Amerika

Perhaps the problem with humans is that we accept a precarious situation and adapt to it even when we should not. It makes sense to be able to camp on a sheer cliff face if necessary, but when life becomes unstable, we shrug and keep on camping thousands of feet in the air because that is just how we do things around here, you know.

No one wants to talk about money. In upper half of middle class families, where there is enough money, it is considered gauche to mention; in the rest of the households out there, people view it as a necessary evil that must be talked about only in the same type of stilted discussions that mention death or bowel movements.

We the voters have by insisting on lots of government solutions suspended ourselves over an abyss known as the collapse of value. Our money, backed by “growth” caused by Keynesian government stimulus, relies on the system to continue total dominance and constant expansion in order for our money to have value.

Much of what people whine about as “capitalism” in fact refers to this constant growth, which will end in ecocide because the planet is finite and humans require many acres each for food, medicine, and products, which means that at some point human uses overtake natural land and all those interesting animals and plants go away.

If you find yourself slaving away in a McJob whose outcome offers nothing to humanity or nature, you may simply be a victim of this churn cycle. Productivity counts as anything that can be sold and taxed, and much nonsense falls under that category thanks to a massive regulatory bureaucracy which “creates” jobs through artificial need.

It turns out that money itself responds to the supply/demand curve made famous in economics. The more money you have, the less any one unit is worth; think of it as a nation having a total value of its production, social order, and influence, and this is divided by the number of monetary units to find the value of each one.

This economic theory, known as the quantity theory of money, was discovered by Copernicus and then fell out of fashion until the disaster of the welfare state revealed itself:

While this theory was originally formulated by Polish mathematician Nicolaus Copernicus in 1517, it was popularized later by economists Milton Friedman and Anna Schwartz after the publication of their book, “A Monetary History of the United States, 1867-1960,” in 1963.1

According to the quantity theory of money, if the amount of money in an economy doubles, all else equal, price levels will also double. This means that the consumer will pay twice as much for the same amount of goods and services. This increase in price levels will eventually result in a rising inflation level; inflation is a measure of the rate of rising prices of goods and services in an economy.

Ironically it first responded to the sudden wealth surge brought on by colonialism, which instead of making Europe more valuable, actually damaged its value by raising prices, making it hard to afford living in Europe:

Copernicus and Bodin articulated the quantity theory of money, that a growth in the money stock results in a rise in prices, a phenomenon observed in Europe since the influx of gold and silver from overseas.

It turns out however that doing the right thing may not lead to power; devaluing your currency makes it highly in demand, even though it is worth less, and allows the countries with inflated currency to wield more economic power. Countries like Poland which limited their money fell behind:

In c. 1540 the counsellors of the King of Poland discovered the central tenet of the quantity theory of money. They were the first to maintain that it was necessary to limit the coinage in order to stop prices rising. Their ideas emerged independently and were much more advanced than the views of Copernicus, and they were applied by the Polish government. The article also claims that this policy was, in principle, appropriate to check the rise of prices.

These two philosophies map to our present-day political outlooks. Conservatives favor supply-side economics, where we increase production in order to make our currency more valuable; Leftists prefer demand-based economics, where moving money around quickly is seen as a path to raising the value of investments even as currency lags behind.

Tags: demand-based economics, economics, quantity theory of money, supply-side economics