Complexity as a Political Strategy: The Cases of Semantic Traps and All or Nothing Cognitive Gatekeepers

of Monetized Market Exchange

7 Money as Debt: On Endogeneity, Redeemability and the Informational Implications of Centralized

7.4 Complexity as a Political Strategy: The Cases of Semantic Traps and All or Nothing Cognitive Gatekeepers

As John Kenneth Galbraith (1975) observed, complexity is often used to conceal the true nature of monetary aﬀ airs. Although not all potential appropriations of monetary complexity to the service of particularistic political strategies are situated within the theoretical framework of money

as debt, this chapter provides perhaps the most appropriate context for analyzing some of the techniques which may sometimes be used to suppress legitimate discussion and criticism. Of the potentially inﬁ nite variety of techniques through which complexity can be used to disguise the types of social relations embodied in a monetary system, two deserve particular scrutiny due to their prevalence and potential eﬀ ectiveness in silencing legitimate criticism: the construction of semantic traps to facilitate the illusion that the substance of the inquirer’s concern has been addressed and the promotion of an ostensibly technocratic all-or-nothing approach as a cognitive gatekeeper to legitimate criticism.

Semantic traps are often transparently misleading, constituting populist attempts to prevent or to slow down the contagion of undesirable ideas or worldviews among individuals who may lack the personal capacity or inclination to research monetary aﬀ airs. For instance, it has sometimes been suggested that the common criticism of the alleged necessity of the money supply to grow exponentially in the long term if money-creating interest-bearing debt is to be repaid is misguided, as such growth is technically not necessary at any given point in time. To see whether the substance of the potential critic’s argument has indeed been addressed by resorting to the technical feasibility of alternative outcomes, it is instructive to break the argument into two interrelated parts: (1) Is there a tendency for liabilities to grow exponentially under the prevailing monetary system? and (2) If yes, to what extent do the counterparts to the expanding liabilities in double entry bookkeeping either constitute money or inﬂ uence the pace of money creation?

In response to the ﬁ rst question, under normal circumstances the liabilities against which money has been created are growing exponentially according to the principle of compound interest. Technically it is possible for a population willing to incur lowering living standards to let the money supply and potentially also the corresponding money-creating interest-bearing liabilities diminish for prolonged periods, albeit the possibilities for reducing the total amount of the exponentially compounding money-creating interest-bearing liabilities merely by refusing to incur additional money-creating interest-bearing debt would clearly appear to be limited.

Technically virtually any alternative outcome to the spontaneous growth of liabilities might also be attained through deliberate debt cancellations.

It would nonetheless appear to be quite appropriate to suggest that inbuilt

tendencies for exponential growth of liabilities – outpacing real growth with the familiar economic, political and social consequences (see e.g.

Hudson, 2007) – do indeed exist as a matter of pure mathematical necessity based on the principle of compound interest. It is worth pointing out that for any potential critic of the presumed unsustainability of the prevailing monetary system – or perhaps more accurately its economic, political, social, environmental etc. implications – a relevant point has already been made at this stage: there would appear to be no need to expand the analysis from the exponential growth of debt into the exponential growth of money, where the substantially larger degrees of freedom for deﬁ ning money are easier to use for opportunistic deﬂ ection of attention from the substance of the argument. It is perhaps also appropriate to note that the exponential growth of liabilities is not the only source of economic, political and social polarization under the prevailing forms of money: even in the hypothetical case of credit creation and withdrawal being precisely equal, the monetary system would continue to be both wealth- and power-centralizing as it would still be the commercial banking system through which the decisions on whether, how much, and to whom money may be allocated through credit creation, investment of accumulated “reserves”, dividend payments, or some other method of the banks’ choice would be made. In other words, even in the absence of exponential growth of liabilities, the economy as a whole would still have to pay a tribute to the banking system just to obtain access to an accounting system that can facilitate multilateral exchange of the existing real capital.

In response to the second question, perhaps the most appropriate answer involves posing a series of further questions: if the money supply does not exhibit similar tendencies for exponential growth as money-creating interest-bearing debt, to what extent is the existing debt compounding without creating new money – thus accelerating the centralization of wealth and power through the ﬁ nancial sector? Under what conditions and to what extent may the counterpart to money-creating interest-bearing debt be classiﬁ ed as something else than money? How appropriate are deﬁ nitions of money which may permit a signiﬁ cant divergence to emerge between the money supply and debt that is monetary in its origins? To what extent may the answers to any of the aforementioned questions depend on the community’s normative attitudes towards perpetual debt slavery – the extent to which the community as a whole

may either passively accept the exponential growth of liabilities or actively attempt to obtain all money that can technically be made available for a collective attempt to liberate itself once and for all from its servitude to the banking system through the repayment of all outstanding liabilities?

A university instructor might capture the essence of some of these points by the following exam question for a sociology or a political economy class: “You have been given a monopoly to issue money against interest-bearing debt. What deﬁ nition(s) of money, debt and interest should you promote in economics textbooks to conceal your monetary powers to the greatest possible extent? For each part of you answer, explain whether you are being intellectually dishonest and why?”

