This is Part 1.
In Part 1 – The Truth About Money – We discuss the properties of Money and explore why Money should be considered debt.
In Part 2 – The Death of Capitalism and the Rebirth of Religion – We discuss how society is rejecting the long-established rules around Money (and Capitalism) and why that will usher in a new era of Religion.
In Part 3 – Money in a Diverging World – We examine how the current geopolitical conflicts in Europe and Asia are interesting case studies to explore the ideas we have discussed around Money, Capitalism, and Religion.
In Part 4 – The Issues With Capitalism – We discuss the issues that Capitalism is already facing before the coming challenges in an era of Religious ascendence.
There are few things more central to our lives (unfortunately) than Money.
Money plays an important role in deciding where we live, what we do, and who we come in contact with.
It’s the cursed altar we have to visit.
It’s the Devil we can never escape.
Yet despite its centrality to our lives, Money never seems to make sense.
Money doesn’t make sense even though there is an infinite (yet still growing) amount of material written about it.
Money doesn’t make sense even though there is a whole series of professions dedicated to counting it, moving it, transforming it, and understanding it.
There’s a whole lot of action around it, but it never makes sense: What is it? Why are we enslaved to it?
Despite our lack of understanding about Money, there’s a – surprisingly – very standard definition for Money that you’ve probably heard before.
1/ A store of value,
2/ A unit of account,
3/ A medium of exchange.
Even if you didn’t study economics in school, you’ve probably come across this definition before, especially if you’re involved in (or are curious about) crypto. Ever since the rise of crypto a decade ago (alongside the violent expansion of central bank balance sheets), there have been raging debates about what Money is and what can constitute Money.
If Money is just: 1/ A store of value, 2/ A unit of account, and 3/ A medium of exchange…Why can’t digital currencies be Money? Why can’t pictures (NFTs) be Money?
Why can’t anything be Money??
Of course, the answer is that anything can be Money!
Objects like shells and stones and minerals (like Gold) have indeed been used as Money before.
However, that still doesn’t answer why only some things can be considered Money…and why some things that used to be considered Money, no longer are.
I think there’s a very simple reason for why Money makes no sense.
The reason Money makes no sense despite the existence of a – surprisingly – very standard definition for Money is because the definitions we use to describe it makes no sense.
Money is not a thing.
Money is a concept.
Money is a philosophy.
Yet we try to understand Money through its properties.
Money cannot be understood through its properties any more than we can understand Humanity by describing the properties of humans (two arms, two legs…usually has a Heart, but maybe not…).
Yes, all humans have those properties, but so do a lot of other animals that aren’t humans at all.
And is someone with a missing leg or an arm any less Human than the rest of us?
To understand Humanity, we need to understand the Heart and Soul of Humanity.
Things like our Dreams…our Fears…our Hopes…and our Regrets.
Similarly, to understand Money, we need to understand the Heart and Soul of Money…not just its properties.
It is this very Heart and Soul of Money that ultimately determines what can or cannot represent Money.
The reason why Money seems to make no sense is because we all implicitly make the wrong assumption about what the Heart and Soul of Money is.
We all implicitly assume that Money is a thing…that Money is an asset like a house, a book, or a phone.
But for those that invest or have studied finance, you will know that every asset can also be classified either as equity-like or as debt-like.
Although Money is an asset, people implicitly assume that the nature of Money is equity…that it is some thing that exists in and of itself.
But the true nature of Money is actually debt.
Debt-like things do NOT exist in and of themselves…they exist only as a relationship, an agreement between parties.
The moment either party ceases to recognize the agreement, the existence of the asset falls into question.
This is not true of equity-like assets. Equity-like assets have value in and of themselves. Your house certainly has value and utility even if someone disagrees that your house is a house.
Debt-like assets, however, only have value when the parties involved accept their side of the agreement.
This probably seems unintuitive…
How can the true nature of Money be debt?
The true nature of Money is debt because of how Money is earned and exchanged.
No one is born with Money.
No one has Money until it is earned.
But what does it mean to earn Money?
In Life, Money is essentially an agreement between two parties.
One side (the seller) supplies a good or a service.
In exchange, the buyer hands out pieces of paper (Money) that allows the seller to eventually receive something of equivalent value in the future. People think the Money is what the seller “gets”, but Money is just a promise from the buyer to eventually give something of equivalent value back.
The Money itself is not what the seller wants. The Money simply represents a debt that the buyer must eventually pay back with an equivalent value good or service. This good or service to be rendered by the buyer in the future is what the seller actually wants.
The true magic of Money is that it gives the seller flexibility on what to ask for in return and when to ask for it.
Before the invention of Money, people had to barter. Perhaps you could offer meals in exchange for clothes. Such a system is hard to keep track of, though, especially if the exchange of goods or services do not happen at the same time.
The invention of Money is really the invention of debt. It allows one party to provide a good or service first, while the repayment can be done at a later date. At a later date, you simply show up at the buyer’s house and request some good or service in exchange for the Money you previously received from the buyer. The moment you hand the Money back, then the debt has been repaid.
The invention of Money also has the added benefit of not requiring the seller to go back to the same buyer to redeem the debt. Money essentially separates half of society into debtors and half of society into lenders at any given time. The lenders (i.e. people with Money) are free to redeem their debt from any debtor at any given time.
Why does this matter?
This matters because the moment you start viewing Money as debt, the more sense the world suddenly seems to make.
I believe this is one of the most fundamentally important aspects of Money that remains misunderstood.
For example, there’s a lot of dislike of people with money. Why should some people have so much Money?
Leaving aside the many ways that people can earn Money through dishonest means (which society should absolutely crack down on), the anger towards people with Money appears misplaced when one understands that Money is debt.
If someone has a lot of Money, this means the person already provided a lot of goods and services to society and others without receiving anything in return yet…other than these little pieces of IOUs called Money. The Money is nothing more than a pile of debt that society and others have promised to eventually repay with goods and services. Wealth is a polarizing issue, but through this lens, it’s easier to understand why some people with Money feel that they are getting less out of society than they have put in, especially when society shames them for having so much Money (despite this being a result of never collecting on that debt by spending it).
Viewing Money as debt also helps explain why you can’t just take any random object and call it Money even if it can fulfill the properties of being: 1/ A store of value, 2/ A unit of account, and 3/ A medium of exchange.
The reason is because debt is an agreement between two parties. BOTH parties need to agree that the debt exists. And both parties must agree that the debt exists to account for some good or service that is already rendered that needs to be repaid.
As I write this, there is a no-frills black stapler sitting on my desk. I could pick that up and demand that you recognize it as Money, perhaps equivalent to a $100 green Benjamin bill.
But Money is not equity-like. Equity-like things can exist in and of themselves.
Money is debt-like. Debt-like things do not exist in and of themselves. It only exists so long as the parties involved agree that it exists.
My stapler will never become Money until you recognize it as Money as well. And, more importantly, you will never recognize it as Money unless I have already provided a good or service to you…otherwise my ability to simply conjure up Money by demanding it would allow me to ask you for more and more things without my ever having to provide anything of value in return.
However, if I do something nice for you first, and then hand over the stapler and promise that you can eventually hand that stapler back to me in exchange for an equivalent favor, THEN we have created Money.
The fundamental nature of Money, the fundamental Heart and Soul of Money is debt.
Money is societal debt.
So why are we all enslaved to Money?
Unfortunately, the reality is that we are enslaved to Money because Money is debt!
How do we escape this debt?
More on this next time…