What Few Understand About Money

This leaves out the purpose of money, which is facilitating social organization.

I've thought a lot about "money" and wrote two books that explore what few understand about money: that it's fundamentally a social construct with a social purpose and structure. The books are Money and Work Unchained and A Radically Beneficial World.

The conventional understanding of money is that it's a financial unit with economic functions--store of value, means of exchange and unit of accounting-- defined by its intrinsic nature as a material that's valuable or convenient.

So gold is "real money" because it's physically permanent, convenient in size and scarce, and fiat currency--paper money and its digital versions--are intrinsically worthless as paper is fragile and digital currency is conjured out of thin air.

This leaves out the purpose of money, which is facilitating social organization. Money's social function and structure is the water we swim in, unseen because we take it for granted.

Many have embraced the view that all our problems would be solved if we returned to the gold standard or adopted Bitcoin. The simplicity of this is appealing, but when examined under the lens of social purpose and function, the simple solutions turn out to have limits: being a store of value isn't enough, as the wealthy hoard stores of value and remove them from circulation. Hoarded stores of value don't enable social mobility, they limit it.

When the social waters we swim in become turbulent, money reveals its fluid, adaptive nature. In a severe famine, for example, the most valuable store of value and most sought-after means of exchange are non-perishable food items and train tickets that take the holder far away from the famine. Gold will have potential value on the periphery, but the most valuable "money" are flimsy train tickets and things we can consume to stave off starvation.

Let's shed light on the social nature of money with a thought experiment.

Let's say there is a geographically defined region with scattered gold deposits. that can be panned in streams or collected with simple hand tools. Gold is the store of value and means of exchange, but its exchange value fluctuates depending on the scarcity of what people want to buy: eggs, shelter, tools, etc.

Two townships arise in this region. The first is conventional: mining gold is a "winner takes all" activity: as long as a miner has a legitimate claim, whatever gold is found is theirs to keep. So when a lucky miner stumbles on a big rock that turns out to be almost solid gold, he quietly uses this windfall to buy up the town's mining claims, land and businesses as a silent partner. Once he controls the town, he raises prices to milk the residents, exploiting his gold hoard in an extractive fiefdom.

The fact that gold is money worked well for the wealthy owner hoarding the gold but not for everyone else. Social mobility--a key social purpose of money--is limited in this neofeudal economy.

The other township establishes by vote of the residents a much different social construct for the gold. Rather than "winner takes all," every miner agrees to put 20% of whatever gold they collect into a common fund that has two purposes: to provide a small stake for those miners who have worked diligently but come up empty due to bad luck or illness, and a town "rainy day fund" for periods where the work stops due to severe weather or other events.

Those tasked with collecting and protecting the town's gold fund are duly elected and scrutinized to insure their conduct is above-board and they're doing their job correctly.

This system works well until an extended period of declining yields of gold begins pressuring the service population--the laundries, restaurants, etc. that the town needs to survive. Those managing the gold fund explain the situation and obtain permission from the miners to extend the modest hard-luck stipend to service workers should they otherwise be forced to abandon the town, leaving the residents without key services.

Even when yields stabilize, it's now obvious that the easy gold has been recovered, and yields will continue declining. The town residents face abandoning the town or starting some other industries to compensate for the decline in gold mining.

The leadership comes up with an idea: why not issue paper currency for use in the town, based on the gold still held in reserve, and save whatever new gold is added to the town's fund for trading for essentials from elsewhere? The paper currency will be "backed by gold": as the town's gold won't be spent, this paper money will have something valuable behind it. The paper money is a representation of value rather than a valuable object in itself.

After some skepticism, the miners agree because the other option--abandoning the town--is even less appealing. After all, the decline in gold yields isn't limited to the township; it's happening everywhere. Pulling up stakes and trying to find an as-yet unexploited area is a gamble with poor odds.

After some hesitation, the paper money is distributed to residents as their stipend and used to pay for services and materials. Those accepting the paper find they can buy goods from other merchants with the paper money, and so trust in the new money is established.

