Saturday, August 21, 2010

Integral Accounting: Money – Part 5 of 7

…modes of transmitting and recognizing value exchange using physical and virtual surrogates including currency, systems of credit and barter

In response to the twentieth century’s first United States’ balance of payments and trade deficit and in recognition of the international market’s loss of confidence in the U.S. economy and dollar, the Nixon Administration closed the gold window 29 years ago this past week. This anniversary slipped by with few noticing that the Federal Reserve, the control room for our free-floating dollar, was without even the crude tools Nixon used in August of 1971. In what amounts to the ultimate “dog ate my homework” excuses, the floating dollar anniversary was marked by Ben Bernanke and his henchpersons (yes, I’m politically correct) trying to serve cocktails to the passengers on the Titanic (a.k.a. spinning their nonsense on the Sunday morning talk shows). Our employment is diving into a yawning chasm too wide for our “safety nets”. Our debt is eclipsing our aspirational GDP. Our financial markets are firmly in the control of dueling quant models which are automatically trading in a macabre zombie dance of the dead.

Despite the near universal public acquiescence to the necessity of money, you’d be hard pressed to find a single person who understands it. M0, M1, M2, and M3 (though M3 was demoted on March 23, 2006 – like Pluto from the planetary fraternity – as not being relevant enough to measure) all form an intricate web of illusory value which the average person doesn’t take the time or effort to comprehend. Ironically, like the termination of the gold standard, the Fed’s decision to cease reporting M3 rendered the U.S. government’s counterparty risk invisible to all. So, the bottom line is we neither understand money and its flow nor do we even know how decoupled or leveraged it is from anything we might consider a metric of value. Yet the band plays on as “Nearer My God To Thee” mixes with the chorus of those slipping into the icy water.

There is a piece of art work hanging in an executive conference room in Salt Lake City which is shown in the image beside this post. The image is the outcome of the 1959 investigation by Congress into the interlocking directors of the U.S. financial system. It’s title – “Interlocking Directors of Discount Corp and It’s Owner Banks With Major Financial Institutions” – sounds rather mundane. However, the substance of the image is far from dull. For in it, you see confirmation of what I’ve written about for the duration of this blog – namely that our current incarnation of money is inextricably linked at its foundation to our mortality. For on this image, among many other fascinating tidbits, is the most interesting morsel of all – the identification of the board members of the Federal Reserve which were largely life insurance executives, not bankers.

The connection between our monetary system and mortality treads on a number of toes which don’t like to be trodden. In light of that, I want to simply state that, in a fractional reserve system such as the one we have in place today, an unspoken element of the calculus stabilizing the flow of money to support the economic illusion is the actuarial tables of death. The more consumers rely on debt – for things ranging from housing to cars to clothing to entertainment – the more the system is dependent on keeping your actuarial death well managed. As I have written before, the centrality of insurance companies to our economy totally justifies the government’s ludicrous intervention to save AIG and others. Had they not kept the insurance industry and its counter-parties afloat, it would have been the whole economy, not just the insurance and banking sector that would have evaporated. And, what they did do didn’t solve the problem. It merely delayed the date with the Ghost of Christmas Future.

You see, the primary motivation for purchasing life insurance is to insure that, on your death your debt is discharged. Sold as a benefit to the grieving family, what this really is is a utility to support fractional reserve monetary dynamics. Your insurance policy allows you to release money into the system from beyond the grave. As your last consumptive act, before the worms get you, you serve a great fractional reserve purpose of redistributing money into circulation. Thank you for dying! In the image below, you can see that the largest growth in life insurance sales and use coincides with, you guessed it, the Fed...


Fractional reserve based monetary systems consume you with debt, indenture you for your “productive life” and then deeply appreciate your demise – particularly if you don’t draw too much on your pensions, thank you very much. I’m reminded of Dickens’ line for Scrooge in A Christmas Carol, that the poor should go ahead and die and “decrease the surplus population.”

So, let me be clear, I do not advocate using, being dependent on, or seeking to stabilize the current illusion of money. The system that we have is dead and its demise was wired into its birth. However, one need not throw the baby out with the bath water. Just because we don’t have a monetary system that works for all doesn’t mean that such a thing is impossible. It’s just impossible with the system currently in place.

Integrally Accounted money looks and acts differently and engenders different responses in its users. It has several key elements:

- It represents an obligation of counterparties to honor commitments
- It represents a recognition that time, materials, or services, in the moment, are inadequate to fully satisfy a value exchange so that future performance or satisfaction is required
- It represents a present subscription to participate in future fruitful production
- It represents a means of transferring value in a logistically efficient manner
- Like energy, it only has “value” in its exchange and flow
- When hoarded or restricted, it represents a measure of isolation and detachment
- It is a utility, not an artifact of success.

A simple way to think about how to become more inclusive about money is to consider the last time you thought that you’d do something “good” if you had the money to do it.

When we stand in the impulse of imagination, desire, or creation and look for a singular resource (money) and then animate the same with the ability to arbitrate the merits of the imaginative, desirable or creative impulse (“If it gets funded then we can….”), we are creating a subordination of our highest form of humanity (creativity) to an inanimate artifact of exchange. The most insidious part of this is that in a fractional reserve monetary system, this means that we’re really subordinating our creative impulse to those who control “legal tender”. It is therefore, no surprise, that when we are challenging the incumbency created by controllers, they delight in hearing that our dependency is on the one utility over which they have absolute control.

