Money and the Crisis of Civilization

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scholarpreneur's picture
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Money and the Crisis of Civilization

Suppose you give me a million dollars with the
instructions, "Invest this profitably, and I'll pay you well." I'm a
sharp dresser -- why not? So I go out onto the street and hand out
stacks of bills to random passers-by. Ten thousand dollars each. In
return, each scribbles out an IOU for $20,000, payable in five years. I
come back to you and say, "Look at these IOUs! I have generated a 20%
annual return on your investment." You are very pleased, and pay me an
enormous commission.

Now I've got a big stack of IOUs, so I use these "assets" as
collateral to borrow even more money, which I lend out to even more
people, or sell them to others like myself who do the same. I also buy
insurance to cover me in case the borrowers default -- and I pay for it
with those self-same IOUs! Round and round it goes, each new loan
becoming somebody's asset on which to borrow yet more money. We all
rake in huge commissions and bonuses, as the total face value of all
the assets we've created from that initial million dollars is now fifty
times that.

Then one day, the first batch of IOUs comes due. But guess what? The
person who scribbled his name on the IOU can't pay me back right now.
In fact, lots of the borrowers can't. I try to hush up this
embarrassing fact as long as possible, but pretty soon you get
suspicious. You want your million-plus dollars back -- in cash. I try
to sell the IOUs and their derivatives that I hold, but everyone else
is suspicious too, and no one buys them. The insurance company tries to
cover my losses, but it can only do so by selling the IOUs I gave it!

So finally, the government steps in and buys the IOUs, bails out the
insurance company and everyone else holding the IOUs and the
derivatives stacked on them. Their total value is way more than a
million dollars now. I and my fellow entrepreneurs retire with our
lucre. Everyone else pays for it.

This is the first level of what has happened in the financial
industry over the past decade. It is a huge transfer of wealth to the
financial elite, to be funded by US taxpayers, foreign corporations and
governments, and ultimately the foreign workers who subsidize US debt
indirectly via the lower purchasing power of their wages. However, to
see the current crisis as merely the result of a big con is to miss its
true significance.

I think we all sense that we are nearing the end of an era. On the
most superficial level, it is the era of unregulated casino-style
financial manipulation that is ending. But the current efforts of the
political elites to fix the crisis at this level will only reveal its
deeper dimensions. In fact, the crisis goes "all the way to the
bottom." It arises from the very nature of money and property in the
world today, and it will persist and continue to intensify until money
itself is transformed. A process centuries in the making is in its
final stages of unfoldment.

Money as we know it today has crisis and collapse built into its
basic design. That is because money seeks interest, bears interest, and
indeed is born of interest. To see how this works, lets go back to some
finance basics. Money is created when somebody takes out a loan from a
bank (or more recently, a disguised loan from some other kind of
institution). A debt is a promise to pay money in the future in order
to buy something today; in other words, borrowing money is a form of
delayed trading. I receive something now (bought with the money I
borrowed) and agree to give something in the future (a good or service
which I will sell for the money to pay back the debt). A bank or any
other lender will ordinarily only agree to lend you money if there is a
reasonable expectation you will pay it back; in other words, if there
is a reasonable expectation you will produce goods or services of
equivalent value. This "reasonable expectation" can be guaranteed in
the form of collateral, or it can be encoded in one's credit rating.

Any time you use money, you are essentially guaranteeing "I have
performed a service or provided a good of equivalent value to the one I
am buying." If the money is borrowed money, you are saying that you
will provide an equivalent good/service in the future.

continues here:

scholarpreneur's picture
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Joined: Jan 30 2009
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Re: Money and the Crisis of Civilization

Sorry if this has been posted before, but this is the best piece I've read since watching the Crash Course. He makes the same connection between usury and runaway expansion that Chris does. For some reason, reading this essay made everything *click* into place for me.

The current system requires an ever expanding pool of goods and services to match the expanding money supply. This has resulted in the monetization of many things we used to produce ourselves or services we performed for free to members in our community, such as cooking, cleaning, child care, and even entertainment. We're finally reaching the hard limits of not only the resources in our world, but the monetization of basic human needs. 

Roundhouse's picture
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Re: Money and the Crisis of Civilization

Absolutely, scholarpreneur.  I'm no economist but I used to teach math (algebra).  A money system that is built on the premise of continuous growth is designed to fail. Period.  Exponential growth is not THAT complicated (though Dr Martenson did a fabulous job of explaining it) to understand and the outcome so very predictable.  The question that remains is "how does the graph look on the way down"?  And down it will come.

I still view the basic problem as population growth with it's identical exponential function except it's crashes into everything else and I fear we are nearing 'peak everything'.  The money supply and the economic dysfunction we are experiencing are simply symptoms of the greater problem.  Just my $.02

 Great article, though.  Thanks for posting. 

pleaseremoveme's picture
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Joined: Jan 24 2009
Posts: 115
Re: Money and the Crisis of Civilization

There is a graph on reindeer populations in this article by Chris Martenson himself:

I this is a good warning about what could happen.

pir8don's picture
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Joined: Sep 30 2008
Posts: 456
Re: Money and the Crisis of Civilization

I only discovered Charles Eisenstein a short while ago and now put him up with Daniel Quinn as the best understanding of ourselves and our situation. He has a book which is available in its entirity online. Unfortunately both Charles and Daniel offer visions of a future that I find it very difficult to engage with. None-the-less their comprehension of our past and present and their coherence in expressing it are unique. 

This link of Charles Eisenstein is good too



So few then with so many ways, so many now with so few ways.

BSV's picture
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Re: Money and the Crisis of Civilization

Thanks to all for these posts! This is an excellent and informative thread.

scholarpreneur's picture
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Joined: Jan 30 2009
Posts: 5
Re: Money and the Crisis of Civilization

Charles puts all this in a spiritual perspective. I find that missing from most doomsayer dialogue. Very few people see the opportunity in what is happening. People either think it's going to be Mad Max or that everything is going to be the same. The truth is, it will probably be neither and it's up to us to create a better society out of the wreckage of the old one.

Crash's picture
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Joined: Nov 26 2008
Posts: 171
Re: Money and the Crisis of Civilization
scholarpreneur wrote:

it's up to us to create a better society out of the wreckage of the old one.


Absolutely X

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