Miners who abandoned their claims are paid to dig deeper mines with the paper money, and a small lumber harvesting operation is also funded by the paper money. Merchants still need gold to buy products from afar, but the paper money encourages residents to start producing more food locally. Though gold production is way down, the paper money has funded the labor needed to continue producing enough gold for outside trade.

The town actually expands as new residents take advantage of the opportunities--social mobility is broadening--and while the leaders maintain the town's stash of gold, the paper money that's needed to grease commerce and pay wages now far exceeds the value of the gold in the town vault.

In effect, the town is issuing a fiat currency, a paper money with no intrinsic value, based on the trust that there is gold backing it up.

But this paper money isn't actually valueless. It's backed by the social structure and purpose of the town's economy--the residents' trust in the institutions, their fellow residents, and in the valuable work being enabled by the paper currency.

As long as the worker issued $1 in paper money can buy $1 of goods with that piece of paper, and the merchant who accepts the $1 can buy labor, goods and services with it, the system functions smoothly.

The key to the system's trust is the leadership's discipline in only gradually expanding the issuance of the paper currency in line with the expansion of the workforce and town's economy. For if the currency doesn't expand enough, the town's economy is starved of both means of exchange and "small money" store of value.

If the leaders issue too much paper money, this excess eventually reduces the value of the paper money and residents will lose trust in the system. The ideal they must seek is scarcity of paper money, but not so severe that it begins limiting hiring and commerce. They must resist the natural demands for more money entering circulation, as the entire structure is trustworthy precisely because there is resistance to issuing any more than the absolute minimum needed to keep the wheels of commerce turning.

But consider what happened: a gold standard--gold was the only money--was dooming the township as the supply of new gold was no longer enough to turn the wheels of commerce. The social purpose of money--maintaining a viable economy, social mobility and a vibrant social order--demanded the introduction of fiat currency, which could be prudently expanded as needed.

The town thrived by doing what many consider is the opposite of financial wisdom: they abandoned a gold standard in favor of fiat currency as the only means of not just surviving, but of thriving by enabling an expansion of work and initiative.

(if this seems farfetched, study the history of paper money in dynastic China.)

This is why I have suggested a labor-backed currency: rather than return to a system in which the wealthy hoard the majority of gold or Bitcoin, or give the power to issue currency to central banks and private banks who enrich those already at the top of the wealth-power pyramid, money is only issued when useful work has been performed. This money is created at the bottom of the pyramid to pay those doing useful work, which is the ultimate foundation of a productive social order and economy.

Money is a social construct with an implicit structure and purpose which we swim in but don't even see. Money is fluid and must adapt to fulfill social purposes. If it fails to do so, it's not just money that fails, the entire society fails.




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Self-Employment Series #2: Ownership Is Not Freedom

Ownership collapses abstraction.

This guest essay by correspondent 0bserver is #2 in a series on self-employment / owning your work. The first entry was Owning Your Work in a World That Rents Your Life.


Charles Hugh Smith's book Get a Job, Build a Real Career and Defy a Bewildering Economy did not resonate with me because it promised escape.

It did the opposite. It stripped away illusions.

Self-employment is often marketed as freedom: no boss, flexible hours, autonomy.

In reality, it is ownership. And ownership is heavier than people expect.

When you own your income, you also own:

Risk
Uncertainty
The learning curve
The boredom
The consequences of poor decisions
The cost of hesitation

There is no HR department to absorb mistakes.

No manager to hide behind.

No structure unless you order it yourself.

That reality alone filters out most people--not because they are lazy, but because their goals are oriented toward comfort rather than responsibility.


The Shift No One Prepares You For

The hardest part of building a self-owned income stream is not technical.

It is psychological.

You have to abandon assumptions that are quietly reinforced for years:

That effort should be quickly rewarded
That credentials confer value
That security comes from institutions
That direction will be provided

None of that survives ownership.

Revenue does not care how hard you worked.

Customers do not care how clever you are.

The market does not care what you intended.