If, however, at the same moment of individual or collective imagination, desire or creation we look to the ecosystem in which the impulse was borne and celebrate the existence of the abundance in that moment, we have the capacity to align the impulse to its temporal and spatial genesis and with the outcomes commensurate with the deployment of present resources. If our impulse is, “Well, all I have is creativity,” then great – use that to its fullest potential. If it is “All I have is contacts,” then great – honor those and invite them into completing the first step. In short, by fully embracing the creative impulse to act and then acting in the abundance of the moment, the energy flow will begin which will take the effort in a manifestation path – at the manifestation scale – appropriate to the moment. Outcomes are measured simply by the following assessment – “Did I align all that over which I have stewardship to the impulse?” If yes and that’s the end – wonderful. No regrets. If the impulse needs other provisioning, great, those will manifest into the system in a form and time appropriate to the ecosystem. Taking account and stock of the present abundance and exercising stewardship over the same is an equipping test. If we honor the present abundance and steward it to its fullest extent, there can be no “failure” as one will have done all in their power to do.

There would be those who would advocate that we simply exclude money because the system associated with its current incarnation is too corrupt to redeem the word. To that argument I would simply encourage a more awakened perspective. Money isn’t the problem – our complicity with an illusory fractional reserve monetary system and the abuse it has wrought on our ecosystem and fellow humanity is. Practice developing alternatives – currency, vouchers, IOUs, and other utilities of exchange and see how easy a world with Integrally Accounted money can emerge. And ironically, you don’t need a monopolist-in-chief turned Ponzi-schemer-in-chief to make it work. None of us do. Including him.


  1. I salute the work you're doing and wish you every success. Money may be observed as having three functions, UOM SOV and MOE. It seems, we need to diminish the Store of Value function and improve the efficiency of the Medium of Exchange. Of course it's impossible to dislodge existing beneficiaries and any new system would have to be completely decentralized to participants, P2P serverless, independent of any chokepoints and based on absolutely hard encryption. Anything less is Walter Mitty, Don Quixote, I'm afraid.

  2. "The most insidious part of this is that in a fractional reserve monetary system, this means that we’re really subordinating our creative impulse to those who control 'legal tender'"

    Well said! It's about time we start to open up to alternatives to our fractional reserve currency system. It's tiresome to observe the ongoing pathologies in the corporate space associated with a system that necessitates such hard lined focus on shareholder profit at the expense of everything else.

    Conscious Capitalism is a noble new shoot in the tree of progress yet still exists within the confines of our antiquated money system...

    How about a new monetary system that benefits companies who attempt to widen their sphere of Good? A new form of profit that rewards the enrichment of the employee, the community and the world at large?

  3. David, the "beautiful event that is shaping up" and that has been unleashed, the "Gennie" that has escaped from the bottle (and it is not coming back), the "storm" that has been unleashed with the Winds from the Aiolos Reserves having escaped, is due to the otherwise unthinkable - until recently - event that the "incumbency" (otherwise affectionately referred to as "monsters" in our conversations) never thought possible, never thought could or would ever happen, as they were so intoxicated with their own invincibility..(remember what happened to the monster otherwise known as "Cyclop the Polyfimous" some 8000 years ago and what the otherwise diminutive man by the name of Ulysses did to him, when the Cyclop was so intoxicated with his own invincibility - which Ulysses purposely fed - and thereafter "gouged" his "all seeing eye" from its socket), so as to completely disregard the "most powerful force in the Universe" (that of the Human Force & Human Ingenuity as you have correctly named), and, for that we are so grateful, as "the reverse countdown to their demise" has already started for them, and their own intoxication has become a boomerang and it has come back to hit them with incredible force"..and I am most honoured to be a soldier in the "boomerang force".

  4. The beautiful reality is that everything is in place to switch from a World of war and want, instantaneously, to a World of Peace and prosperity. All you have to do is, with one stroke, not use money. All banks could monitor resources on a credit card totting up system to limit waist and abuse of the contributor system, whereby everywhere in the World could go to full production with all the raw materials supplied freely by God. There will be free for all shopping and those who want to contribute expertise and time will be welcome. Those who don't want to contribute don't have to, as technology will take over most of the tasks of manual labour.
    Real education, enlightenment of the masses, or a DNA lifting of the veil is required for this to be put in place. I don't think we will have much longer, but remember that things usually get worse before they get better. Bill...

  5. David, Leland pointed me to your work, and I also like what I find here. I'm a physicist of natural systems, who has studied in some depth how the physical processes of self-organizing growth systems work, as part of my general study of the world of eventful individual open environment systems.

    I'm a little more accustomed to concise descriptions, so I'm looking for may be included in your thinking but just not stated, but you seem to be missing the fundamental principle of change in complex system development. An economic growth system has to start the one self-investment strategy and finish its growth with another. It's actually a direct implication of the conservation of energy, that starting and maturing a system are by fundamentally different processes.

    That takes place by a change in how the resource used for self-investment (profits) is allocated, altering the system from one that expands by consuming its host ever more rapidly, to one that relieves itself of the need to grow and joins its host as a partner. I've written lots about it. Perhaps we think alike that you wouldn't need much help understanding it. I'd really like to get our approaches coordinated, though, to expand the team on this and have a language for it that can be used more widely.

    My version of Integral Accounting can be seen in two of my recently proposed commons based institutions:


Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave