Calling all Austrians: Money is not a bright, shiny object
Via Big Picture, this fascinating graphic, originally published in, of all places, Popular Science, is making the rounds. Check it out (unless you're a member of the Austrian school, in which case you can go directly to jail in the note at the end of this post).
Today, in the 21st century, money is digital. And money "really is" a spreadsheet. Just like the MMT (Modern Monetary Theory) school says. Popular Science, in the article that accompanies the chart, has an extremely interesting take on the digital nature of money, omitted by Ritholz:
So where is your money today? What's not in your wallet is in a spreadsheet ...
Lambert here. I don't think that's quite it. One day, paper in your wallet might turn into only a representation of what's in the spreadsheet.*
... in what's called a core data center, a massive concrete building full of servers. But really, says information-security executive John Meakin, "Your money is everywhere."
.... What he means by "everywhere" is that with ATMs and online banking, servers can deliver your money anywhere, anytime.
And everywhere there's a "delivery," there's an opportunity for the banksters to charge you a rent (for example). Just like everywhere there's a leaf or a flower, there's a pest. So the obvious course of action is to use this wonderful system as little as possible, eh? Since happiness, merit, and accommodation to usury are inversely related?
But don't go on faith.
Feh. Faith (ideology) is exactly what we're going on. If, by flipping a few bits, whoever's programmed the servers can "deliver" your money, then, by flipping other bits, they can jack up the rent on delivery, or not deliver it, or freeze it, or reroute it, or confiscate it. Of course, they would never do that. And that would be the "faith" part.
As a financial citizen, it's important to understand how a digital bank knows what you're worth.
"Financial citizen"? Financial citizen?! I don't recall that concept from Civics 101. I wonder what the operational defintion of that concept could possibly be? Total compliance with the demands of rent-seeking banksters? Could that be it? (SASQ**)
Anyhow, you notice what's left out of this "blinding us with science" description of "your money," right? The telling omission?
The money in this chart from The Big Picture***:
The bailout money is just as much "my money" as the money in my wallet or in my account,
because it's taxpayer money, and I'm a taxpayer because one way or another I'm going to pay for it****. Yet oddly, or not, the Popular Science diagram omits all mention of it. And $22 trillion of bailout money is a lot of mention to omit.
I can only speculate why Popular Science has misdirected its readers in this way. I suspect that's because were it to have been fully informative, certain questions might have been raised, questions that MMT asks and answers as follows:
1. Who creates money? The state. See Article I, Section 8, at "coin money." *****
2. Why should money be created? To serve the public purpose. See the Preamble at "general welfare."
Of course, as The Big Picture's diagram above shows, the public purpose has nothing to do with the bailouts whatever, and everything to do with bailing out our kleptocratic banana republic-style overlords from the consequences of their bad bets, and further reinforcing their control over our political economy.
Welcome to the brave new world of financial citizenship! Reach me that soma, wouldja, hon?
NOTE * Cash, of course, isn't trackable, so although it's on whatever spreadsheet the Fed uses, it's not on the spreadsheets the banks use. Of course, the banks can't charge you a quarter every time you take a bill out of your wallet, which is why they'd like to find an excuse to abolish paper.
NOTE ** Oui. Bien sur! Gail Pearson of the University of Sydney defines the term:
The greater freedom of individuals to invest and borrow for their future in this market has resulted in the development of a new concept of human being – a financial citizen – and the need for a unique system of financial regulation. This financial citizen is somewhat knowledgeable about market risk; a willing participant in the market for financial services; and dependent on the financial services market for long-term economic security. ...
 Condon, M and Philipps, L ‘Transnational Market Governance and Economic Citizenship: New Frontiers for Feminist Legal Theory’ (2005) 28 (2) Thomas Jefferson Law Review 105 use the term ‘economic citizenship’; Gray, J and Hamilton, J Implementing Financial Regulation: Theory and Practice, John Wiley & Sons, 2006, use the term ‘financial citizen’. I prefer the term ‘financial citizen’ as it captures engagement with financial markets.
I like "engagement." It sounds so neutral. Like a cog in a big machine. Or that which precedes a marriage. A totally unforced marriage, of course. Pearson's book was published in 2009; how anyone sane could imagine, after the crash and the subsequent depression, that "dependen[ce] on the financial services market for long-term economic security" would be achieved through anything other than the force of the state (what "progressives" call nudging) is beyond my comprehension. Then again, it's not clear that our transnational ruling elite of banksters and rentiers is sane. Judging by outcomes.
NOTE *** I'm pleased to collect the two best visualizations I've seen of the financial system in one post. It's two, two, two charts in one!
NOTE **** Paul Krugman explains one way here. Other ways are through disemployment, the theft of my Social Security, gutting Medicare, and the collapse of housing values.
NOTE ***** More precisely, only the state can create money "exogenously," from outside the financial system, by fiat. It does this -- which should come as no surprise to you, at this point -- by changing numbers on a spreadsheet (or functional equivalent). By contrast, a bank does indeed create money, but endogenously, from inside the financial system, when it makes a loan. But what is a loan on the bank's books is a credit on somebody else's books, so in the economy taken as a whole system, the transaction nets to zero. If you move a twenty dollar bill from your right hand to your left, you still have twenty dollars, and not forty.
NOTE Other misfeatures of the Popular Science diagram: (1) The fetishization of the physical plant (the building, the servers, the cute little armored car) is interesting, too, since it's really the data structure -- the spreadsheet itself, its rows and columns, its macros, which parts of it are password-protected -- that's important. (2) There are no feedback loops. But, as we know, the financial system is reflexive, and incorporates both feedback and feed forward mechanisms, managed through precisely the data structures conveniently omitted in point (1), through the decrement of the value in the chocolate ration row from thirty to twenty grams a week, and like that.
JAIL NOTE When I wrote Austrians," I really meant to write ... I meant... Well, it's a nice day today, the birds is singing, there's stuff like . . . kittens and stuff, so I will direct you to this fine post by Randy Wray.