It responds only to value delivered, consistently, under constraint.

That requires a different orientation toward time.

Days give way to weeks.

Weeks expand into months.

Eventually, years become the unit of measurement.

Most people do not fail because they lack ability.

They fail because they measure progress using the wrong clock.


Loneliness, Boredom, and Friction

Self-employment is lonelier than advertised.

There is no shared ladder, no approved narrative, no external validation.

You don't get credit for persistence.

You don't get applause for showing up.

Much of the work is unglamorous:

Repeating tasks that don't scale yet
Fixing small operational failures
Saying no to distractions that feel productive
Doing things manually because leverage comes later

There are long stretches where nothing appears to happen--except quiet improvement.

Those stretches are where most people quit.

Not because the work is too hard, but because it is dull.


Feedback, Authority, and Reality

Ownership collapses abstraction.

It forces human capital into direct contact with reality.

Feedback arrives through product quality, timing, and process.

It is immediate and unforgiving.

One of the harder lessons is that ownership cannot be delegated.

Responsibility without final authority does not create empowerment--it creates resentment.

Businesses are not voluntary societies.

Someone has to decide.

Someone has to absorb the consequences.

Cleverness works early.

It fails under scale.

Structure survives pressure.

That realization changes how you operate--and how you lead.


Why So Much Work Is Being Exposed

This is why the current economic adjustment feels so destabilizing.

Large portions of modern work drifted away from value creation and toward coordination, signaling, and lifestyle optimization. When conditions were loose, that drift was tolerated. When conditions tighten, it is not.

Ownership environments do not allow that separation.

If something does not produce value, it disappears quickly.

That is not cruelty.

It is feedback.

And feedback, while uncomfortable, is clarifying.


What Ownership Actually Provides

This is not a warning against self-employment.

It is an argument for honesty.

If you accept the tradeoffs, ownership offers something rare:

Alignment between effort and outcome
Skills that compound rather than expire
Optionality grounded in capability, not permission
Social capital built through accountability

These rewards come late.

And they only arrive once the work stops being an identity project and becomes a discipline.

You do not become self-employed.

You build something that earns the right to exist.


Conclusion

Ownership forced me to recalibrate what I measure and why.

Progress stopped looking like recognition.

Success stopped meaning comfort.

Work stopped being expressive and became accountable.

Nothing about it felt free at first.

Most of it felt heavier.

But over time, the weight clarified what mattered.

And clarity--not freedom--is what ownership ultimately provides.

This is a guest essay by longtime correspondent 0bserver.




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A Market Crash and Recession Are Bullish, Not Bearish

This isn't "Capitalism," it's Model Collapse ushering in the inevitable conflagration.

One of the most peculiar hyper-normalized hallucinations about "Capitalism" is that markets and the economy "should always go up" and if they don't, something is terribly wrong and somebody better do something to fix it.

Remarkably, this hyper-normalized hallucination is the exact opposite of real-world "Capitalism," which relies on the periodic clearing of excesses of debt, leverage and speculation as its essential mechanism of self-correction and adaptation. If these are stripped out, "Capitalism" fails as a system.

The two charts of the NASDAQ stock index below illustrate the astounding divide between a real-world understanding of "Capitalism" and the hyper-normalized hallucination of always goes up "Capitalism."

Various justifications are trotted out to support the "markets and GDP should always go up" narrative:

1. There's always a Bull Market somewhere. In other words, the market and "growth" are always going up somewhere, and so rotating out of flat sectors into growing sectors enables markets to always go up.

2. The economy can no longer survive a market crash or recession, and so we can't allow either to happen. Spoiler alert: If the market and economy cannot survive self-correction, then "Capitalism" as a system has already failed.

3. The Federal Reserve has mastered the art of manipulating--oops, I mean managing--the market and economy via adjusting the dials of liquidity, stimulus, money supply, cost of credit, etc. As a happy result of their god-like financial powers, markets and GDP will never go down again, barring an alien invasion or asteroid strike.

