Money

Paper money eventually returns to its intrinsic value — zero.
–Voltaire

In Time

What would happen if you woke up tomorrow and the currency of your country had been devalued by 1/3 or 1/2, or was completely worthless? How would we feel about our lives, lifestyles, and the value of our work and belongings up until this point? Currencies, indicated by a dotted line in the diagrams below, flow in a countercurrent direction from work and energy. Currencies circulate only within the human subsystem of the economic system. “Whereas the contribution of environmental resources to the economy is not measured by circulating money, money circulating in the markets increases with the emergy and transformity of the products once they are above a threshold for economic use and processing within the economy” (Odum, 2000, p. 11).  Currencies are an imperfect form of information that values our wealth and our work. How do we value assets and labor, and when commodities are in abnormal surplus, and the information surrounding them can be gamed, how does that skew society?

Value Added MTB3 http://www.emergysystems.org/lectures.php

In contrast to emergy-based valuations, market valuations using standard economic metrics or currencies makes significant errors in at least two places; first the measure does not include the contributions of earth energies and natural resources built hierarchically over time. Thus the value of natural resources in particular, timber, or shrimp, or gold, or oil is measured by demand based subjective measures of willingness to pay with market valuation, rather than the real contribution from Nature based on the amount of time and solar energy it took to make the resources.

Secondly, money “swims upstream” so, as Gary Snyder says below, so it seeks to own the source, yet it never makes it completely to the source, as it stops short of the circulating with Nature, so money is always working to catch up. And third, if the money is debt driven, it is borrowing from the future, assuming a future that not only grows but will have more resources (stocks) to draw from to meet that growth. That ensures that any money metric will overshoot–we will be in a situation of imbalance, inequity, or negative returns for our international trade long before the money system recognizes it.

Money Goes Upstream (Gary Snyder, Axe Handles, 1983, p. 101)

I am hearing people talk about reason
Higher consciousness, the unconscious,
    looking across the audience
    through the side door
    where hot sunshine blocks out
    a patch of tan grass and thorny buckbrush

There are people who do business within the law.
And others, who love speed, danger,
Tricks, who know how to
Twist arms, get fantastic wealth,
Hurt with heavy shoulders of power,
And then drink to it!
    they don’t get caught
    they own the law.
Is this reason? Or is it a dream.

I can smell the grass, feel the stones with bare feet
    though I sit here shod and clothed
    with all the people. That’s my power.
    And some odd force is in the world
Not a power
    That seeks to own the source.
    It dazzles and it slips us by,
    It swims upstream.

In contrast, emergy synthesis evaluates trade well, especially the complexity and imbalances that occur in international trade due to varying qualities and value of natural resources and human labor embodied within products. The measurement is based on solar units rather than money, so it captures the real value of stocks of resources that have been built up hierarchically over time with natural systems (some geological resources may have built up over hundreds of thousands or millions of years). And since emergy valuation is supply driven, based on the “Supply of Nature”, it is independent of demand driven vagaries that occur in markets. See examples at the link for several good articles on application of valuation to international trade and a link to the Emergy database.

http://tinyurl.com/ 7h8tnjl Robinson Financial Sense

Whereas the contribution of environmental resources to the economy is not measured by circulating money, money circulating in the markets increases with the emergy and transformity of products once they are above a threshold for economic use and processing within the economy. Thus, this essay supports the Jansson-Zucchetto hypothesis that market values increase with embodied energy (emergy). In year 2000, with economic growth still in progress, self organization is generating a hierarchy of sub-economies with controversies about the relationship of economic power to other information. The broad base of global energy is supporting high diversity super-circulation. There appears to be a struggle for control between monetary power and the shared information of an emerging world public opinion. The coupling described here helps anticipate the future, as fuel shortages reduce the energy hierarchy, concentrations in centers, and the circulation of monetary buying power. Since emergy is a general measure of inherent real wealth, rising costs of energy means rising prices (Odum, 2000, p. 11-12, from PDF below).

From Odum, 2000 Energy, Hierarchy and Money (PDF, 13 pp.)

Here is a good description of the Petrodollar System.

