Year 9-14
“I screwed up” said President Obama last week. He also admitted that if he can’t solve the money crisis, he will be a one term president.
Why is there a money crisis? The simple answer is that money is debt, which, in fact, makes it a debt crisis. When I go to the bank to get a mortgage, the bank quickly creates that money in the form of a debt, for which I, in return, give my house as guarantee until I have paid the debt back in full.
Yes, money is debt. And there is no dearth of debt. We have come to the point where debt is doing us in. Debt, unsecured debt, depreciating debt, deflating debt, ecological debt is today’s bane, is society’s death knell. Will it make Obama a one-termer?
I am reading a 400 page long somewhat boring sermon – not unusual for sermons – by New York Times columnist Thomas L. Friedman: “Hot, Flat and Crowded” in which he explains in daunting detail how global warming and an expanding middle class world-wide with a rapidly growing appetite for bad things such as cars and air conditioning, spells disaster unless we all go green. In his latest column he concedes that this means a much lower living standard. Welcome to the 21st Century.
One of the laws of ecology is that “everything is connected to everything else,” and this applies to climate change and money meltdown as well. Both have their origins in the notion that it is perfectly acceptable to burden the world with mammoth amounts of malignant material: in the case of the credit crunch, with trillions of dollars of sub-prime lending, and with climate change, with millions of tons of carbon. In short: bubbling consumerism has boosted emissions.
Admit it: our monetary gods have failed us. The globalization of the US dollar has been the last straw. Money is nothing else but an agreement to use ‘something’ as a medium of exchange. That something is ‘trust’. That trust is disappearing.
In saner times gold guaranteed the bank notes in circulation. These could be redeemed – until 1972 – for a fixed $32(US) per troy ounce – 31.1034 grams. Having gold as the money basis would have greatly curtailed debt creation, which would have forced society to live within the limits set by the available gold, reflecting the finite world we live in, which, incidently, would also have prevented pollution overload.
Over the very, very long term, gold holds its value. An ounce of gold today buys about as much stuff as it did during the reign of Julius Caesar, 2000 years ago. This is because we have increased the amount of gold above ground at about the same rate as we have added other goods and services. Throughout the centuries gold has been the world’s most reliable, most universal store of value. No wonder gold is now the only rising commodity.
At any rate, Obama has bet his political future on the soundness of the American Dollar. He needs a lot of prayers, because it looks to me that he hasn’t got a prayer. Now every important country has bailout fever, so the world at large no longer has the surplus funds to finance the US trillion dollar deficits, while the American citizens themselves also lack the cash to help Uncle Sam. This will force the Federal authorities in Washington to print the missing dollar bills, signaling hyper inflation.
We live in new times. I can foresee that barter will again become fashionable. “I have a load of wood, you have a bag of flour, since I need to eat and you don’t want to freeze in the dark, after some haggling, the proper exchange amounts are arrived at.” The variations are endless.
Willem Buiter of the prestigious London School of Economics writes that: “We can go down in history as the generation that created the Great Depression”. He continues that, if they go ahead with unsustainable fiscal stimuli in the US, the UK and elsewhere this will spook markets, push up long-term interest rates and raise the spectrum of default everywhere.
The US President appropriately apologized for a mistake. It’s about time that we Westerners admit that we too have screwed up badly in letting money mesmerize us, to the extent that we have sacrificed all things, precious air, water, soil, our very health, our family structure and spiritual welfare on the altar of money.
Everything is connected to everything else, with the human mind central to it all.
This column and earlier ones can be seen at ‘hielema.ca/blog’. He can be reached at ‘hielema@allstream.net’.