (shared!).

Having established my lack of credentials, I’ll just get straight on to the pontificating.

As far as I can tell our economy relies on promises. That’s what money represents. Once upon a time, banks had to back up that promise on the paper note by owning concrete items of value – like gold. For some reason we (humanity) apply a reasonably consistent high value to the stuff. Personally it has no intrinsic value.

Most of us use money to assign a value to our time and then to exchange it for concrete items like food, heating and cups of tea. It is a tradeable abstraction of value.

A currency (GBP, US$, Krona, Cowrie shells) is a promise backed up by a particular culture’s powerbase, let’s call it a government for now but that’s not necessarily the case. The value of a particular currency is a measure of how good that government’s promise is to turn the paper promise into a concrete item of value, like gold or cattle or camels.

The value of currency is of course subject to a great many variables including social structure and customs, political and environmental pressures as well as rumour and speculation.

Banks and fincancial markets exploit the perceived differences in value of currencies (as well as the value of actual concrete items like gold, bananas etc… ) and speculating on their future value.

Now it seems the finance world became tired of trading in paper money backed up by gold and invented a new kind of money. One the rest of us would call debt. The next sentence is going to hurt my brain. By assigning a value to a promise to pay money, which is in itself someone else’s promise to pay a concrete item of value, they could now trade promises to pay promises.

The whole process relies on the ability to assign a reasonable value to a debt. A unit of debt is just like a unit of money – except it is not backed up by some government promise to turn it into something of real value.

Money enables people to add ‘extra’ value to concrete items and even value to promises. Our culture expects us to add value to things, it’s called profit.

As long as we continue to need things like 40″ TVs and mobile phones, other people can make things and add a little bit of profit. Or maybe quite a lot of profit.

Profit is like a light gas and it rises through the dark sludge of toil to the top. Most people aren’t able to add a little bit of extra value to their time. Their wages are dictated by ability and availability. However as long as people can be entertained by digital watches, soap operas and celebrity dancing, other people can sell them these necessary items.

It always comes back to the same old problem. That of greed. There’s one good thing to say about the barter system. It’s incredibly impractical to hoard wealth. Imagine if Bill Gates had to store all his ‘wealth’ as cattle.

We can survive by living in small villages hunting our own meat and growing enough crops for the village. This of course only works for a given (and quite small) population.
We have, however, matured beyond the furrow and swapping chickens for pig fat candles. We have even gone far beyond LED digital watches. These days we’re all buying mobile phones faster than potatos reach their expiry date.No ones day is complete until they give some indication on their social network of choice that they are still alive and prepared to sum up their daily existence in a few words for the price of a cross referenced and data minable entry on a mass storage system, probably not protected by the few privacy laws our government have left us.
Yes I am talking in extremes, but the reality of the modern world is actually pretty extreme. This differential is real as you can see in any third world country.

As long as it remains possible for individuals and corporations to gather infinite wealth or until humans are able to reconsider what value we assign to material things this problem will never be solved.

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