The Slippery Sliding Scale of Funny Money

The following is a ‘ramble’ of mine from 2014 on the nature of money. Ten years later it seems right on s our new government tries to say that coal, for example, is a source of value. It will be a source of money (‘funny money’), but will be of negative value as it helps takes away our future.

“The Quiet New Zealander”

Dr. David Burke

Victoria University Continuing Ed course – Jan/Feb 2014

A Ramble

This “ramble” is not a review of the course.  Rather there were one or two ideas from the course which stimulated these thoughts.  Other sources of inspiration  have come from a documentary on money which I first saw a few years ago, and generously from my observations of the alarming  political developments in the USA and New Zealand (and globally, of course) over the last few decades.

In bringing the course to a conclusion with a consideration of the current need for, or at least use of, intelligence (in the context of security and intelligence agencies) Dr. Burke mentioned money laundering as a key consideration, and in particular described the BCCI bank event. (I will not define the term ‘money laundering’ here or discuss BCCI, just continue to ramble.)   I ask myself, how does money laundering differ from other means of imposing your will, or becoming fabulously rich, by finance means?   And what relationship is there between all these means and intelligence agencies?

A few years ago I saw a documentary on money (“Money is Debt” by Canadian Paul Grignon) which revealed to me my own ignorance of money, what it is and consequently how it is created.   From an early age I had always had a conservative view of how I would use money and how it might affect me.  You earn some money or receive a gift, and if you don’t spend it right way you might put it in the bank.  The bank keeps an account of your credit.  It may pay you a bit of money to keep you interested, and you can reasonably get your deposit out whenever you want.  I knew of course that banks lent money which must be paid back to the bank along with a considerable fee.  I was always cautious about that; never really had a real bank loan in my life.

The documentary said that private banks create money.  This seemed surprizing to me, even bizarre.  Why would a democratic society allow something as important as money to be created by a private company?  And then I learned that the way banks create money is by debt.  The bank makes a loan and voila, the loan is money!  It was a eureka moment to realize that all money is ‘funny money’!  Well, there is some credit money, which is real money, but then how much of your own credit money is derived from someone else’s funny money?

Money is not an element of nature.  It is created by society within a culture.  Since our finance system uses funny money, we should realize that our imaginations can envision many possible uses of this finance.  It could be a slippery subject.  There is room for much discussion on this; it has been going on for thousands of years, and in my time I have not been entirely unaware of this discussion. 

Here I would like to make the observation that it would be expected that at any given point in history some consensus might be reached, or at least attempted, about how money and finance should work.   Various uses might be made illegal.  That ‘money laundering’ is illegal is an example of this.   There have been other outlawed examples ranging from conservative, credit based systems, on to promise based ones such as ponzi schemes.

But at different times in history there might be different consensi on what is the proper use of funny money.  That there is a ‘slippery sliding scale’ of uses should be no surprize to anyone who has experienced the last 15 or 20 years.  The energy company Enron in the nineties, for example, was the first clear sign to me.  Enron executives (‘The smartest guys in the room’) were a joyous lot who essentially justified the stated financial outlook of the company by showing how confident and joyous they were about it.  Rating agencies agreed.  While not every business was this ‘joyous’, this example should give us some insight on where society is moving on the funny money scale.  While Enron collapsed in a heap it has set an example for leading edge capitalists to follow. 

Further along the slippery sliding scale, the 2007-2008 finance crisis was brought about when some large finance companies created toxic packages in the subprime mortgage market, then bet against them.  In short this induced a frenzy of collapses and takeovers.  (When the carnage settled, there were just six megabanks—Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley.)   That it turned into a global crisis should not be taken as a sign of failure in the larger picture of funny money.  Rather it should be taken as a sign that when you go so far out on the slippery sliding scale of funny money, dangerous, perhaps unexpected, and surely exciting things can happen.  Instant fortunes can be made by companies and individuals, and furthermore, some of these fortunes can be swallowed up into even bigger fortunes.  What could be more exciting than that?  Even better than joyous!  The six megabanks are more firmly “too big to fail” than before the crisis (and as of 2015/03 there still have been no prosecutions for the many unlawful actions which occurred). 

Likely we are only seeing the beginning of that era.  To understand why we have reached this bizarre stage in history one would need to look at how the funny money systems of the dominant human societies deal with the resources of planet Earth, then add the global realization that limits have been reached on the use of available resources to feed this approach.  (But I won’t go there now.)

So the consensus on the proper placement on the sliding scale for the use of funny money has moved significantly away from the cautious end.  What does this have to do with security and intelligence agencies?  The relationship can be glimpsed in the concern about money laundering expressed by Dr. Burke.  It should also be seen in the use of these agencies in spying on businesses and leaders of other countries and the United Nations, as well as ordinary people,  in the name of “economic wellbeing”.  The key factor to understand this is that in the last forty years the global economy has been primarily focused on widening the gap between rich and poor.  (Why? It’s related to the point I raised in the previous paragraph, but I’ll not go there in this case, either.)  The pursuit of ‘economic wellbeing’ refers to preserving the ability of the economy to continue widening that gap.  Espionage is probably not needed to accomplish this.  So-called “free trade” such as the Trans Pacific Partnership Agreement (TPPA) will make heretofore unlawful or unpalatable interference in local democracy and local economies legal for the benefit of large global corporations.  Intelligence agencies will be engaged to spy on opponents of this process.

It has been said that since the end of the cold war intelligence agencies have been looking for a new reason to exist   Given that there has been a significant move in the consensus on the sliding scale of funny money, and the emphasis by the agencies on spying for economic reasons, this should be expected.  Likewise it could also be suggested that analysts of security and intelligence agencies might be looking for a new justification for their traditional approach to understanding these agencies and their roles.  Perhaps that is a fitting observation to make at the conclusion of this ramble inspired by the Cont Ed course “The Quiet New Zealander”.