Sunday, August 4, 2013

Make It Simple

I have lost count of the number of people who have written to me after a blog post.  “David, please make it simple.  I have to read your blog with one eye on the screen and the other in a Thesaurus or on Wikipedia.”  I don’t know when we were taught to be intimidated by money in our society but I’m pretty sure that it was not accidental.  Create a system of indenture; co-opt every human endeavor within that system; and, use terminology embedded in small font and, voila, you’ve got slaves to the celebrated illusion of capitalism that has never been truly and transparently attempted on the planet.

I would suspect that the first encounter most of us had with money was the “responsibility” laced allowance in which parents paid children for doing basic household chores.  As early as the 1830’s, the Progressives encouraged parents to give their children money to teach “fiscal restraint” and “charity”.  Behaviorists advocated the habitual enticement in the form of allowances or pocket money to induce socially acceptable behavior.  In post-Depression America and post-War Britain, an estimated 50% or more of children of white collar workers received allowances while only 15% of their blue-collar or agriculture peers had any such experience.  Churches got in on the act by including charity collections in Sunday schools and children’s gatherings placing the expectation on children to be in a position to adopt the practice of tithing.  This religious tax, once meant for the sponsorship of clergy and relief funds, was long ago co-opted by the institutional patronage required to support real estate and corporate programs operating under the moniker of religion. 

Ironically, during this first introduction to money, none of us were told what money was.  We knew that it could be granted or withheld capriciously.  We knew that it was “important” and with it we must be “responsible”.  But these constructs were devoid of any explanation.  In adolescence, the idea of working for money was introduced – in same cases out of familial support and in some cases to enable greater autonomy of behavior.  With money, one could individuate:  go to the movies; get clothes that were more to one’s liking; gain status as a sustainer in a family; etc.  At no point was money explained.  And then, for many, the first sizable encounter with large sums of money came with education and with that education – debt.  Still no education!  No real knowledge of how monetary systems work (or not).  Just the certainty that, having been invited into debt, “getting a job” would be a necessity to become a responsible adult.  How’s that for insanity?  To get an education to get a good job, someone has to be indebted – student, parent, or society – for which an obligation of indenture is explicitly formed – get a job!  Besides being circular in its illogic, it’s no wonder that I could sit this week with a group of women in D.C. who, at mid-life, had little to no actual financial literacy despite being highly educated.  What they knew was that they needed money to sponsor their lives and their causes but they had no idea what they actually were asking for with that blind insistence. 

Make it simple, Dave!

O.K.  Most of you are wearing your chains modestly well but you are slaves!

As a “responsible adult” you buy life insurance.  Why?  So that your family can pay off your debts when you’re dead.  Really, that’s why most of you buy it.  And many Americans buy term life insurance (insurance that is only good while you’re paying premiums and accrues no terminal value).  In data collected by the National Association of Insurance Commissioners, in 2010 alone, $1.1 trillion in term life insurance was bound.  At the same time, $112 billion in credit life insurance was in force.  The average life insurance policy in the U.S. is about $160,000.  With funeral costs running about $8,500, this leaves the balance of benefit for, you guessed it, the debt you didn’t pay off in life.

As a “responsible adult” you invest in real estate.  O.K., kind of.  What you really do is attach your labor indenture to a contract that flows much of that money to the bank (oh, and did I mention that the bank required you to get credit insurance?).  By the time you pay off your mortgage – a diminishing prospect in the current refinancing regime – you will have paid more to the bank than the real estate was worth by as much as 150% (or more).  So who won? 

As a “responsible adult” you will put money into savings.  Your bank – not you – will have your money insured for their benefit through the much misunderstood FDIC scheme.  And you will be paid a fraction of what your bank will charge for the use of your money.  And when they use it, they don’t use it.  They use it ten times over.  That’s right, your dollar deposit gets to be used by others 10 times at the interest payment the bank imposes.  You get paid once.  They get paid 3-5 times what they pay you 10 times over.  Who won?

