Thursday, January 20, 2011
Yesterday I sent a second of two emails to Planet Money giving my thoughts and applause to their presentation on the Invention of Money on NPR's This American Life: Sunday, January 7. I highly recommend you listen to it and contemplate how it changes or adds to your view of money. I admire how articulate and concise they are in describing money's strangely magical qualities. They dwell on the truth that money is trust, a powerful and apt description. Alas, I regret that this may be the first time that the word trust appears in this blog. Thanks, Planet Money. Otherwise, I find support in their words--and much food for further thought. Listen, then read my response:
=====================================================To the Inhabitants of Planet Money
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This email is a follow-up to one I wrote on January 11th after listening to your piece on the invention of money on This American Life. As the week went on I continued to attempt to connect dots in your insightful presentation. I share below where that attempt leads me.
- Your presentation on the invention of money is explicit regarding the essential trust in-money, but from your presentation I also infer that there is a second side to the coins of trust—trust in self. When I lose confidence in my ability to invest or buy well, I hoard my money. When a bank loses confidence in its ability to invest my money well, it hoards money. When our national government loses confidence in its ability to invest, it concentrates on balancing a shrinking budget rather than on guiding investment of our resources toward a brighter future. This is not only recipe for depression, but also for a deflationary spiral. I search vainly for a perfect super-hero analogy. When the Fed sheds its cloak of meekness and swaggers forth she is our self-trust of last resort—trying to restore trust not only in our currency but also in ourselves. Unfortunately, since we are villain as well as victim, many of us condemn our rescuer rather than welcome her as our hero.
- I connect your description of the banking system’s magical creation of money with your description of the brash, unprecedented behavior of today’s Fed. Even if the arithmetic of the once-meek Fed’s new boldness is unprecedented, we should not be startled unless the dollars resulting from the Fed’s boldness more than equal the banking system’s precedented retreat from creating money.
- Not in your presentation, but an interesting step from your answers to the question, “what is money?”: What then are taxes of money? (I fold the Fed into “government” here) Since to trust our money requires that we extend trust to the governmental structure that caretakes our money, what does it mean to extend some of the trust a second time and call it tax revenue in the caretaker’s budget? I have trouble believing it means much of value.
- Stuck in a day-to-day world where we seem to have to balance our personal budgets, our trust in the loans and certificates issued by our local bank and also our trust in the currency of our national government give us ways to gamble on the promise of growth in the larger economy. It seems we do want to believe in magic (or is it voodoo economics?). Perhaps, another good metaphor: Money is simply the older and better lottery ticket.
Those are my thoughts,
Thanks for listening,
Bob Komives
p.s.
to simplify my archive, I copy here my earlier comment on the “Invention of Money.”
Today, I downloaded and listened to the mp3 of the "Invention of Money" piece that I missed on Sunday. I appreciated the approach, the sense of wonder, and the clarity of explanation of this confusing, wonderful invention, Money.
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I am interested in the creative approach in Brazil to defeat Hyper-inflation and am trying to compare it with Jeffrey Sach's also successful approach in Bolivia (The End of Poverty, page 92 ...). The cure was almost instant when Bolivia eliminated a flaw built into the market for oil and gasoline--less a subtle trick to the public mind than a sledge hammer to the bowls. Yet, I assume there are experts who can articulate the common thread (or lack thereof) underlying the two solutions. I mention this in hopes that you might venture that way again.
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When I had problems with what I had been told about why we have money, I composed a Better Money Legend (link if interested), which I find satisfying even if I do not attempt to defend it with historical fact. Your presentation on "Invention ..." makes me feel even better about my legend. My legend holds that, similar to your brilliant Brazilian drinking buddies, a selfish-but-wise ruler tricked her people into success by substituting trust for half the gold that should be in her coins.
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Thanks, for an insightful, entertaining, thought-provoking show.
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I am interested in the creative approach in Brazil to defeat Hyper-inflation and am trying to compare it with Jeffrey Sach's also successful approach in Bolivia (The End of Poverty, page 92 ...). The cure was almost instant when Bolivia eliminated a flaw built into the market for oil and gasoline--less a subtle trick to the public mind than a sledge hammer to the bowls. Yet, I assume there are experts who can articulate the common thread (or lack thereof) underlying the two solutions. I mention this in hopes that you might venture that way again.
.
When I had problems with what I had been told about why we have money, I composed a Better Money Legend (link if interested), which I find satisfying even if I do not attempt to defend it with historical fact. Your presentation on "Invention ..." makes me feel even better about my legend. My legend holds that, similar to your brilliant Brazilian drinking buddies, a selfish-but-wise ruler tricked her people into success by substituting trust for half the gold that should be in her coins.
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Thanks, for an insightful, entertaining, thought-provoking show.
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