Relationship Money & Energy MTB-Lecture 3
Brown & Ulgiati, 2011
BIS Pyramid Global Liquidity http://tinyurl.com/77f8wnx

The difference between emergy use and Global World Product (GWP) in the graph at right represents inflation. “Inflation is an acceleration of the rate of money circulated in relation to the energy flow” (Odum, 1971, p. 195). “In the 1930s, a badly functioning economic system and a transition from a rural solar economy to an urban fossil-fuel economy created lower productivity … Adding money will stimulate the flow of energy only when supplies of energy are large. Adding money when sources of energy are limited merely creates inflation” (Odum & Odum, 1976, p. 55, 58).

The digitalization and commodification of money creates extra opportunities for inflation in modern fiat currencies. Expanding political promises for the future represent unpayable debt, which become untenable as economies begin to contract, even while monetary systems and GDP continue to expand. Political expediency demands that we print more money and not accept international defaults and contract the monetary system. Increasingly, GDP measures churn in fiat debt obligations at the global level as a form of super-circulation outside the economy, removed from the real production-consumption economy.

  • Buying and selling that does not generate anything new is circulation without production.. Buying and selling that does not bring productive resources into the economy is expenditure without value. The money buys less, the standard of living is less, and the economy is less competitive. . .  Finance for profit can only cause a country to be less productive. . . Capitalism, profit, borrowing, and debt are only compatible with a growth economy (Odum, 1987, p. 17, 21)
  • Circulating more money for high finance, luxury or gambling will not accelerate resource use, economic growth, or generate useful products. Circulation without production is expenditure without value. Finance for profit creates diminished productivity as industries become outdated and lose to competitors overseas (Odum, 2001)
  • Adding money to the circulation when wealth is declining can’t stimulate growth and only causes high rates of inflation….People who don’t understand the changes might keep trying to expand, borrow, and invest in growth unsuccessfully. This would only generate defaulted loans and bankruptcies….When growth of real wealth is limited, new money cannot be added without losing its value. If profits and money cannot accumulate, capitalism can no longer dominate
  • According to the discount idea, more money is obtained by harvesting and selling resources now rather than later…Especially in a time of descent, the real wealth systems can hold its monetary value better than bank savings. Environmental systems such as forestry, fisheries, and agriculture generate new wealth continuously…Then it pays to buy real wealth rather than save money in the bank
  • Bank deposits may also lose value from inflation. Loans made in a period without growth are hard to repay. There are more business failures, bankruptcies, and bank closings. Banks may acquire new roles such as financing contraction. Some capital will be needed to finance more efficient, smaller, and lower-energy enterprises. When populations decrease or people give up second homes, banks can buy the excess housing and sell to first time home-buyers
  • Stocks of companies emphasizing the reorganization and contraction of society could rise in value temporarily…Borrow less and cut expectations of profit from stock markets
  • Perhaps the most important descent policy is cutting salaries uniformly….Instead of firing 10 percent of the people, cut everyone’s salary 10%, keeping everyone employed (Odum, 2001)
Real wealth, 1997 Brown/Odum

The United States went off the gold standard in 1971, joining the rest of the fiat currencies, except for the Swiss Franc, which ended gold convertibility in 2000. All currencies are now fiat, and most are represented digitally, at least in part. Most countries have massive debts that represent a future of economic growth that cannot be paid if our economies are in contraction. What does this mean for the future of fiat currencies if confidence is lost? Can we relocalize our money systems as slow money, how do we do it, and what should the standards be? Can we do it right this time and create a supply-driven basis that values Nature’s contributions to economies?

NewEconomics.Org Report on Energising Money

Brown & Uligiati presentation from 2012 Tesla Conference on Energy Currency

Measures Beyond Money, Denis White, Gresham College, November 14, 2012, 28 minutes

Canto 38/190 Ezra Pound

A factory
has also another aspect, which we call the financial aspect
It gives people the power to buy (wages, dividends
which are the power to buy) but it is also the cause of prices
or values, financial, I mean financial values
. . .
and the power to purchase can never
(under the present system) catch up with
prices at large,
and the light became so bright and so blindin’
in this layer of paradise
that the mind of man was bewildered. . . .

Our civilization can thrive in a future where we live with less