As a “responsible adult” you will donate money to charities and non-profits.  Good news here, right?  Well, let’s not get too excited.  About 39% of what you give for others actually goes to others – just not the “others” you thought you were helping.  It actually is going to administer the charity. 

Make it simple, Dave!

O.K. Between taxes (40%), credit-related fees (25%) assuming you’re living among the top 20% of fiscally responsible citizens, and “charity” (5%), your existence is a majority indenture to the interests of others.  And if you’re capable of using the remaining 30% wisely – for things like eating, being mobile, and communicating – you’ll put 5-10% into “investments” which, at the moment do not earn enough to make up for the management fees you’re being charged.  In short, this whole racket, from start to finish is a mess.  You’re in the middle of it.  And the system is structurally unstable meaning that, when central banks decide to stop flooding the market with money, you’ll run the risk of inflation (rapidly rising prices), increasing taxes (governments doing less service for more of your money), and highly volatile investment markets (think about the mid-June equity swoon when Ben Bernanke said he might relax the Federal Reserve’s intervention). 

Make it simple, Dave!

Here’s the little problem.  The simple part is that the current taxation-state, indebted government, indentured labor routine has effectively enslaved the populace across much of the planet.  The average informed citizen knows that they’re part of the predation but doesn’t want to confront that reality.  The majority of humanity is chasing the illusion of fiscal footing and, in so doing, doesn’t take any time to reflect on the structure that is in place to insure that they do not progress.  Even elite capital market professionals, when asked basic questions like: what is a derivative contract?; how is solvency of government sponsored enterprises truly calculated?; what is the real capital exposure measured by rating agencies and what does ‘investment grade’ actually mean?; can neither answer nor clearly articulate where they’d go to find the answer.  The hard part – the part that defies ‘making it simple’ – is the fierce defense of the system of predation mounted by humanity – the prey – when they are confronted with the fact that they’re enslaved.  And that one, that core Stockholm Syndrome paradox, is the one that defies simplicity. 

These posts are simple.  They are direct.  And they’re not written in cartoon or Crayon.  That’s because you, the reader, are intelligent.  Co-opted, exhausted, but intelligent.  And with any luck, you’ll make the simple choice.  To continue to be more informed.  And with that information, choose to disengage from the utilities of your indenture. 


  1. Great article, David....hitting the nails on the heads with this one.

    Personally, I went to biz school & ultimately became a CPA after majoring in American Studies in undergrad because I wanted to understand, fundamentally, what money was & how it worked within micro-economic systems. I found it a fascinating course of study.

    When I came out into the working world and had the mindshare freed up from school to begin studying the broader economy [more out of intellectual & existential curiosity than any professional interest, per se], I was seeing incongruencies with the way money systems within micro-economic systems worked & were evaluated and the way macro-economic systems worked & were evaluated. The incongruencies were at first compelling to me, then puzzling. I knew there must be some reasons/motivations underlying the incongruencies.

    Then I dove back into reflecting upon & processing how the money systems were structured & working within the micro-economic systems and was seeing incongruencies between those systems & structures and natural systems & structures.....characterizing "human beings" as "expenses" on the income statement, for example, while characterizing "plant & equipment" as "assets" on the balance sheet.

    As you well know & guide, how inputs are characterized in the reporting impacts evaluation of "success"/"performance" and, consequently, ends up driving decision-making and behavior. One simply can not understate the significance of how the characterization of economic inputs & factors within financial reporting shapes the nature of perceptions, decision-making, behavior and, ultimately, in turn, macro-systemic & ecosystemic outcomes.

    This significance was not fully seen & appreciated by those who originally designed the systems & made "the rules" as contextual restraints were not only not pressing, they seemed, perhaps, irrelevant. The designers' primary interests were fostering systems with centralized decision-making structures, protecting property rights, maintaining social order, etc. These weren't/aren't necessarily irrelevant or unworthy interests or objectives, however, the explosive population growth, the increasing interdependent nature of our reality given resource constraints and technological innovations, and the huge efficiency gains from technological innovation that have reduced necessity/demand for physical labor, substantially, are new factors existing financial reporting & operating systems don't "factor in". The result is decision-making & behavior incentivized by reporting that doesn't take these significant factors into account.

