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 (58 page)
If money is in a savings account, it probably means that someone doesn’t need to use it right now. The function of a bank is supposed to be to put that money in the hands of someone who does want to use it. Only then can it be said to “exist” in economic terms, and only then does it have economic effects (e.g., stimulating production). In contrast to a saver, a borrower is someone who does want to use money right now. Therefore, any transfer of money from saver to borrower, whether under a full-reserve or fractional-reserve model, will increase the effective money supply. It will increase the amount of money that is actually being used.
I cannot help but remark on the similarity between fractional-reserve
money and the superposition of states of a quantum particle. The matter is therefore more subtle than the same money existing in many places at once, a description that still conceives it as an objectively existing thing. It is that it exists in all and none of those places at once, existing only as a possibility until brought into being by a transaction. Ten people can have $100 each in their savings accounts, based on $100 of base money. Any one of them could withdraw their $100 at any time, but until they do, that $100 cannot be said to exist in any of those savings accounts. Like in a quantum measurement, the money is virtual until brought into reality through an interaction, a transaction. You withdraw your $100 from the ATM and look! There is the cash! It was there all along, right? No. It only appeared there through the act of the withdrawal, or the act of writing a check. Is the money in your savings account “really there” or not? That is the question that bothers “real money” advocates, but ultimately it is not a useful question. Whether or not it is there, it comes into being when a transaction is made, just as an electron comes into being when it interacts with an observer. With money as with matter, existence is a relationship.
“Real money” advocates would seem to want to return us to a Cartesian age, in which existence is not a relationship but a monadic predicate. This desire is inconsistent with the revolution in human beingness that is underway today: the expansion of the discrete and separate self into a larger, connected self. Even in physics, being is no longer an objective property, at least if by “exist” we mean “to occupy a quantifiable point in space and time.” Physical location is not an objective quantity. Why, then, should we demand it of our money?
Indeed, perhaps if we are to move with the tide of the times, we should do away with base money entirely and move toward a
pure credit system where all money comes into being through a transaction and perishes in its absence. Are reserves even necessary at all? Paradoxically enough, the possibility of a full-reserve system implies that they are not necessary, since a full-reserve system is no different from a reserve-less system. In both cases, there is one kind of money, not two. Moreover, reserve-less systems on a smaller scale have been envisioned and employed—LETS and other mutual-credit system are reserve-free credit-based systems.
Could the present system work without reserves? Why couldn’t Bank A create that $1 million credit in John’s account and then debit that account by $1 million when he pays Mary, whose account in Bank B is then increased by $1 million, all without reserves? Well, it could, except that we would then face the same problem that all mutual-credit systems face: how to regulate who gets to create how much credit, and how to limit negative balances. The reserve system puts a limit on bank lending. Without it, a banker could lend unlimited amounts to his cronies and then go bankrupt, effectively divorcing money from contribution to society and debasing the value of the money of those who do contribute. Of course, other limiting mechanisms might be employed—for example, the state could determine by fiat who gets credit, or we could use some kind of formula or a social feedback system with ratings and points. To return to the quantum money metaphor, in a quantum system the range of possible quantum states made manifest though a measurement is limited. Just as the probability wave function describes the distribution of particles, we also need some social function that influences the distribution of money. In a single-slit experiment, most of the photons end up in certain small areas. In a credit system, most of the credit should go to those who will put it to good use. The “social function” I describe doesn’t dictate to whom it
goes; it merely sets the conditions so that it will be most likely to go to a certain area that represents the social consensus of good use. This function can be adjusted, just as a pinhole slit can be made larger or smaller, to “diffract” the creation of money over a larger or smaller domain.
Among such functions, the reserve system offers some important advantages. It is organic and self-regulating; it allows for risk taking; it accommodates both spontaneous grass-roots entrepreneurship and collectively decided direction of the flow of capital. Finally, a credit-based system with decaying currency embodies two cardinal principles of the new world: interdependency and impermanence.
Perhaps most importantly, a credit-based system can accommodate all of the proposals of this book without the revolutionary destruction of the existing financial infrastructure and rebuilding of a new one. Although the effects of negative-interest currency, elimination of economic rents, localization, and a social dividend are indeed revolutionary, the means to achieve them are not. Indeed, they all exist in embryonic form already. While many of us, including at times myself, desire to wipe the slate clean and begin anew, such revolutions have the exasperating tendency to reincorporate the old into the new. The all-or-nothing desire for total revolution can also be dispiriting and paralyzing, since it implies that incremental, doable changes are meaningless. Consequently, today’s self-proclaimed revolutionaries sit in their chat rooms doing nothing, cynically assuring each other that when the collapse comes, everyone else will finally see the error of their ways.
I think those cynics are going to be waiting a long time. Where they see a collapse, I see a transformational crisis in which the old is not abandoned but incorporated into something larger. The connected self does not deny the separate self of modernity but
adopts it as one of the many ways of being that comprise a larger self. The same is true for the structures of our civilization, all of which ultimately arise from, contribute to, and correspond to our sense of self. We could say, then, that the crises converging upon us today are a kind of identity crisis. The mistake of the collapsist crowd, I think, is to look to that crisis to save us, to do the work of wiping the slate clean. Our own efforts, the thinking goes, are not enough. From 2012 end-time theorists to Christian believers in Armageddon, the underlying thought-form is the same. But while the intuition that “things cannot persist the way they are” is valid, the conclusion is mistaken. It is not that the collapse will do our work for us. It is that the crisis will provoke us into doing the work we need to do. It is work we can start doing right now. As I wrote before, any efforts we make today to “raise bottom” for our collectively addicted civilization—any efforts we make to protect or reclaim social, natural, cultural, or spiritual capital—will both hasten and ameliorate the crisis. It is true that conditions are not yet ripe for the full blossoming of any of the proposals of this book. However, before blossoming can happen, the soil must be prepared, the seedlings nourished. That is the time we are in as I write these words. Soon, these seedlings will grow strong in the soil made fertile by the decay of existing institutions; then they will blossom and finally bear fruit.
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