Read Sacred Economics: Money, Gift, and Society in the Age of Transition Online
Authors: Charles Eisenstein
Sacred Economics: Money, Gift, and Society in the Age of Transition (18 page)
In principle, any government with a sovereign currency can create unlimited amounts of money without need for taxation, simply by printing it or forcing the central bank to buy zero-interest bonds. Yes, it would be inflationary—wages and prices would rise, and the relative worth of stored wealth would fall. That governments instead use the mechanism of interest-bearing bonds to create money is a key indicator of the nature of our money system. Here, at the very heart of a government’s sovereign powers, a tribute to the owners of money is rendered.
Why should government pay interest to the wealthy for the sovereign privilege of issuing currency? Since ancient times, the right to issue coinage was considered a sacred or political function that established a locus of social power. It is clear where that power rests today. “Permit me to issue and control the money of a nation, and I care not who makes its laws,” said Meyer Rothschild. Today, money serves private wealth. That indeed is the fundamental principle of usury. Yet the age of usury is coming to an end; soon, money shall serve another master.
The systemic causes of the greed, competition, and anxiety so prevalent today contradict some of the New Age teachings I regularly come across—that “Money is just a form of energy,” that “Everyone can have monetary abundance if they simply adopt an attitude of abundance.” When New Age teachers tell us to “release our limiting beliefs around money,” to “shed the mentality of scarcity,” to “open to the flow of abundance,” or to become rich through the power of positive thinking, they are ignoring an important issue. Their ideas draw from a valid source: the realization that the scarcity of our world is an artifact of our collective beliefs, and not the fundamental reality; however, they are inherently inconsistent with the money system we have today.
Here is a well-articulated example of this kind of thinking, from
The Soul of Money
by Lynn Twist:
Money itself isn’t bad or good, money itself doesn’t have power or not have power. It is our interpretation of money, our interaction with it, where the real mischief is and where we find the real opportunity for self-discovery and personal transformation.
17
Lynn Twist is a visionary philanthropist who has inspired many to use money for good. But can you imagine how these words might sound to someone who is destitute for want of money? When I was broke a couple years ago, I remember feeling annoyed at well-meaning spiritual friends who told me my problem was “an attitude of scarcity.” When the economy of an entire country like Latvia or Greece collapses and millions go bankrupt, shall we blame it all on their attitudes? What about poor, hungry children—do they have scarcity mentality too?
Later in the book, Twist describes toxic scarcity attitudes as follows: “It’s like the child’s game of musical chairs, with one seat short of the number of people playing. Your focus is on not losing and not being the one who ends up at the end of the scramble without a seat.”
18
But as I have described, the money system
is
a game of musical chairs, a mad scramble in which some are necessarily left out. On a deep level, though, Twist is right. She is right insofar as the money system is an outgrowth of our attitude of scarcity—an attitude that rests on an even deeper foundation: the basic myths and ideologies of our civilization that I call the Story of Self and Story of the World. But we can’t just change our attitudes about money; we must change money too, which after all is the embodiment of our attitudes. Ultimately, work on self is inseparable from work in the world. Each mirrors the other; each is a vehicle for the other. When we change ourselves, our values and actions change as well. When we do work in the world, internal issues arise that we must face or be rendered ineffective. Thus it is that we sense a spiritual dimension to the planetary crisis, calling for what Andrew Harvey calls “Sacred Activism.”
The money system we have today is the manifestation of the scarcity mentality that has dominated our civilization for centuries. When that mentality changes, the money system will change to embody a new consciousness. In our current money system, it is mathematically impossible for more than a minority of people to live in abundance, because the money creation process maintains a systemic scarcity. One man’s prosperity is another man’s poverty.
One of the principles of “prosperity programming” is to let go
of the guilt stemming from the belief that you can only be wealthy if another is poor, that more for me is less for you. The problem is that under today’s money system it is true! More for me
is
less for you. The monetized realm grows at the expense of nature, culture, health, and spirit. The guilt we feel around money is quite justified. Certainly, we can create beautiful things, worthy organizations, and noble causes with money, but if we aim to earn money with these goals in mind, on some level we are robbing Peter to pay Paul.