These justifications overlook the need for systems to self-correct self-reinforcing excesses that reflect the inevitable self-reinforcing human emotions: greed / confidence and doubt / fear: soaring markets generate demand for more credit and leverage to boost higher risk gambles which in the euphoria of the bubble are perceived as guaranteed to win rather than guaranteed to fail.

Given that the core functions of capitalism require feedback that correct / clear excesses, these justifications are incoherent. Dynamic systems such as capitalism don't remain in a steady state; they are constantly in motion, and humanity's herd instinct and built-in attraction to windfalls will inevitably generate the madness of crowds which then generate excesses of borrowing, leverage, risk and speculation, all of which must be reset via market crashes and recessions.

If corrective market crashes and recessions are not allowed (via ever higher stimulus, moral-hazard backstops of the biggest gamblers, etc.), then the system becomes increasingly brittle and dependent on hallucinations such as "markets can always go up, and so they should always go up."

Actually, excesses must be wiped out to enable markets and economies to reset organically rather than kept aloft by centrally organized manipulation. The forest fire analogy explains this: routine, periodic fires burn off the deadwood that piles up in a forest, clearing space for new growth. If these healthy fires are suppressed, the deadwood (debt, leverage, speculation, moral hazard) reach dangerous extremes: when a fire finally ignites, the conflagration consumes the entire forest.

This is how markets clear excesses of speculation and risk: they crash 80% and reset over a period of years. Though the crash is naturally viewed as disastrously bearish by those absorbing the losses, it's ultimately bullish for the economy and market, as suppressing the self-correction generates system collapse.



This is how the incoherent, system-failure hallucination views this bullish process: quick, do more of what crippled the system to maintain the illusion that "Capitalism" is "markets always go up."



This isn't "Capitalism," it's Model Collapse ushering in the inevitable conflagration.


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The Banality of Evil and Those Who Said No

In the Realm of the Banality of Evil, saying yes is always easy. The hard part is saying no, for reasons that have nothing to do with getting ahead.

The Epstein files have unleashed a flood tide of bleatings of innocence and accusations of guilt by association. This is just what we'd expect in the Realm of the Banality of Evil, a phrase made famous by Hannah Arendt, who described the "terrifyingly normal" participants in systems that normalize evil of the sort that "could not be traced to any particularity of wickedness, pathology or ideological conviction in the doer, whose only personal distinction was a perhaps extraordinary shallowness."

Amidst this flood tide of proclaimed innocence, consider the forgotten few who declined invitations to enter Epstein's circle of influence. While the files record those who accepted an invitation, those who said no appear to be less well documented.

Was it really that difficult to make a few inquiries about the host before saying yes? Or was the attraction of obtaining favors, funding and flattery just too powerful to resist? Or was it the promise of rubbing shoulders with the rich and powerful that was impossible to resist? Or was it the discreet promise of self-indulgence without limit?

Yet some did make inquiries and declined. Some said no. These few are forgotten, for their refusal is an indictment of the entire status quo. In the rush to declare everyone's innocence, perhaps we should first consider those who refused the invitations for self-evidently sound reasons.

In the context of the Banality of Evil, those few who said no are the only real innocents. Everyone who said yes was manifesting ordinary obedience to the perverse rulebook of America's elite class and aspirants seeking to join this elite: when it comes to self-enrichment and ambition, the only question is: can you get away with it.

In other words, there isn't a low standard of morality and ethics: there is no standard at all, a complete absence of anything but by any means available. America's elites in all the fields Epstein harvested were part of a system that made their unquestioning, automatic acceptance of the invitation inevitable.

The ideal medium for the expansion of evil is the shallow passivity of taking every opportunity to climb the ladder of power and increase one's private wealth without hesitation. Rising into the ranks of the elites in America boils down to doing everything you can get away with to get ahead without any thought for the consequences borne by others or for the sacrifice of your integrity, because integrity has no value in today's America. Even saying the word integrity makes you a chump.