While it is up to the reader to select an appropriate deﬁ nition for money when judging the veracity of the contending knowledge claims on the nature of the prevailing monetary arrangements, the walk away test introduced in section 7.2 may leave less room for normative considerations. Assuming that the community as a whole wishes to terminate its servitude to the banking system and to replace the prevailing forms of debt slavery with an alternative accounting system for economic interaction, the exponential growth of money-creating interest-bearing debt does impose a corresponding growth requirement for the institutionalized default settlement procedures sometimes referred to as “recycling” money through the issuer: the exponentially expanding liabilities express at any given point in time the total cumulative monetary value that the members of the monetary space must deliver to the issuer of the currency through the repossession of collateral – whether physical assets or the debtors’ future labor power – in order to be able to settle their monetary debt once and for all and to walk away from the creditors. In other words, seen from the perspective of potential collective liberation from debt servitude, the growth of money-creating interest-bearing debt does produce a requirement for a corresponding increase in debt-free money supply – no matter how technically infeasible such a requirement may be whenever newly created money or money that is

“recycled” “back” into the economy is also issued against interest-bearing debt and it is entirely up to the issuers of the currency to decide whether to accept any speciﬁ c collateral to settle unrepayable debt once and for all. At the risk of tormenting the reader with obvious redundancies:

the alleged capacity of any given nominal value of money to clear an

unlimited number of transactions does not apply to the repayment of money-creating interest-bearing debt. Once money is returned to its issuer, the members of the monetary space will have to agree to whatever conditions the issuer chooses to set for issuing or “recycling” additional repayment capacity in the form of monetary IOUs. Th e fact that such monetary IOUs are also likely to be issued against interest-bearing debt diminishes rather than enhances the capacity of the members of the monetary space collectively to walk away from their debt servitude and to institute alternative payment mechanisms or scorekeeping systems for economic interaction.

For those who dislike any potential implicit convolution of the spontaneously expanding counterpart to credit in double entry bookkeeping with the exponential growth of money to a greater extent than what might be indicated by economistic deﬁ nitions of money,⁶¹ perhaps a more appropriate reference point to analyze the logic of some of

61 Some economically oriented social scientists take great pleasure in hindering a more comprehensive understanding of the nature of money by adopting an unambiguous deﬁ nition of money as the sum of speciﬁ c types of liabilities of the government or the banking system. To illustrate some of the problems with such an approach, suppose that the government were to distribute to its favored interests a given number of machines which can be used to print one 500 euro note each day in perpetuity. According to most economistic deﬁ nitions, money could only be created either by actually using any one of such machines to print a note or by pledging them as collaterals for credit creation through the banking system. Does this mean that the number of such machines circulating in the economy is irrelevant for the deﬁ nition or the measurement of money as long as they are not being used for either one of these purposes? Does it not matter whether the amount of non-money-creating securitized claims potentially created on top of the collateral provided by these machines is 1% or 1,000,000% of the money supply?

Such securitized claims unquestionably have the theoretical capacity to act as reliable stores of value in terms of the chosen monetary unit of account and as media of exchange through a number of potential routes – whether through exchange into monetary IOU’s or the repossession of the collateral to start up the printing press. What proportion of the potential medium of exchange or store of value functions of money may be stored outside the monetary system in ﬁ nancial capital or debt instruments classiﬁ ed as something else than money according to the prevailing economistic deﬁ nitions before the conceptual separation between money and other forms of ﬁ nancial capital starts to lose its relevance for policy purposes? While it is far from clear that analyzing money and other forms of ﬁ nancial capital in isolation of each other is either desirable or feasible, the analytical importance of this distinction should perhaps not be overstated. As often appears to be the case in monetary analysis, the most signiﬁ cant issues of contention may be found in areas where relatively little debate is taking place – in this case the long term implications

the prevailing forms of money might involve the rat in the running wheel analogy. At any given point in time accrued interest on money-creating interest-bearing debt approximates the amount of debt free money that the economy as a whole might need in order to terminate its servitude to the banking system once and for all through the simultaneous repayment of all outstanding liabilities and to construct an alternative accounting system to facilitate its division of labor and potentially a wide range of other objectives. Yet there may be no debt free money available: every attempt by the economy as a whole to obtain the missing amount by incurring additional interest-bearing debt will merely deepen its servitude to the banking system. Not entirely unlike the rat in the running wheel facing the choice between a slow death at its current running pace and speeding up to get there faster, the majority of the members of any given monetary space can choose between fading away slowly as their real assets are being repossessed and productivity gains extracted by the ﬁ nancial system and having a brief glimpse of illusory opulence by speeding up the build-up and the eventual burst of the credit bubble. Given the conventional assumptions on human motivations, how many economically oriented social scientists can claim that no inbuilt tendencies for growth – of debt, money, or whatever the relevant variable may be for keeping one’s own funeral party going until it is time to start ﬁ tting the coﬃ n – exist?

