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This video will be about money.
But before this video starts - yes, I know it has just started - I want to say: what follows is not a scientific work, nor should it appear to be. It is my personal, non-scientific research, born out of curiosity about what is actually going on in this world. And I want to share these thoughts here. It’s a very complex subject, and you could go into much more detail after each sentence and end on pretty much everything that affects our world. Because it’s a topic that affects everything. I will try to paint a picture as simple as possible here. Knowing that it’s way too big to see all the way through, or put into a twenty minute video. But simplifications are also important to be able to understand things and structures at all.
So here we go!
The year is 2021, and we have been in the midst of a global pandemic for the past year. In order to avert an economic crisis, central banks are granting billions in loans so that countries can compensate for wage shortfalls, but also to be able to rescue companies that have stumbled. The vast amounts of money that are currently being spent in all directions led me to ask the question: how does this work? And what are the consequences? Will there be any consequences at all? Or will everything stay the way it is? Because if that were the case, it would mean that money works differently today than it once did.
Has the idea of money changed, in a world that is changing a lot? What is the idea of money anyway? It’s everywhere, determining the course of everyone’s life. And at the same time, it’s just an idea. An idea that we all rely on. What that idea is, and how that idea is changing, or should change, is what I want to explore in this video.
I will skip the history of the origin of money here. There is a lot of information about this elsewhere.
I want to focus here on the change in the idea of money in times of capitalism.
The ideal image of money in times of capitalism goes as follows:
A company manufactures a product. For this, the company hires workers. These provide their life time and life energy to work in a factory. In return, the workers receive a salary. The manufactured product is sold. The buyers of the product are again workers and can buy the product with the money they have earned from their work. This ideally creates a money cycle. However, most of the money earned from the sale goes as profit to the company that hires the workers. This means, of course, that here already the cycle does not quite work, because more and more money is siphoned off. That’s why capitalism has the ideology of growth. But that’s another topic, which would require a separate video. Just this much about it: the idea of infinite growth - most people agree on this - cannot work in the long term.
Just a quick side note, because I have only talked about industrial production so far: In the so-called developed countries, there has been talk for decades that these would transform into service societies, because industry has been largely outsourced to so-called low-wage countries and most people in so-called developed countries work in the service industry. So they are not involved in the production of physical goods, but provide intangible services. Nevertheless, the physical industry still plays a big role even in the so-called developed countries. However, I will exclude the service industry here and limit myself to the comparison between industrial production and digital production. Firstly, for the sake of simplicity, and secondly, because I believe that these are the more relevant areas of money generation globally. However, the service industry is of course also strongly affected by the digital transformation. Here, too, professions are gradually disappearing because they are being replaced by digital services.
But back to the topic. In the increasingly digitalizing and automating world, a dysbalance arises in this logic that I have just described, even if you start from its ideal image. In the virtual world of software and the Internet, neither labor nor physical material is needed to duplicate goods and provide services. Code, once written, can be infinitely duplicated.
It is true that software and Internet services are renewed and maintained through updates, and resources are also required for the digital infrastructure. However, this is not comparable to manufacturing a physical product individually from scratch. There is an infinitely bigger scaling. In the physical industrial world, physical material is still needed, through increasing automation, but less and less labor. Automated processes in factories are replacing more and more human labor.
This can be seen in a positive light, since people can certainly use their time and energy for nicer things than working in factories. But there have to be structural changes in the whole idea of money. But I will come to that at the end of this video.
First of all, back to the software, which I want to focus on here. It gets even more blatant when you no longer buy software but rent it, which is becoming more and more the norm. Popular examples of this are Adobe with Creative Cloud or Microsoft with Office. As soon as you stop paying the monthly fee, you can no longer use the product. This makes the dichotomy between tangible and intangible even bigger. A product that is infinitely versatile has to be bought anew every month, while physical products, which require labor and material each time, are usually owned forever.
(If you disregard planned obsolescence, but that would be again a topic for another video)
This leads to the situation that while in the immaterial economy money is abundant, in the physical economy every penny is fought for, due to the paradigm of profit maximization with largely exploitative labor at every level from the extraction of raw materials, to the manufacture of the products, to the distribution and finally the sale of the goods.
In the case of physical goods, in addition to the value-added tax, which ideally also takes place when digital goods are sold, the revenue from the sale of a product must be distributed among many parties. In the end, only pennies arrive at some parties. Which mainly affects the so-called low-wage countries where the products are assembled and where the raw materials are extracted. The majority of the profit, in turn, goes to the company whose brand name is on the product.
By the way, these companies whose brand name is on the products are usually not hardware companies at all. Of course, they also rely on hardware. However, the production of this is outsourced.
They commission other manufacturers to produce the devices they have designed. In this way, they too free themselves from the burdensome limitations of the material by transferring this burden to others and therefore have an unsurpassable advantage over them, which gives them virtually limitless money and, as a result, power. So here too, as with software, a company produces only a virtual idea that is materialized by others. Most of the money, however, goes to the producer of the idea. So there is also a direct exploitation relationship between material and immaterial economy.
Thus, a great dichotomy opens up between two worlds in which the values of money vary considerably.
But that is not all. There is a second area, related to this one, in which there is a great dichotomy between monetary values. But for that, I have to take a step back.