Please understand here that I do not mean to deter you from opening to the flow of abundance. To the contrary—because when enough people do this, the money system will change to conform to the new belief. Today’s money system rests on a foundation of Separation. It is as much an effect as it is a cause of our perception that we are discrete and separate subjects in a universe that is Other. Opening to abundance can only happen when we let go of this identity and open to the richness of our true, connected being. This new identity wants no part of usury.
Here is an extreme example that illustrates the flaw in “prosperity programming” and, indirectly, in the present money system. Some years ago, a woman introduced me to a very special organization she had joined, called “Gifting.” Basically, the way it worked is that first, you “gift” $10,000 to the person who invites you. Then you find four people to each “gift” you with $10,000, and then each of them goes out and brings the gifting concept to four more people, who each “gift” them with $10,000. Everyone ends up with a net $30,000. The program literature explained this as a manifestation of universal abundance. All that is required is the right expansive attitude. Needless to say, I jumped at the opportunity. Just kidding. Instead I asked the woman, “But aren’t you just taking money from your friends?”
“No,” she replied, “because they are going to end up making $30,000 too, as long as they fully believe in the principles of gifting.”
“But they are going to make that money from
their
friends. Eventually we’re going to run out of people, and the last ones who joined will lose $10,000. You are essentially taking it from them, stealing it, and using a language of gifting to do so.”
You may be surprised to learn that I never heard from that woman again. Her indignation and denial mirror that of the beneficiaries of the money economy as a whole, which itself bears a structural similarity to her pyramid scheme. To see it, imagine that each $10,000 entrance fee were created as an interest-bearing debt (which in fact it is). You
have
to bring in more people under you, or you lose your property. The only way those “at the bottom” can avoid penury is to find even more people to draw into the money economy, for example through colonization—ahem, I mean “opening up new markets to free trade”—and through economic growth: converting relationship, culture, nature, and so on into money. This delays the inevitable, and the inevitable—an intensifying polarization of wealth—rears its ugly head whenever growth slows. The people who have been left holding the debt bag have no way to pay it off: no one else to take the money from, and nothing to convert into new money. That, as we shall see, is the root of the economic, social, and ecological crisis our civilization faces today.
1.
I have purposely left out issues such as margin reserve requirements, capital requirements, and so forth that limit a bank’s ability to extend loans because they are not directly relevant to the discussion of interest in this chapter.
2.
Actually, they are making a covert comeback in some U.S. states as people are incarcerated for failing to heed court summons for nonpayment of debts. See White, “America’s New Debtor Prison.”
3.
Even after it is obvious that these debt-based assets are junk and the debts will never be repaid, the authorities do their best to hide this fact and maintain them at face value.
4.
Actually, interest doesn’t consist of “components”—this is an analytic fiction—but we can pretend it does. Most authorities list only three or five components of interest. I won’t offer definitions here—you can look them up yourself—except for the most relevant, the zero-risk interest premium. That is equivalent to the rate on short-term U.S. government securities (T-bills), which have essentially zero risk and full liquidity. One might say that there is risk here too, but if things unravel to the point where the U.S. government is incapable of printing money, then no asset class would be safe.
5.
The new means of keeping interest rates above growth is the Fed’s new power to offer interest on bank reserves. Currently at near zero, the Fed plans to raise these rates when the economy starts growing (see, e.g., Keister and McAndrews, “Why Are Banks Holding So Many Excess Reserves?”). This will ensure that any new wealth created through economic growth will accrue to the banks and bondholders who benefited from the Fed’s liquidity facility giveaways.
6.