Any potential appeals to the aforementioned semantic trap may thus eﬀ ectively amount to a request for any potential critic to reformulate her point along the following lines: if the majority of the population wants to maintain or to increase its living standards, a money supply consisting primarily of the monetary counterpart of bank-created interest-bearing debt must, on average, grow within any prolonged period of observation, provided that the selected deﬁ nition of money does not allow the entire increase in the counterpart to the exponentially expanding interest-bearing debt to be classiﬁ ed as something else than money and that the majority of the population continues to view deepening debt servitude as the only viable strategy to pursue higher living standards or some other relevant objectives. Th is is, of course, quite diﬀ erent from saying that no inbuilt, economically, politically and socially polarizing tendencies for either credit or money supply growth exist under the prevailing socially

of compound interest irrespective of the part of the exponentially increasing counterpart to debt that may be classiﬁ ed as money.

constructed speciﬁ cations of money, which may sometimes be implied by individuals who cultivate such semantic traps to silence criticism.⁶²

In contrast to the semantic traps, the all or nothing cognitive gatekeepers for legitimate criticism are often evoked in an attempt to delegitimize the work of relatively self-motivated and persistent critics of the prevailing monetary arrangements. While the essence of the argument – the “if you are going to criticize the system you might as well do it correctly”-part of the statement – has a point, the implications of the tendency to evoke the argument to provoke self-censorship rather than genuine learning or logical consistency are troubling. Th e implicit suggestion that anyone without equal or greater expertise in monetary aﬀ airs than individuals who obtain their living from the management or manipulation of the system should refrain from any form of substantial critique has three main problems. First, any possible misunderstanding of a speciﬁ c aspect of the prevailing monetary system does not invalidate criticism targeted at other elements of the system – sometimes not even the substance of the critique targeted at the misunderstood aspect.

Second, as a public institution imposed upon virtually every individual in a modern society, the burden of proof for the alleged desirability of the

62 Th e lengths to which some of the apologetic accounts of the prevailing forms of money are willing to go to defend the status quo might give an indication of the extent to which complexity may be replaced with unchallengeable simplicity as a political strategy whenever the conventional usage of the average intellect might produce undesirable patterns of thought. According to one apologist interpretation, it is futile to contemplate upon the conditions for liberating the economy as a whole from its debt servitude to the banking system through the repayment of all outstanding liabilities, as the economy will always need money and thus presumably also unrepayable interest-bearing debt and the forms of servitude that they entail. Following the same logic, a polity should presumably never attempt to analyze the theoretical conditions under which a corrupt dictator might be replaced, as some forms of political institutions are always needed and such capacities for political organization would presumably be lost if the prevailing Dear Leader were to go. Instrumental rhetoric notwithstanding, in both cases it is quite appropriate to inquire into the political and economic conditions which perpetuate the reign of the respective power structures and to contemplate upon the various theoretical possibilities for replacement, particularly when the respective institutional logics suppress the possibility of spontaneous transformation. Whether such institutional structures should indeed be replaced is another matter, but any potential suggestion that thought experiments which do not presuppose the analytical primacy and the perpetual reign of the prevailing Dear Leader – whether of the monetary or the political variety – are somehow beyond the bounds of legitimate or conceptually feasible analysis should hardly be taken seriously by social scientists who are committed to the pursuit of non-instrumental variants of truth.

prevailing forms of money rests on the primary beneﬁ ciaries – the “lock-in between the political, legal, bank“lock-ing and “lock-institutionalized monetary system”. Rather than seeking easily addressable substantive or semantic misunderstandings and strawmanning the entire spectrum of criticism as belonging to the same categories, it would be the task of the primary beneﬁ ciaries to open the books of the entire monetary system from central banks and treasuries to the commercial credit creation to public scrutiny and explain the functioning of the system by transparently tracing each speciﬁ c form of money from the moment of its creation to its extinction or withdrawal from circulation. If any discrepancies were found between the explanations and the actual creation and ﬂ ow of funds, it would be the public oﬃ cial or the private employee in question who would be removed from oﬃ ce or relieved of her duties rather than the hobby-critic presumably being deprived of credibility as a result of failing in the task that would have proven to be excessively diﬃ cult or unpleasant even for some of the primary beneﬁ ciaries.

Th ird, if any potential critic of the monetary status quo is perceived to be responsible for perfect understanding of every single intricacy of the prevailing forms of money, surely the same cognitive standards must be applied to any potential beneﬁ ciaries. In other words, the “if you are going to beneﬁ t from the system you might as well do it correctly”-standard should be applied to all potential beneﬁ ciaries before any gains are distributed. In practice such a standard might entail the responsibility of any politician or legal or banking professional to submit to a public defense of her views and expertise on the technical intricacies of the prevailing forms of money, responding to every query or straw man posed by the public in a manner deemed satisfactory by the same self-selected interrogators before obtaining a license to beneﬁ t from the prevailing monetary arrangements. At the risk of stating the obvious, having even a single individual worldwide to

In document On money (sivua 135-144)