No one has the ingenuity of understanding the complex topic of money better than Marshall McLuhan. He surpasses even Allan Greenspan and most certainly Niall Fergson’s boring historical book on the history of money. Neither person has grasped the dynamics that ground sound money. Greenspan is so committed to his reputation as Washington insider he dare not look partisan. Is not the truth itself partisan? We must get rid of this crazy notion that objectivity is impartial! Only Marshall McLuhan grasps how to teach people the means of perceiving the dynamics of sound money.
This post will explore how McLuhan reveals the perils of why paper (fiat) money is dangerous. I must remind the reader to read more extensive essay’s I’ve written in the category of ‘Money’ on this blog. This is very significant for I cannot surmise the absolute necessity of understanding how our current neo-liberal model of governance is the nemesis to becoming a great Republic that is fiscally sound! Madison, Washington even Hamilton understood how the right political governance informs sound finance.
Anyone with a sound financial education knows that quantitative easing, an overly accommodating monetary policy is the source of a bubble. Bubbles are a monetary phenomenon. Just ask Ann Schwartz or Fredrick Hayak, (Schwartz is still alive!) Nevertheless, McLuhan has written extensively on how monolithic financial institutions generate dependency ironically within a decentralized economy. For at the heart of our financial mess is the creation of value exponentially. To-big-to-fail (TBTF) financial institutions deploy arcane instruments of value and other derivatives that are so specialized that not even governments can manage nor regulate them. THE BUSINESS MODEL FOR MAKING MONEY TODAY IS DELIBERATE CONFISCATORY INSTITUTIONAL OBFUSCATION MASKING DEPENDENCY.
Can I give an example?
TBTF institutions create a financial instrument that incorporates risk in its own interest rate, then instead of spreading the risk through reinsurance TBTF compounds such risk at full face value as a BET AGAINST ITS OWN INVESTMENT OR LOAN. This churning, gambling has no other benefit other than the generation of institutional fees as profit.
Get outside the ‘rent-seeking’ that dominates Wall Street. We must understand the basis of our economy is sound technological innovation, not arcane financial instruments that spread risk.
How can McLuhan fortify us as we arrive toward November? He counsels patient fortitude in American exceptionalism for several reasons. Chief among them is the fact that the American political economy is permanently decentralized, time is no longer on the side of TBTF. Secondly, the new vortices of power emerging from within such a decentralized political economy render individual initiative primary. The downside is that wealth creation will be quite easy for the immediate future, however, security and social stability will decline with the emergence of other nations like Brazil or India that are ethnically and linguistically homogenized.
The immediate future for wealth creation rests in discovering companies with sound revenue streams that are innovating. The commercial exchange of the movement of information itself will be the new commodity grounding wealth. What MONOLITHIC FINANCIAL INSTITUTIONS CANNOT UNDERSTAND IS THAT THE TRADITIONAL CONCEPT OF MONEY IS IN JEOPARDY WITH THE ARRIVAL OF AN ELECTRIC DECENTRALIZED ECONOMY! WHY?
As new dynamics emerge (think Nano) for human interdependency from innovation, traditional money will be the adjunct to express social mobility. J.M. Keyes wrote extensively on this matter in ‘A Treatise On Money’ when he admonished Central Banks for inflating or deflating managed representative money. TBTF has done the same. The political consequences will be dire in a decentralized political economy. What McLuhan reveals is that Paper money has specialized itself away from being a store house of value toward being an adjunct displaying social mobility. Money is not a closed system, but a dynamic translator, amplifier. Today, money is now having its function transferred to information, science and innovation.
To gain mastery of how to understand contemporary money, read Elias Canetti, Fredrick Hayak, Anne J. Schwartz, or even the short essay’s of Marshall McLuhan.