In the Realm of the Banality of Evil, saying yes is always easy. The hard part is saying no, for reasons that have nothing to do with getting ahead. As Hannah Arendt wrote: "The sad truth is that most evil is done by people who never make up their minds to be good or evil."

One of the points I'm trying to make here is that the surveys of the Epstein files are prone to Survivorship bias: "the logical error of concentrating on entities that passed a selection process while overlooking those that did not." In other words, the data points of who accepted Epstein's invitations to parties (both the conventional parties of bigshots and those on his island) are becoming known, while the data points of who declined the invitations (those who said no)--and why they chose to decline/say no--are not known.

Yet those are the most interesting data points, as the few who refused to enter Epstein's circle of influence tell us more about the moral rot of our culture and the realm of the Banality of Evil than all those who joined the herd saying yes. And it was a large herd, extending into the upper reaches of virtually every sector's elite.

Self-absorbed ambition and self-gratification have no use for pondering good and evil, and that's the banality of evil that's consumed America's culture, society and economy.



Can you see those dark clouds gathering up ahead?
They're gonna wash this planet clean like the Bible said.
Now you can hold on steady, try to be ready
But everybody's gonna get wet.
Don't think it won't happen just because it hasn't happened yet.

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Re-Set: Reversing the Debt-Debasement Death-Spiral

The end-game of debt-debasement is already visible. The only thing that's still up in the air is our response.

The unspoken foundation of the US dollar debasement narrative is TINA: There Is No Alternative to debasing the USD to zero because reversing course by reversing the expansion of debt and the money supply (i.e. monetary inflation) are impossible in a debt-dependent economy.

Without a steady expansion of debt and a steady debasement of the dollar so debtors have an easier time paying existing debts, the economy would crash, and so doing more of what leads to collapse is the status quo "solution."

The second assumption of the US dollar debasement narrative is that those who own crypto, precious metals and other tangible assets will not just survive the eventual crisis but emerge wealthy, as the value of their assets is not dependent on fiat currencies.

This suggests the following thought experiment: since those holding the levers of power "know" the end-game of debasement is the collapse of the currency and the economy, and they "know" the economic devastation that this collapse will deliver not just to the majority but to the wealthy whose wealth ultimately depends on a functioning economy, wouldn't they consider pursuing a still-painful but less apocalyptic option that steers clear of the death-spiral?

Let's also consider that history hasn't been kind to governments that let their currency collapse. Those in power who "know" this would be wise to seek a way to escape the debasement death-spiral simply out of self-preservation, as their power would not survive the (entirely avoidable) destruction of the currency and economy.

Put another way: is there a way to escape the debasement death-spiral that actually re-sets the economy for legitimate advances in the quality of life after a painful excising of the fatal dependence on ever-soaring debt and debasement to prop up the illusion of "prosperity"?

There is a way to reverse the death-spiral, and the key for those in power is to distribute the unavoidable pain evenly enough that no one class reaches the point where they have nothing to lose in seeking to dismantle the entire status quo.

For the past 50 years, the status quo has slowly bled the bottom 80% while channeling all the gains to the top 10%. There were sufficient crumbs left by those feasting on capital gains to give the bottom 80% a reason to comply rather than revolt, but the pain of reversing debasement could make revolt more appealing than compliance.

Note that this redistribution was the result of policy decisions that benefited those reaping the gains of financialization and globalization. It was a choice, not fate.

Those in power must even out the distribution of pain so those who reaped the gains (the top 10%) bear the brunt of the financial damage while funneling enough of life's essentials to the bottom 80% to avoid revolt.

Recall that the top 10% own the vast majority of financial assets, with the bottom 50% owning a wafer-thin 2.5% of financial assets, a 28% decline from their 3.5% share in 1990. The share owned by the top 1%, meanwhile, rose by 42% to 35.6%.



The only way to reverse the debasement death spiral is to end the economy's dependence on ever-rising debt to fund consumption and an ever-expanding money supply to inflate the asset bubbles that fuel both soaring wealth inequality and the outsized spending of the top 10%--spending that generates a lopsided illusion of "growth."

