The Currency Crisis Is In Your Head

What in the world do I mean by that?  Of course I think the dollar and euro are broken, but what’s the alternative?  Gold?  Maybe, but it won’t last.  Tyler Cowen partially touches on information classification in his book, but does he make the link to currencies in their traditional sense?  Before I get to why the crisis is in your head, make sure you get what a “currency” really is:

“We are in the lazy habit of thinking that the flow of the currency in a transaction is the one that matters instead of the actual flow of goods, services, resources, knowledge or participation which flows COUNTER to an exchange currency.

Those real-world currents shaped and enabled by currencies are what make them so valuable and powerful.

The currency itself is actually just a flow of information. But there are two reasons we myopically focus our attention on the currency flow as if it is the one that matters:

1) We are big-brained, symbol-using creatures, and it’s much simpler to us to deal with those nice clean symbols than the actual sloppy flows — dollars are easier to account for than time, random quantities of random things and other stuff which is difficult to count (such as the state of relationships), and

2) The REAL flow is an event which happens in a moment and is gone. If you were NOT there to witness the service being performed, the good being exchanged, or the participation of that person, then once that moment has passed, the only consistent way we have of knowing what occurred is the record we keep of the event. We use currencies to keep records of currents.

I believe this is the single MOST CRITICAL CONCEPT for currency practitioners to grasp. It allows us to break out of bad habits of thinking about currencies in very outdated ways (such as believing they have or should have intrinsic value because precious metals were once used as coins). This allows us to see currencies for what they truly are: formal systems which shape, enable and measure currents which allow communities to interact with those currents.

Of course, the story itself has passed. All we have left are the tracks. But the tracks can tell quite a lot to the right set of eyes: what types of animals were involved, how long ago it happened, which direction the bird flew off, etc. This is the role that currencies play in our economy. Actual currents of resources and relationships occurred and currencies are the tracks they left behind. The tracks are very informative to the right eyes, so we use them to make business and policy decisions.”

Source:  http://newcurrencyfrontiers.com/wagn/Introduction_to_Currencies

The centralized currency of our governments is undergoing a crisis.  But that’s simply evidence that the short-sighted hierarchical system of power in our politics and positively reinforcing system of capitalism have become obsolete in light of our electronic technologies.  Recommendation and trust network systems unbiased by the speed of light and low cost of competition are exposing the idiocy of godlike decision makers.  Do you really think the emperor cannot be naked in this Day and Age?

The point is NOT that these new systems of aggregative expertise and opinion are and will continue to be “better”.  Rather we are on the frontier of extracting patterns from behaviors we haven’t been able to capture before, due to the inferior biological, mechanical, and electronic technologies of the past.  The new systems will also become obsolete, and definitely at a faster rate.  But do you think we have a say?  Unless you think we can slow down or stop the pace of quantification of behavior when everything is becoming electronic?

What do you think about the last slide – Wealth a Living Systems Model?  OR do you want to wait a few months or years until “60 Minutes” tells you what to think?  That IS the question. Find sources of expertise YOU TRUST and trust yourself to move on when YOU judge them to be obsolete.

That’s precisely what MLK meant by this:
“Power properly understood is nothing but the ability to achieve purpose. It is the strength required to bring about social, political and economic change. … What is needed is a realization that power without love is reckless and abusive, and love without power is sentimental and anemic. Power at its best is love implementing the demands of justice, and justice at its best is power correcting everything that stands against love.”

Now don’t make me quote Eminem or Buddha. :)  Once you really understand that this means that the power is within you, you will be able to kill goats with a stare.

Related posts:

1. Towards an Economy of Abundance
2. Another Must Read on the Origins of the Crisis
3. Financial Crisis Act III: The Flailing Response
4. Financial Crisis Act I: Government Meddling
5. Who's Curious About the Financial Crisis?