If only I had known, I should have become a watchmaker.”
There is a famous quote that half of the money spent on advertising is well spent and the other half is wasted. The problem is that nobody knows which half is which. The same thing can be said of Karl Marx.Half of what he wrote was true- the trick has been to figure out which half.
One of the really good, really perceptive ideas that Karl Marx crystallised was that in the modern world, material objects are the expression of social reality. In other words instead of a formally stated hierarchy in the form of law and custom we have an implicit hierarchy embedded in the material form of the society we see around us.
This is a truly profound insight.
The flip side of this insight is the realisation that technology is culturally specific. Since the concrete objects we see around us are the realisation of social reality they must express the society and the culture that gives birth to that social reality.Technology and culture are much more closely linked than you might be led to believe. Cultural artefacts can be more clearly understood as a form of technology.
Which brings us to money (surprise, surprise!)
One of the most difficult problems in explaining Crackernomics and how money is developing is to get people to understand that money is a dynamic, fluid technology. Not a static fixed expression of value.
This technology can be uncovered and examined in detail.
In The Great Money Train Hijack I suggested that you can understand money as a train ticket, that is to say a permission to ride on the rail system within the parameters of the contract embodied in the ticket. A money note is a permission to participate in the economy within the terms of a contract. The parameters of the contract determine the value of the ticket/currency note at any given time.
At its simplest level this means that a ticket on a notoriously inefficient rail system prone to breakdown and likely to deliver you to your destination late, is worth less than a ticket on an efficient system that is comfortable and punctual. This is a good working definition of inflation. The later a train will be, the less a ticket to ride on that train is worth… Inflation is an indication of the efficiency of the money train network.
I can focus in on this interactive, dynamic aspect of money more accurately by using the analogy of money (a coin), as a watch. Modern currency and modern watches were invented and popularised at around the same time and this is not a co-incidence; they are both fundamental parts of the social mechanism that allow the functioning of modern societies.
As any curious boy will tell you, a watch can be prised open and its workings exposed for examination. I am presently working on a new short film entitled ‘The Structure of Money’ which will do just that. But for the moment let us just focus on the surface, the watch face as it were.
The first thing you notice about a watch face is that it is constantly changing, providing information about a common abstract known as time. A coin performs exactly the same technological function. It provides and stores changing information about a common abstract known as value.
There is no more absolute value than there is an absolute time. They are both social constructs, that gain their social power exactly to the extent that they are held in common by the societies that adhere to them. It is only 4 o’clock because we agree it is. A 1 euro coin only has a specific value because we agree it does.
A watch changes its description of the time constantly. That is why it is useful. But the important thing to understand is that although the time constantly changes on the watch your relationship to the watch itself does not change. You do not disagree with your watch just because it shows that you are late for an appointment! You modify your behaviour accordingly. You take a taxi instead of the bus. If you simply moved the hands on your watch twenty minutes into the past would it mean that you were no longer late? Of course not. You would still be late and you would also be a fool.
The same is true of money. The value of a pound coin at any one time is a reflection of its commonly held value. And like the time, that value is constantly changing. It is always ‘getting’ later and money is always ‘losing’ value.
This reveals clearly the stupidity of those who argue for ‘sound money’ which is supposed to be money that never changes in value. This is the same as arguing that you should set your watch to twelve o clock and never wind it up so that you can always know what time it is without having to look!
The next important insight from this analogy is to understand that value is not embodied in a coin anymore than time is embodied in a watch. Time is not divided up between each individual time piece and value is not divided up between each and every note and coin. If you gathered every watch together and put them in a pile, would you have gathered all the time there was in one place? Nonsense.
And if you make a thousand more watches, is time diluted in some way? Of course not. But the more watches there are, the more people have access to information about the commonly held idea of time. More people can interact in a more complex way
Who could be against the idea of the maximum number of people having access to time? Who could be against the maximum number of people having the most efficient information possible about the common social idea of time?
Here is a simple example of the benefits of the maximum possible knowledge of value
There are three people on a desert island, one of whom has a goat.
One of the other two people finds a coin on the beach and successfully buys the goat from its owner. The ‘value’ of the goat is one coin. It can’t be anything else.
Same three people, same one has a goat. But now both of the other two find a coin on the beach. What is the value of the goat? The value cannot be determined by price since there is only one price; (one coin) but two examples of it (two buyers). If the goat is sold it must be on some other criteria than the most money offered.
Now say that the one buyer finds 50 coins on the beach while his competitor finds 49 coins. When the goat is sold its value (the differential between available money) is described down to 2%. And if it were 500 coins vs. 490 coins the value of the goat is described down to 0.2% and so on.
In other words, the more money there is in circulation, the more accurate the value placed on any given commodity will be. In exactly the same way that the more watches there are in circulation the more punctual a society will be.
Who could be against that? Let us take our example a stage further.
Suppose the first man has two goats to sell. One goat has three legs. As in the beginning, there is only one coin in circulation. The price of a goat with three legs and the price of a goat with four legs is the same. There is no ‘price mechanism’ since no price variation is possible.
Say both purchasers have one coin each. Still no price mechanism.
Only when there are enough coins in circulation for there to be a twenty five percent differential in price (four legs vs. three legs), would there be anything like enough money to take account of the real value of the goats.
And what if the three legged goat miraculously grew another leg to make up for his perceived deficiency? The two goats are now more or less the same. Does that mean that now there is less meaningful difference (information) that we can safely diminish the money supply?
The information that a particular goat can grow another leg to replace one that is lost is surely likely to form a vital part of any further negotiations on price !. There is now very much more information than there was before so there needs to be very much more money to express that historical information.
Knowledge and information about the economy and its history are always expanding. Therefore the money supply will always have to correspondingly expand to take account of this fact. As knowledge and information about human history have expanded so the methods to record them have expanded.
So I ask the question again:
Given that money is an expression of information and that the availability of money is an expression of the availability of information who could be against having the greatest possible dispersal of money?
Who wants to restrict the flow and the amount of money and why?
Who are the Monetarists?