A virtual philosophy of money

by jexmas on January 11, 2011

What is money but trickery and obfuscation? Money is untrustworthy and shadowy, elusive and shape-shifting. Who really knows what its worth? Perhaps it is obvious I have never understood money. So this is a piece about what I know about money in an attempt to pin down something positive and useful about this currency that keeps us all going.
Here is the first thing I know: money is abstract. It only means what you think it means.
The best class I ever took was a class in college called The Philosophy of Money. It was taught by an energetic, witty instructor from Adelaide in Australia, an ex-pat like me. He had such a funny, wise and irreverent perspective on money, it was refreshing to first of all understand I do not have to take money as seriously or be as afraid of it as I had been prior to the class.
He explained the beginning of money like this: A woman goes to a money lender with ten gold coins and says, “These are much too heavy to carry around. If you give me a note that says I have left ten gold coins with you, can I trust you to look after them?” The money lender says to her, “Of course! Hand them over.” and gives the woman a piece of paper ostensibly worth ten gold coins and he charges her a small amount because he is taking the risk of protecting the coins from being stolen. As soon as the woman has disappeared around the corner, the money lender puts up a sandwich board proclaiming, “Need money? I’ve got plenty to lend you! Come and get it!”
Nine people come to see him for a loan and he gives each of them a note worth ten gold coins, telling them in all seriousness their individual piece of paper is worth ten gold coins and they can go and cash it anywhere and get actual things worth ten gold coins.
So how did he suddenly turn ten gold coins into ninety?
He still has only the ten real gold coins the woman gave him for safekeeping and this is his reserve, just like the Federal Reserve. He uses her real money to create nine times its value in virtual paper money that he lends out. He then charges another fee for doing this since he has created a risk for himself if any or all of the customers demand real gold coins instead of their pieces of paper. And is being paid a fee by the woman who gave him the money for safekeeping in the first place. When the people who have borrowed the money give it back to him in gold coins, he has to get rid of it by burying it in order to balance the books. Or he could keep it and get very rich very quickly.
What is wrong with this picture?
Many, if not most, people would say “Nothing” since isn’t that how the world goes round? It’s just a piece of paper and the more one has of it, the better off one is. The banks lend money in exactly the same way and charge high fees for the service. So everything they lend is, in a sense, virtual and the only real money that changes hands is the interest one pays to the bank and that’s how banks get rich. When you pay back the money you borrow, the banks have to burn it to keep their accounts straight.
But here’s the problem for me. In this shifty maneuver, money completely loses its value to me. Or at least, it is worth everything and nothing, because it is not linked to anything any more. It has no value other than the value it has for the money lender. It floats and I try to make it mean something important, but I cannot get there. At its most positive, it is wonderful and suggests abundance: business running smoothly, bills paid, clothes and shoes, dinners, parties and gifts. At its worst, it is persecuting and inadequate: unpaid bills and credit card companies trying to persuade me to take the monthly payment seriously. It very quickly becomes about love and hate, generosity and greed, joy and despair. For me, it shifts from one day to the next to mean one thing and then the other and then nothing. There is nothing stable about money. Its abstract nature becomes a concrete representative of how I have understood my life and there is nothing concrete about that.
In the end, the only direct relation to money is the value one has for oneself. If money is not linked to real things in terms of how it can be valued, there is only one other way to value it and that has to be in terms of oneself. So thank goodness I’m working on valuing myself more.
In 1923, Frederick Soddy won the Nobel Prize for chemistry and then devoted the last forty or so years of his life to writing about the problem of virtual wealth. I feel we were kindred spirits, although undoubtedly for very different reasons. Virtual wealth is like virtual anything, isn’t it? It’s virtual, people. It’s not real.
He was worried about the consequences of infinite debt. When money is linked to real things, there is a limit to how much there can be, since there are only so many real things of value (but even what is valued is a deep, abstract and strange idea in and of itself). So when debt is introduced into the picture that is not linked to anything concrete, there is no limit to how much there can be. Frederick Soddy talked about negative pigs. Negative pigs? From Soddy’s perspective, there is no limit to the number of negative pigs one can have if one buys pigs with virtual money. And by the way, I love the idea of negative pigs and want a herd of my own. But wait, I already have herds of all sorts of negative stuff in my house bought in exactly this fashion.
I have an idea though. I am going to call the bank and tell them I am no longer going to pay back my student loan on the grounds that it does not exist. Then I will call the credit card company and do the same thing. I will tell them I am happy to pay the interest since that seems to be the only real money in these arrangements. I’ll see how far I get and get back to you.

Leave a Comment

Previous post:

Next post: