Have you ever stared at a wad of green currency in your hands thinking, "What the hell is this?"
Or maybe when you were a teenager you took some hallucinogenic drugs and had a deep conversation with a stoned friend about the nature of money in society, at the conclusion of which you both said, "Wow, that is some deep s**t!"
One of the bizarre features of money is its inherent worthlessness as an object. You can't eat it, wear it, live in it or sleep with it, and its not very pretty to look at. And yet... it's as vital to our life as blood. What is it exactly?
Is this a relevant question? I think so. I think questions about the nature of money and what has gone wrong with it are at the root of all the demonstrations and protests around the world.
A few days ago I saw the movie, "In Time," with Justin Timberlake. The film is a provocative, poetic meditation on money and society and what to do about it. Follow me over the squiggle for some timely philosophical and economic musings that riff from the movie.
I hope you go see the movie so I won't ruin it for you by talking about the plot and the characters. I'll just quickly state the premise.
The movie takes place in a future dystopia in which humans automatically die at age 26 unless they earn time. The exact amount of time they have left is displayed in a neon counter that glows on their left forearms. The time they can earn is unlimited; they can live forever if they succeed in earning time. Those who can't earn time drop dead the second they run out. In this economy, time really is money: you pay for everything with minutes, hours, days and sometimes years of your life. A cup of coffee costs not dollars but a few minutes from your account. Timberlake's character wins a millenium of existence at the poker table and then buys a sports car for 59 years. When his luck runs out, seconds away from death, he pawns his girl friend's diamond earrings so they each can have two days. It's a potent metaphor.
The movie inspired me to revisit thoughts I have had over the years about the connection between money and time.
I'll start with some fundamentals and build up.
If you sit somewhere quiet and think for while about money, you'll see how it functions as a medium of exchange. Why do we need money? It solves an enormous practical problem in bartering: the disconnect between time and the creation of value.
One way to understand this is to imagine how the world would function without money. Without money, we would need to work in a contemporaneous barter economy. We would produce stuff, go to a marketplace, and trade it for stuff that other people brought to market. Imagine yourself trading vegetables that you grew in your garden for some lumber that someone else grew.
In the real world of trading, however, we have a big problem. What we want to get isn't all available at the same moment. The market solves this by producing a broad array of vouchers. So we go to market with our newly harvested vegetables, but the timber isn't ready yet. So instead of getting the timber, we get a piece of paper that says, "The lumberjack owes you timber." Full stop. If you understand that, then you understand all money. Because money is just that: vouchers for value from trades that took place in the past.
Now here is where things get interesting and complex. What happens in advanced economies is that we start trading the vouchers for the stuff as well as the underlying stuff. "In Time" illustrates this idea beautifully through the metaphor of time as currency. This is something we lose touch with in the heat of market activities but it makes intuitive sense. If it takes you ten years to accumulate $500K, then it is reasonable to think about purchasing a $500,000 house as trading time for it.
(Of course Marx is lurking in the background here with his ideas about the alienation of value from labor.)
A lot of interesting observations flow out of this idea about the mysterious connection between time and money.
The use of money as an abstract referent for value created in the past (thereby allowing that value to be exchanged across time and space), creates enormous possibilities for slippage in the system of exchange. This slippage could happen in a variety of ways. Here are a few examples of many (I am sure you can imagine others):
1) The promise we receive for the value we give up at the present moment is actually worthless. (Imagine that the guy who gives us the IOU for our vegetables doesn't really have any timber after all. So if we sell his voucher to someone else, we are actually passing along nothing.) This is the root of the mortgage crisis, wherein banks profited by selling the promises to pay of vast numbers of people who had no way to make good on those promises. This slippage across numerous transactions eventually brings down the house.
2) Circumstances change while we are holding the money. (Imagine that after we trade our vegetables for the lumber voucher, wood either crashes in value or becomes extremely scarce.) Now the lumberjack has to honor a transaction that no longer makes sense because the market has changed fundamentally while we were holding the abstraction of value (money). There are tons of people who make their living from exploiting such slippages. They are not producing value per se. They are working the foibles of the system. This is also the nature of the distortion that comes from inflation and deflation. The problem arises when the value of the trades becomes distorted because of intervening conditions in the market while we are holding the abstract value (money). I sell my 4 bedroom house to buy another in a different location, for example, but while I am shopping, prices double. Now I can only afford a two-bedroom house. A problem!