With the realization that much earlier there was a significant change in what money is: until the 70s, the concept of money was that there was only a limited amount of money whose value was linked to gold. Also, banks were not allowed to lend all the money they managed, but had to hold reserves as collateral. Which makes sense, because it prevented too much money from being on the market, which would lower the value of money. But back in the seventies, both the linking of money to gold and the regulation of lending were removed. A bank could from now on lend 100% of the money that was in an account. This leads to a debt spiral. This is because the money that the bank lends out is again in another account and can be lent out again at one hundred percent. Each of these lending processes is a de facto doubling of money, since the money is now available in two accounts. And this process continues uninterrupted. As a result, almost one hundred percent of the money in the world today is debt-based.
What this means in the final analysis is that money no longer has any countervalue Today, money is purely virtual. It is theoretically available in unlimited quantities.
Which also explains how the massive monetary disbursements by central banks during the 2008 banking crisis, after Lehman Brothers went bust, and now, during the Covid 19 pandemic are possible.
This leads me to 2 naive questions. One: If money is unlimited, why does it not reach the people? And where does it arrive? And second, according to the old laws of money, shouldn’t there be a massive inflation when so much new money is thrown into the market? Because when more money is in circulation, the market should automatically adjust and prices rise accordingly. But it seems like, on the whole, not much has happened. There don’t seem to be any price explosions in normal life. How can this be? Does this confirm the hypothesis that the idea of money linked to labor and material value has already moved elsewhere? The answer is: in a way, yes. Because, as just described, the linkage of money to an equivalent value was broken some time ago. But in another way, no, because we still live in a world that nevertheless tries to hold on to the old idea. And the lack of inflation I just talked about is an illusion: because inflation did and does take place. What we can observe is a partial inflation. An inflation that does not take place everywhere at the same time, but only in parts of the economy. And inflation takes place precisely where the bulk of the new money ends up. The money ends up with people who can afford to reinvest the money, and they invest it where it can multiply best: in the stock market and the real estate market. So the money doesn’t even get to the real world. And stocks and the real estate market go through the roof.
This explains absurdly overvalued companies, some of which have never made a profit and are worth billions. Originally, the share value of a company was supposed to reflect its “actual value”.
And it also explains the ever-increasing real estate and rental prices:
The real estate market is also a perfect money multiplication machine. You can, almost without contributing anything, generate money virtually forever - from people who are dependent on housing. Meanwhile, the value of the building increases just as continuously because so much money flows into the real estate market that inflation takes place there. Which is why many buildings in cities simply stand empty and serve only as investments, without having to deal with troublesome tenants. So the newly printed money ends up with people who can afford to invest the money. And they invest it, of course, in areas where is the greatest chance that it will multiply. Thus, a partial inflation takes place there, which never or only later affects the rest of the world. This phenomenon of partial inflation is also known as the Cantillon Effect. The fact that this inflation does not yet take place in the rest of the world does not mean that it has no consequences in the rest of the world - in the real world. The most direct consequence is the explosion in rent prices, which pretty much everyone suffers from. But inflation in the stock market also has significant consequences: The money that is worth virtually nothing in the stock market due to inflation is still worth as much in the rest of the world as it was before. The billions of Eurodollars that are a few cents in the stock market because of the inflation taking place there still mean billions of Eurodollars in the real world. And this leads to an enormous power imbalance between these worlds, especially since the real world, financial dimensions aside, is actually much larger, involving many more people. A power imbalance that is getting larger and larger and seems to be more and more difficult to reverse, and which is further massively increased by the additional splitting of the world into a virtual and a material world described earlier. So there is not much left of the ideal image of money in times of capitalism described at the beginning. Apart from the fact that this ideal image was already an ideal image from the very beginning.
It is a mix of many factors and here in the video also only very roughly outlined, which makes the whole thing very complicated and the resulting problems seem unsolvable. But this feeling of powerlessness is very dangerous and must be overcome, because the feeling of powerlessness makes us inactive. And inaction leads to the fact that nothing changes structurally.
My initial thesis: has the idea of money changed? has not been directly confirmed, because no, we still live in a world with an old idea of money. But it doesn’t really work anymore, if it ever did. But the whole complex shows that we need a new idea of money, because the dynamics described here build up an inequality that cannot be
Apart from the fact that, also in view of human-caused climate change, we have to take a huge step away from an economy based on profit maximization to a sustainable economy. There are already some approaches that go in the right direction, such as an unconditional basic income, a robot tax, a digital tax or a financial transaction tax.
But what we basically need is more:
We need a new idea of money.
An idea of money that no longer is based on labor.
An idea of money that money only works when it is distributed fairly.
An idea of money that is not based on exploitation.
An idea of money that produces no super rich and no super poor.
An idea of money that also sees all these aspects globally in a globalized world.
That was my plea for a new idea of money. Finally, a small comment on cryptocurrencies, since these are often said over the last few years and especially now again, they are the future of money and with blockchain everything will be better.
I don’t see it that way. And also hope that cryptocurrencies have no future. In my opinion, the non-regulability of this money would only strengthen the dynamics just described. It would give free rein to speculation - the extreme price fluctuations in cryptocurrencies at the moment are already a small foretaste of this - and lead less to global redistribution and more to widening the gap between rich and poor. What we need is not a deregulation of money, but a regulation! From a politics that sees itself as politics again, and no longer in neoliberal thinking as a service provider or administrator. Politics should be there to prevent such things from happening, or now, after having stepped back over the past decades, to make sure that such things are undone
before it is entirely too late.
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NRW SOFORT HILFE 2020
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