Saturday, June 30, 2012

Relative Currency Value

In its most absolute form, that is on the FX market, a currency system is a measure of the quality of the relations of production inside the civilization that denominates trade with it. Because the three major currency systems, in the absence of any effective  institutional constraints on recently deified bankers, have valued the positions of creditors above all others, they are aggressively eroding all the other kinds of economic relationships.

Money is a measure, wealth is what society produces. When society becomes obsessed with the measure, the score becomes more important than the output. The importance of money to wealth is not how it scores the winners and losers, but how it facilitates the creation in the first place. The economic production of a civilization is governed by a constellation of institutions that hold various factors of productivity, from people to plant to resources in free or coerced relationships that allow the division of labor to flourish or stagnate, depending on the quality of those relationships. All production is social: it does not happen without people doing it; it does not happen if people don't want it; it does not happen for long if people can't pay for it.

That civilization that through its institutions allows the greatest economic freedom to the greatest number of its people is the one who's currency will ultimately hold the strongest relative value against those of lesser social organizations. At present the three major currency systems are competing to figure out how best to score their money with the result of devastating their real factors of production. China is robbing the savings of a billion people to indulge scions of the Party, Europe is liquidating all economic relationships in the periphery, simply starving them in a fiscal famine eventually to consume the core as well, and the United States is looking more Chinese by the day with a brittlely thin and crazing veneer of institutional legitimacy for a kleptocratic elite.

The future will be won by that society that values society as a whole more than the relative value of its money. This society will accidentally produce the most valuable money by creating a world where people want to live which will be one where people are encouraged to produce to their potential and reap the rewards of doing so: this is why they'll do it and why they'll want to live there.  This was once a description of the United States. Money will be viewed as a tool to lubricate the improvement of real material conditions for this population at large, not the measure of winners and losers we now imagine it. On current trends, as likely as not this future society will not be in Europe, the United States or China. Its time to change the trends so it can happen in all three and more.

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