Is money just a scorekeeping system or a vital necessity?
by Lucy Lindblad, Unknown News Dec. 1, 2008
I read an opinion piece stating that $10 trillion
of stock market losses was similar to the discovery
and destruction of $10 trillion of counterfeit
money. Supposedly, the people, factories, land
and shops still exist -- the real world is just
fine thank you -- and that everything ought to
continue on as if ...
Funny thing though, "money" is the way
modern humans keep score, and "good credit"
has replaced trust and even trustworthiness.
The humans are basing their decisions about
future actions on their own cumulative scores,
and in the "real world" effects are now being
seen:
Excerpt: Warehouses in the Kenyan port city of Mombasa, host to the world’s biggest tea auction, are filling up with the crop as buyers struggle to secure financing for cargoes, broker Africa Tea Brokers Ltd. said.
Excerpt: Coffee farmer Joao Carlos Terra says his trees will yield about a third less than planned next year because he can’t get a big enough loan to buy fertilizer and pesticide as the global credit crunch bites in Brazil ... "It’s kind of impossible to keep going like this," said Terra… who grows arabica coffee on about… 25 acres… I don’t know what will happen."
Excerpt: The Massachusetts Turnpike Authority expects to spend an additional $2 million a month after bets it made using financial derivatives went awry. ... The authority, at the center of protests over a proposed toll hike, says the cost of repaying $800 million in debt will soon increase because of wagers made with UBS AG on future interest rates. The agency, controlled by Governor Deval Patrick, sought earlier this month to double tolls to $7 on some downtown Boston highway tunnels as it struggles with rising maintenance and debt costs.
Excerpt: South Carolina's largest student lender announced Thursday it will suspend private student loans while continuing to make Stafford and other federal student loans. ...
Excerpt: Fueled by rising unemployment and food prices, the number of Americans on food stamps is poised to exceed 30 million for the first time this month, surpassing the historic high set in 2005 after Hurricane Katrina… ‘We soon will have the most food stamps recipients in the history of our country,’ said Jim Weill, president of the Food Research and Action Center…
US government debt is no longer "risk free" -- and that means that the "moneyness" of US "money" is declining, which has serious repercussions for people who keep score using dollars! To buy insurance on $10 million of US government debt with a 5 year maturity costs $47,500 per year! Obviously, someone thinks the risk of US government implosion within the next five years is non-zero ...
Excerpt: The cost of insuring against the U.S. government defaulting on its Treasury bond debt hit a record high on Wednesday as markets digested Federal Reserve programs worth hundreds of billions of dollars. ... Ten-year U.S. Treasury CDS widened to 54.7 basis points from Tuesday's close of 50.0 basis points, credit data company CMA DataVision said. ... Five-year Treasury CDS jumped to a record 52.0 basis points from Tuesday's close of 47.50 basis points, it said.
The problem facing individuals whose lives are tied to scorekeeping based on US dollars is that there is no easy escape, only costly amelioration.
US government debt is no longer "risk free" -- and that means that the "moneyness" of US "money" is declining, which has serious repercussions for people who keep score using dollars! To buy insurance on $10 million of US government debt with a 5 year maturity costs $47,500 per year! Obviously, someone thinks the risk of US government implosion within the next five years is non-zero ...
To "escape" means abandoning dollar-based human activities, and this is a one-way exit from normal American civilization. It would mean burning your ID and credit cards and hitting the road -- abandoning the system which abandoned you.
Amelioration does not bring guaranteed safety either. Converting US dollars to the currencies of other countries is expensive, risky and may be outlawed in the event of TEOTWAWKI*. I doubt that the US government will confiscate gold -- the reason FDR did that back in the Great Depression was that the value of the dollar was defined in terms of gold, and he could not print money as long as Americans could switch to gold as their scorekeeping unit of measure. And that's not applicable any more.
But the government might try to prevent Americans from sending their money to other countries, and from using other scorekeeping units of measure. (Expect the IRS to drop hard on barterers' doing tax avoidance schemes the way GW Bush tortures prisoners ) And, of course, getting a government job won't help if the US government goes bankrupt (it might even be dangerous if the government implodes and begins sending soldiers to attack hungry civilians ... I wouldn't want to be a GS-13 after that!)
On the other hand, inaction by the individual is likely to be just as expensive and potentially fatal. Doing nothing is often the wise choice, but I am guessing that this is not one of those times.
Bottom line, it is more usefully accurate to consider our mutually shared reality and its scorekeeping systems as a gigantic massive multi-player online role-playing game -- and you can stop keeping score but you cannot stop playing.