    When I started unfolding into some of these realizations I began thinking...."uh-oh.....we could be in trouble, here". This "Thing" (i.e., meaning, the "whole-kit-&-kaboodle") is not set up to "Win".

    That informal endeavor of study for me began back in 2005 - 6 and culminated in '08 - '09 as everything began unraveling at the seams.

    The degree to which one understands & appreciates how human-made systems & structures must be designed & modeled after "successful" (i.e., "co-creative") natural systems in order to realize similar contextually "co-creative success" is the degree to which one can clearly see how off track we (i.e., our present systems & structures) actually are.

    And yet, as you suggest in the article, most folks have yet to go that deep in their study & fuller understanding & awareness regarding how our present financial systems are designed and how they "work" -- or more aptly put, how they are designed to "not work". Many continue to keep their awareness at the level of "simply needing money" which is a very limited level of awareness & understanding which, in essence, is no longer sustainable.


  2. continued…Part 2 of 2

    And I'm glad you came out and said it -- this goes for "financial professionals", as well. It's extraordinary to me and downright FRIGHTENING, in many respects! We're really unfolding towards a pretty sobering moment of Truth, I feel, at some point. When we unfold into the moment of Truth, exactly, is challenging to predict. It could be within years, it could be longer. It seems imminent, though, and the nature of how we unfold into it could be 'more proactive' in nature or more cataclysmic in nature based on the number of folks choosing to wake up to & honor the Truth prior to the event. The degree to which the resistance to, and denial of, the Truths universal feedback is signaling us to face is the degree to which the event will be systemically crippling [or worse] and painful [or worse] for more individuals.

    Personally, I feel it would be best for us, collectively, as a species, to proactively invite in this moment of Truth rather than have it thrust upon us by market breakdown. I'd much prefer we simply "get real" and openly look at what we've designed, here, and face up to the realities that it's simply no longer relevant or sustainable.

    It served, as you suggested, as kind of a 'proprietarian capitalistic' system that has been "effective" the last couple centuries at stimulating some profound "leaps-&-bounds" innovation & materialist evolution, hwvr, it seems clear we've reached a point, multidimensionally & contextually, where we're being called to put the brakes on all this sooner rather than later, face this moment of Truth, and work together across the planet to redesign our macro- & micro economic systems & structures to be in greater congruency with the ecosystemic contexts that provide for our being in the first place : )

    I gather this is the work you do and I commend you for it, and I appreciate reading these Inverted Alchemy pieces. I particularly appreciated this one because I feel it hits on the most relevantly pressing issue of the time....."chronic, indoctrinated financial illiteracy".....and not just illiteracy within the general public, but within the financial professions, themselves. It's an "Emperor's Clothes" [un]reality and very few are shining a light on it as constructively as you are, in my opinion.

    There are a lot of blamers & haters & "truthers" & doomsayers out there, and what I find refreshing about you & your approach is the realism integrated with genuine enthusiasm & optimism for what is, indeed, "possible"....the design of financial systems aligned with natural systems that will, through their design, optimally unleash human ingenuity & creativity in ways that authentically enhance & enrich the human experience for everyone, rather than degrade it as it's presently doing. That's, at least, how I interpret what you're putting forth through your work.

    Sorry for the long 2-part comment.....just felt inspired by your article. Peace & continued success on all levels & fronts!

  3. Brilliant David – very clearly put! Humans don’t appreciate money just as fish don’t appreciate water. I see money as a battery – it was never intended to be the primary value in itself, only as a device to enable energy transfer. So we cannot use the money artefact as the value in itself – we need to look deeper to identify the real value sources!
    Peter Hojgaard-Olsen

  4. This is a very compelling article Dave. I look forward to realizing new ways of distancing myself from the machine.


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