The Money Saddle
It occurred to me this fall that money may be a saddle function.
Imagine a saddle. If one poured water on the seat of the saddle, the water would flow off, either to one side or the other.
If a person was holding the saddle, and if there were only one drop of water, balanced perfectly in the middle of the saddle, it *might* be possible for the person to keep the water drop balanced on the seat, but it would be very difficult, and would require constant attention and adjustment.
Perhaps a better illustration would be trying to balance a golf ball on the center of the saddle. How long could anyone keep that golf ball in the center, without it falling off? What if it were a machine, a specifically designed robot, that was holding the saddle, and could make the adjustments?
I suspect that our money system is just like this. The proper functioning of money only works if there is constant adjustment to the money system, and *perhaps*, this is a feature of ALL money systems, no matter how perfectly we design them. Which is to say that ALL money systems are ultimately doomed to fail, because it is impossible to hold something perfectly still forever... and their might be breezes or gusts that are simply so surprising that there is no time to adjust.
What happens when a money system falls off the saddle? Hyperinflation? Removal from the economy as a store of value?
In the hyperinflation case, does all the money shift over into "medium of exchange" function, and then it is used for spending... faster and faster... until the money system and economy both collapse.
In the "hyperdeflation" case, all the money moves out of the spending/buying economy and into the "store of value" function, and so the spending slows, money seems to vanish, and the economy also begins to collapse due to a lack of "medium of exchange" money.
I've been attempting, over the past year or so, to think of a money system that can remain stable, but maybe, and perhaps, that is an impossible equation. Perhaps hyperinflation and hyperdeflation are always a feature of a money system AND so it always takes constant vigilance, to keep the system balances carefully between the two, on the saddle point.
How does this inform us?
The money saddle lets us know that we must be prepared for the possibility that a collapse of the money system will occur, because it is inevitable to occur. In our current case, since all the currencies are linked, it means that we must each, individually, have a plan to adapt to the collapse of the currency and to take all of our money out of the money system... to buy things of value, that can hold their value, or be useful, during the transition time from one money system to the next money system, whenever that new system might be created and implemented.
One can imagine that it might take a year, or two, or even five for a new money system to come into existence, and the timing of such would likely depend on the speed of the collapse of the older system. A quick collapse might lead to a quick creation of a new money system, whereas a slow and asymmetric collapse might linger, and might deter new money systems from being implemented.
It seems reasonable that an alternate money system, the next money system, be devised well in advance of a monetary collapse, and be waiting in the wings for the point when the new system can be rolled out without it becoming attached to the old money system, and consequently, collapsing itself. It seems that the history of collapsed money systems would be very useful to study... and in specific, the instances when a new money system was introduced, which became stable (for years) after the previous system imploded.
In the case of the USA, one wonders if it is possible for a new monetary system to be introduced by the government. Perhaps it would be impossible due to the huge debts owed to the rest of the world, debts that would doom any US money system. Would it take a war to extinguish those debts? A period of isolationism? What would it take?
Perhaps the new money system would need to be devised, rolled out, and managed by a totally distinct group of people, who were trustworthy and perceived as practically infallible, and certainly not part of the current government. Again, history may inform us about how such a transition could occur, such as durin gthe German Weimar Republic, but we are now in such a new world, a post-peak oil world, that perhaps the US government would be ever unable to maintain a stable money system.
Perhaps it will be up to us to both prepare for the collapse of the currency, to get our money out of it, and to also devise a method for barter/trade to work in the interim, and to finally devise a new money system that can carry us into the next phase of human civilization.
Possible Internet Reading
http://en.wikipedia.org/wiki/Hyperinflation
Google Search on Saddle Point for a Money System
Imagine a saddle. If one poured water on the seat of the saddle, the water would flow off, either to one side or the other.
If a person was holding the saddle, and if there were only one drop of water, balanced perfectly in the middle of the saddle, it *might* be possible for the person to keep the water drop balanced on the seat, but it would be very difficult, and would require constant attention and adjustment.
Perhaps a better illustration would be trying to balance a golf ball on the center of the saddle. How long could anyone keep that golf ball in the center, without it falling off? What if it were a machine, a specifically designed robot, that was holding the saddle, and could make the adjustments?
I suspect that our money system is just like this. The proper functioning of money only works if there is constant adjustment to the money system, and *perhaps*, this is a feature of ALL money systems, no matter how perfectly we design them. Which is to say that ALL money systems are ultimately doomed to fail, because it is impossible to hold something perfectly still forever... and their might be breezes or gusts that are simply so surprising that there is no time to adjust.
What happens when a money system falls off the saddle? Hyperinflation? Removal from the economy as a store of value?
In the hyperinflation case, does all the money shift over into "medium of exchange" function, and then it is used for spending... faster and faster... until the money system and economy both collapse.
In the "hyperdeflation" case, all the money moves out of the spending/buying economy and into the "store of value" function, and so the spending slows, money seems to vanish, and the economy also begins to collapse due to a lack of "medium of exchange" money.
I've been attempting, over the past year or so, to think of a money system that can remain stable, but maybe, and perhaps, that is an impossible equation. Perhaps hyperinflation and hyperdeflation are always a feature of a money system AND so it always takes constant vigilance, to keep the system balances carefully between the two, on the saddle point.
How does this inform us?
The money saddle lets us know that we must be prepared for the possibility that a collapse of the money system will occur, because it is inevitable to occur. In our current case, since all the currencies are linked, it means that we must each, individually, have a plan to adapt to the collapse of the currency and to take all of our money out of the money system... to buy things of value, that can hold their value, or be useful, during the transition time from one money system to the next money system, whenever that new system might be created and implemented.
One can imagine that it might take a year, or two, or even five for a new money system to come into existence, and the timing of such would likely depend on the speed of the collapse of the older system. A quick collapse might lead to a quick creation of a new money system, whereas a slow and asymmetric collapse might linger, and might deter new money systems from being implemented.
It seems reasonable that an alternate money system, the next money system, be devised well in advance of a monetary collapse, and be waiting in the wings for the point when the new system can be rolled out without it becoming attached to the old money system, and consequently, collapsing itself. It seems that the history of collapsed money systems would be very useful to study... and in specific, the instances when a new money system was introduced, which became stable (for years) after the previous system imploded.
In the case of the USA, one wonders if it is possible for a new monetary system to be introduced by the government. Perhaps it would be impossible due to the huge debts owed to the rest of the world, debts that would doom any US money system. Would it take a war to extinguish those debts? A period of isolationism? What would it take?
Perhaps the new money system would need to be devised, rolled out, and managed by a totally distinct group of people, who were trustworthy and perceived as practically infallible, and certainly not part of the current government. Again, history may inform us about how such a transition could occur, such as durin gthe German Weimar Republic, but we are now in such a new world, a post-peak oil world, that perhaps the US government would be ever unable to maintain a stable money system.
Perhaps it will be up to us to both prepare for the collapse of the currency, to get our money out of it, and to also devise a method for barter/trade to work in the interim, and to finally devise a new money system that can carry us into the next phase of human civilization.
Possible Internet Reading
http://en.wikipedia.org/wiki/Hyperinflation
Google Search on Saddle Point for a Money System