The situation has grown far worse in recent years, as the category of risk-free investments has expanded to include all kinds of financial junk that the government has decided to back up. By ensuring the solvency of risk-taking financial institutions and the liquidity of their financial offerings, the government has effectively increased the risk-free rewards of owning money and accelerated the concentration of wealth. No longer is the Fed Funds rate or T-bill rate the benchmark of risk-free interest. The concept of moral hazard that has come up in the context of “too big to fail” financial institutions isn’t just a moral issue. When risky, high-interest bets are not actually risky, then those with the money to make such bets will increase their wealth far faster than (and at the expense of) everyone else. Moral hazard is a shortcut to extreme concentration of wealth.
7.
The conservative argument that putting money in the hands of the wealthy will spur increased investment, more jobs, and prosperity for all holds only if the rate of return on capital so invested exceeds the prevailing interest rate on risk-free financial investment. As the relentless concentration of wealth in the absence of redistribution demonstrates, such circumstances are rare, and they will become rarer if not extinct as we near the limits of growth.
8.
Moreover, some types of debts, such as student loans and tax debts, cannot be discharged through bankruptcy.
9.
There are signs of the beginnings of such an unraveling, in the U.S. mortgage documentation crisis of 2010. Here, the web of agreements that constitutes a mortgage came under question. Mortgages had been split into so many pieces that it became difficult to prove who actually owned the property. The corpus of contracts, laws, regulations, and documentation practices began to crumble under the weight of its own complexity.
10.
It is no accident that World Bank policy permits agricultural loans only for the development of export crops. Crops that are consumed domestically do not generate foreign exchange with which to service the loans.
11.
Since the writing of this chapter, Haiti’s foreign debt was annulled by a world sympathetic to its plight following the earthquake. Now the country has uncommitted income and assets—perfect targets for collateralization as the basis for renewed debt.
12.
Moreover, many loans today have variable interest rates, often indexed to inflation (there are now even inflation-indexed treasury bonds.)
13.
Moreover, many loans today have variable interest rates, often indexed to inflation (there are now even inflation-indexed treasury bonds.)
14.
Economists try to deal with this question through the concept of “velocity of money.” As the Appendix describes, the distinction between money supply and money velocity breaks down under close scrutiny.
15.
There are some other negative effects of inflation, such as “menu costs” (from the need to keep changing prices), accounting difficulties, and others. In the case of very high inflation—above the carry cost of commodities—it can result in hoarding. These considerations play a role in envisioning negative-interest money systems.
16.
The only kind of inflation that does not result from wealth redistribution arises from shortages of goods caused by war or embargo. In this scenario, which sometimes leads to hyperinflation, there is no equalizing effect since the rich simply hoard inflation-proof commodities.
17.
Twist, 19.
18.
Ibid., 49.
THE CRISIS OF CIVILIZATION
We have bigger houses but smaller families;
more conveniences, but less time
.
We have more degrees but less sense;
more knowledge but less judgment;
more experts, but more problems;
more medicines but less healthiness
.
We’ve been all the way to the moon and back
,
but have trouble in crossing the street to meet our new neighbor
.
We built more computers to hold more copies than ever
,
But have less real communication;
We have become long on quantity
,
but short on quality
.
These are times of fast foods but slow digestion;
Tall men but short characters;
Steep profits but shallow relationships
.
It’s a time when there is much in the window
But nothing in the room
.
—Authorship unknown
The financial crisis we are facing today arises from the fact that there is almost no more social, cultural, natural, and spiritual capital left to convert into money. Centuries of near-continuous money creation have left us so destitute that we have nothing left to sell. Our forests
are damaged beyond repair, our soil depleted and washed into the sea, our fisheries fished out, and the rejuvenating capacity of the earth to recycle our waste saturated. Our cultural treasury of songs and stories, of images and icons, has been looted and copyrighted. Any clever phrase you can think of is already a trademarked slogan. Our very human relationships and abilities have been taken away from us and sold back, so that we are now dependent on strangers, and therefore on money, for things few humans ever paid for until recently: food, shelter, clothing, entertainment, child care, cooking. Life itself has become a consumer item.
