- The middle class is shrinking and poverty is growing.
- Jobs are going overseas.
- The top one percent is getting richer while everyone else gets poorer.
- Our infrastructure is falling apart.
- Taxes and government debt are high.
- States and the federal government are in crisis with serious budget shortfalls.
- Thirty percent of American corporate profits go to the financial sector.
- We have immigration issues.
- We spend huge amounts on weapons and war.
Why, why, why?
Our present money system pushes us toward these outcomes
There is not a direct cause and effect, but our monetary system establishes parameters and pressures that make these outcomes predictable and alternative outcomes nearly impossible.
We are social animals who exchange the things we value. Because money is our primary tool to facilitate exchanges, our money system sets boundaries, lays tracks that become ruts, and at a deep and fundamental level determines the nature of our society. We can have all the conversations we want about how to:
- reduce our deficit
- cut taxes
- get right size government
- strengthen our middle class
- stabilize our financial sector
- reestablish trust in government
- stem illegal immigration
- assure enough jobs
- assure that help for those in need does not foster crippling dependency
- assure businesses on Main Street thrive
- maintain and sustain our infrastructure and natural resources for future generations
But, even when we make some small improvements here or there, our current monetary system, the bedrock of our economy, determines most of our current outcomes. Until we look clearly at our money system, and make it truly match our values, we will keep getting what we are getting – at exponentially increasing magnitude.
River to the sea
This book’s discussion of our money is a distillation to make the basic system clear. Life is far more complicated of course, but the math is indisputable. The bones of the money system are mathematical, and matter, because the money system is structural and determines how resources move around in our economy. Since the money system is complex, there can be positive and negative outcomes along the way. This means if you start looking for anecdotal evidence of good or bad results, you can find plenty of both. A money system can dictate that resources and wealth shift toward those who already have wealth, and away from the people who produce it. At the same time, the rules of the game – economic policy – can allow people to rise from rags to riches, and allow some businesses to prosper, and some individuals to make their fortune on hard work alone. It’s critically important to look deeper than anecdotes at the nation as a whole and at the money system itself.
Think of the earth’s water cycle as a metaphor for our money system. Moisture evaporates from the ocean, is carried as rain to land, falls, and then flows again to the sea. This is the fundamental water system. Along the way, some water sinks into the ground to maintain aquifers. Some is soaked up by plants. Some is dammed. Some flows into streams and ripples along. Some flows into farms, lakes and reservoirs. There can be droughts and floods and hurricanes and the soft patter of rain on thirsty crops. The benefits and burdens of the system are extensive and complex. AND the general cycle exists with certainty. Earth’s water cycle is a closed system: shifts and changes occur as water moves through the system, but it moves in a consistent directional cycle.
A money system has an irrefutable mathematical core with predictable system-level outcomes. At the same time, money will eddy and flow, flood and dry up, and swirl into beneficial or destructive individual outcomes.
A money system can be designed to function like the water cycle: a closed system where money circulates in complex ways, sometimes constrained, sometimes freely shifting around for all sorts of reasons, while the amount of money remains essentially or proportionally the same.
Or the money system can be designed so there is a one-directional transfer of wealth from those who produce value to those with the power to create an expanding supply of new money. In our water system metaphor, this would be the equivalent of having a giant straw touching down somewhere and sucking up a steady portion of the water on the planet. Most would agree this is a very bad idea.
A money system with a fundamental one-directional transfer of wealth requires an exponentially growing supply of money – so that there is money for basic exchanges and money to skim off the top for the wealthy few new money-creators. Because this latter system is the one predominantly used worldwide, it is important to understand what exponential growth means, because in a closed system – and all natural systems are closed – exponential growth inevitably leads to collapse.