THE MIRAGE OF MONEY
Money is the fundament of our market economy system. Its foremost functions are known: it’s a standard to measure transactions and a unit of account. It possesses a transactional role for it permits replacing direct good and service exchange by an intermediate state, i.e. money itself. From this perspective, it measures the utility of the time spent on the production of a good or service. Yet, this is not all: is also serves as a hoarding instrument. Consequently, by conserving a certain amount of money, it is possible to defer its consumption in time. Indeed, saved money predominantly serves to cover potential future expenses.
Money has been imposed following the rhythm of labour divisions, i.e. when bartering no longer permitted to ensure human community functioning. Over the course of history, it has had numerous forms. Originally, it was a consumable good (an animal, for example) to progressively become a non-consumable good. Progressively, its monopoly was often being seized by governments, for money is a power attribute that permits paying taxes. The right to leverage taxes and to strike money correspond to two royal privileges. But there is more: the monetary phenomenon credibility measures the stability of the Establishment and the guardianship degree of the production factors labour and capital.
Yet, over the course of history, money has become paper, fiduciary (i.e. based on confidence) and scriptural (transmissible through manual or electronic writings). Today, money is…at its best a piece of paper and at its worst electrodes that episodically appear on computer screens. It is no longer guaranteed by precious metals, such was the case in the context of the fixed exchange rates of the Bretton Woods system, scuttled in 1971. Money no longer has an intrinsic value and is limited to representing it.
How is it thenceforwards possible to reconcile this lack of monetary intrinsic substance with the value that is being attributed to it? It’s at this level that abstraction is needed and that there should be imagined that money needs to be guaranteed by a referent that surpasses its quantity. Something should thus guarantee money, while at the same time being superior to it.
Now, what is this « something » ? It is confidence. Everything thus happens as if money was guaranteed by individual confidence units that, collected collectively, ensure its durability. The question thus lays in knowing in what confidence needs to be placed. It’s at this level that reasoning comes to a sudden end: money should be guaranteed by the confidence in this very same money.
In other words, the substance of money is undefinable for it is guaranteed by itself. Confidence quality and money quantity reciprocity is needed. This is a concept that is in levitation and in suspension. It’s a confidence postulate, a phenomenon that is more or less conscious of forced adhesion. The signifying of a currency that is only guaranteed by confidence is not distrainable. We could even put forward that money is an artefact, i.e. a phenomenon created in every detail, devoid of any theoretic significance. That would explain monetary order subordination to social order, the latter corresponding to a tangible reality.
The French economist Jean-Baptiste Say put forward that « money is a veil », undoubtedly based on the credibility of the governments that strike it, as well as on commercial exchange health. Today, we could put forward that the ECB’s “moral” discipline guarantees the euro’s durability, i.e. that monetary authority independence invests its leaders with confidence conservation associated with monetary signs.
We will thus admit that the status of this monetary phenomenon is precarious. This could explain the etymological origin of the word “money”, which corresponds to the Latin verb « monēre », i.e. to caution. In Rome, the Moneta Palace, the place where the coins were struck, was situated there where Capitol mutts warned the Romans against the imminent Gaelic attack in the 4th century BC.
Money is guaranteed by itself. It thus transports a certain political organisation vision. It is at this level that governments need to intervene. The latter has the right to leverage taxes and to strike money, but also to collectively run into debt.
The majority of the states are facing debts for they anticipate future growth and demography. They believe in the hypothesis that future living standards will be sufficiently high to compensate public debts. Nevertheless, this is a delusion for labour is the real measure of the exchangeable value all goods and services. Money thus ensures the proportion between the utility of the various labour quantities. The quantity of money should be proportional to demography and productivity. One could imagine monetary mass reaching a level that allows population growth and good and service production to occur more efficiently. Unfortunately, public debts anticipate demography and productivity. This leads us to the inescapable conclusion that excessive public debts generally come with deviated money (inflation, confiscation, etc.) .
Moreover, this is exactly what is happening in the Eurozone: the countries were to respect certain debt criteria, amongst which public debts inferior to 60% of the GNP, which already is a very high percentage. So, today, average public debts are over 88% of the GNP, this will undoubtedly lead to having to print more money, depreciating its value. It will thus ultimately be inflation that will reimburse the down payment of prosperity that we have borrowed from future generations, without ever having had the intention to refund them.
Besides, the risk that the burden of public debts imposes on money (and thus on the confidence that is attached to it) is illustrated by the sociological difference between American and German monetary phenomenon conceptions.
According to the Germans, public debts need to be financed by savings, maintaining their purchasing power. The United States, on the contrary, consider that public debts can be financed by monetary creation. This opposition reflects antagonism between German Lutheranism and American monetary paganism. The German currency is hoarded while the dollar is nothing but transactional. Moreover, in Faust, Goethe stated that inflation, i.e. monetary depreciation, was the Devil. Another antagonism concerns the relationship between various Eurozone countries. This single currency was coined to consolidate peace in Europe between two hereditary enemies: France and Germany. Everything opposes these big nations: it’s Luther against the Church’s eldest daughter, Goethe against Voltaire, industry against agriculture, Germanic against Latin. There remain umerous remote conflicts, and today, this is exactly money.
The Germans consider money to be the cement of national reconstruction. Deficits are thus financed by savings. This is Lutheran logic. For the French, however, money is a royal attribute. In this Colbertist state, it can thus be printed at the discretion of central authorities. French monetary history is moreover full of long, successive devaluations.
To conclude, money is a singular concept. It is even an archetype, an idea that serves as a model for another one. Money itself warns against its ephemeral character: it depreciates, is being replaced, confiscated and nationalised according to human community evolutions. It only temporarily protects against the future, i.e. as long as mankind determines the stability of its future.
Some believe that money is synonymous with the protection against future hazards, but this is quite naive: fortune is fragile. The biggest error in economy is to believe that monetary irritations are irreversible. Now, they never are: history is full with currencies that became lapsed. A currency never harnesses a community and cannot be applied by authority. One can never impose a monetary standard that is not adapted to a population that refutes it.