3) Think about investment activity in light of this simple thought experiment. Instead of trading or fulfilling our lumber voucher, we could loan it to someone else with the expectation that he will pay it back and also compensate us for borrowing it. This allows our value to be put to work by someone else while we are thinking about what to do with it. But here is another opportunity for slippage. Suppose that the person who we lend it to takes the lumber, burns it for heat, and then dies. Too bad for us. Now we have nothing. The chance that something bad will happen to the value we possess while someone else is using it is called risk.
4) Think about theft. Suppose someone comes and steals the lumber while all of this is going on. We're all screwed at that point. The system falls apart. So now we need insurance and protection of private property.
5) Someone who borrows value and loses it risks becoming enslaved in the future to the person he borrowed it from, as his productive energies are drained repaying value to the lender. He can no longer trade what he makes for his own consumption or benefit because he owes it all to someone else.
6) What is government debt, really? It's the public borrowing vouchers of value created in the past in exchange for promises to pay vouchers of value to be created in the future through taxes. Talk about a massive mental fantasy!
If you spend a lot of time thinking about this, you can come to some powerful insights.
But for purposes of thinking about where we are at this macro (OWS) political moment, probably the most important insight is that this money system we have requires full societal confidence and agreement. The use of value in its abstract form (money, commercial paper, stocks etc.) requires that we all agree about the system.
The 1% are just individuals like the 99%, except that they have a lot of this abstract value horded. But in order for them to use that abstract value, they need the system to function. They need everyone to agree that the abstract green stuff has meaning. They also need the green stuff to mean something when they want to trade their mountains of stuff for other stuff. And that meaning of abstract value in the market place system is nothing but a big mental fantasy that we all agree to share. If the 99% decide not to play this game, the market goes poof. Also known as a "crash."
The 1% would like to pretend that the system of abstract value is a just a fact or simply "reality." But this is obviously not so. The system requires an enormous infrastructure of complex and interdependent social agreements to work. It requires regulation of all the potential slippages in the system. People who get rich using these slippages aren't doing it by producing value. They're doing it by manipulating the exchange system itself. The people as a whole invent the system through their interlocking projections about value. The system does not arise from nature or physics or justice or any kind of transcendental truth. It is a socially-constructed game that everyone must be willing to continue playing. The social construction is reflected in law but not created by it. It's cultural as much as it is legal.
Of course we all knew this. But it's easy to forget or suppress when you are on the treadmill of life trying to trade a few minutes so you can pay the rent or put a meal on the table. The differential impact of the time value of money (or the money value of time) between the rich and the poor is something that the movie "In Time" illustrates brilliantly.
What would happen if the 99% made a point of remembering that this is all just a big social construction? One that can be changed if you think about it in another way.
Take out your bank statement and stare at it for a while. What is this all about, anyway?
This could be very bad news for the 100%, not just the 99%.
In Ayn Rand's fantasy about the power of the free market, all wealth is created by a small subset of demigods who don't need the 99% at all. They could just go off and live within an idylic alternative universe and leave everyone else begging and starving to death on the outside.
But when you really think about money, property and time, you realize just how silly this fantasy is. The meaning of money and property itself requires the entire system to work. If there is no shared system, all that abstract value is worthless. In order for abstract value (money) to mean anything, it has to be backed up by an entire functioning market. And if the money is worthless because the system is s**t, then property also becomes useless, because you have no way to exchange it. You can't even hire security guards to defend it. You can't even bribe your corrupt politicians (think about that, 1%). So in a sense, those 1% with all the stored up value in the form of cash and gold (they don't even have custody of the actual gold, do they?) are extremely vulnerable in this system. What is the purpose of owning gold after all? It has no purpose but exchange. You can't do anything else with gold bricks. The 1% are the most at risk when and if the system collapses because people stop playing or rewrite the rules. It's like society as a whole discovering that the entire system has been run by Bernie Madoff.
So we're all in this together, you see. If people feel that the system doesn't work or is fundamentally unfair, and chaos then ensues, everyone is going to get hurt. When the system becomes rampantly unfair (as it has), the players start to wonder why they should respect the system at all. Then all that money and property in the hands of the 1% starts to look like a gigantic dream from which everyone else might just wake up. This is what is most scary to the 1%: What happens if everyone just wakes up and sees the rigged game for what it is?
When you want to trade your vegetables in the marketplace, you need those people on the other end of the transaction, no matter what a great farmer you are.
Remember these lines from that other great movie, "The Matrix":
The Matrix is a system, Neo. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.
Listen 1%, when you throw the 99% overboard, or off the cliff, or out the window (take your metaphorical pick), you just might discover a rope attached. Lo and behold, you might be surprised that the rope is tied around your neck.
Go and see "In Time" and think about what it is saying about money. It's deep.