The most effective way to defend the dollar and suppress debt expansion is to influence supply and demand by jacking up Treasury yields / interest rates. Global capital will flow into US Treasury bonds to reap the higher rates while demand for new loans declines as rates rise. The federal government's borrowing costs will jump, squeezing spending while debt-based consumption falls off a cliff.

This is the recession that's necessary to clear the dependence on debt, inflation and speculative excesses, the recession that's been put off for 45 years by excessive money / debt expansion.

At the same time, the Federal Reserve lets the resulting bankruptcies and defaults reduce private-sector debt by refusing to bail out Wall Street and the "too big to fail" banks. Overleveraged banks will fail as the necessary step to re-establish some semblance of market discipline rather than backstop the biggest gamblers (i.e. Moral Hazard).

As when the Savings and Loan debacle wiped out (often fraudulent) lenders, the appropriate public agencies will liquidate assets and spread the losses borne by the public over enough time to manage the pain.

Note that federal debt (i.e. the national debt) of $38 trillion is about a third of total debt, with 2/3 being private-sector.

Recall that private-sector lenders create most of the new currency: when a bank issues a new mortgage, that origination creates new currency. When the mortgage is paid off, that currency goes to Money Heaven--the money supply declines accordingly. Paying down debt or writedowns of debt both reduce the quantity of dollars.



Concurrently, the Federal Reserve tightens liquidity / ceases creating USD out of thin air, reducing the money supply, which induces a scarcity of dollars globally as investors seeking to lock in the higher yields of Treasuries (see above) are in effect bidding for dollars, as Treasury bonds / bills / notes are denominated in US dollars.

The dollar rises due to this shift in supply and demand, and while this punishes exporters, it increases the purchasing power of the dollar for workers and employers alike. Again, any reversal / re-set will generate extreme pain, and the only management strategy with any hope of success is to distribute the pain widely enough, and fairly enough, so that no one class absorbs all the pain.

The long-avoided rebalancing of federal obligations and revenues is finally undertaken, reversing the past 50 years of policies that benefited owners of capital (the top 10%) at the expense of wage earners (the bottom 90%).

Here's an example of such a policy change: apply the 15.3% social-welfare tax paid by self-employed workers to all unearned income: capital gains, stock option compensation, etc. As with self-employed workers, income tax is on top of this 15.3% social-welfare tax.

On the expense side, ending the perverse incentives built into SickCare and the no-limits funding of all the sacred cows (Big Ag, Big Processed Food, Big Pharma, Big Defense, Big Banks, SickCare, Higher Education, etc.) would spread the pain to those elites and sectors that have enjoyed unimpaired federal largesse for decades.

As recession cuts consumption and employment, mass defaults will wipe out trillions in debt. You can't get blood from a stone, and the owners of all this debt--auto loans, student loans, credit cards, mortgages, etc.--will eat the writedowns. All the currency created by the debt issuance disappears, and the quantity of dollars in circulation plummets, reversing the debt-debasement-inflation death-spiral.

This is a chart of M2 Money Supply, which shows the expansion of the money supply in relation to the GDP generated by the money. (Note that M2 and GDP are imperfect / misleading measures, but everyone uses them anyway.)



Yes, I get it, every one of these steps is "impossible" because some entrenched concentration of wealth / power would suffer. The point here is the suffering that will be inflicted on the elites and sacred cows by the collapse of the currency will be far greater than the pain they will suffer in a re-set that actually changes the nation's course from a debt-debasement death-spiral to an economy with market discipline and a dynamic balance of social and financial interests.

As I explain in my new book Investing In Revolution, the extreme imbalances generated by the current death-spiral policies will get rebalanced one way or the other, and those influencing policy have a stark choice: leave the status quo as-is and guarantee a non-linear (i.e. uncontrolled, chaotic) collapse, or reverse course now while some control of the re-set is still available.

The end-game of debt-debasement is already visible. The only thing that's still up in the air is our response. Don't think it won't happen just because it hasn't happened yet.

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