Preparing for Global Bankruptcy (Part 2)

In Part 1 I stated that we will all have to take part in “the great rebalancing” as the world adapts to global insolvency.   The picture I am attempting to build describes the remapping of Values and priorities as the Western world gets to grips with the pressures which will either drive our “momentous leap” into second tier Values, or see us fall over that hurdle.  Clare Graves offered no guaranteed outcomes, describing three possible scenarios.  The first is failure and catastrophic regression, possibly as far as pre-industrial conditions.  The second is that we become stuck in the Red-Blue-Orange bands as society attempts to control the chaos using old thinking.  Only the third, in which we emerge into the Yellow sunshine was enticing.  Here said Graves, man “becomes truly a co-operative individual and ceases being a competitive one”.   Here mankind truly sees its interdependence and “uses the knowledge gained through his first-ladder trek in efforts to put his world together again, systematically”.

So that’s our challenge.   And in order to accomplish it, we will need to understand our money systems and our relationship with them in as much depth as we can.

If you listen to economic news you may recently have heard the Brazilian finance minster describe a global currency war, as countries devalue their currencies to drive export competitiveness.  Behind this, conscious or unconscious, is the recognition that the value of our money is not based on anything real.   The fight to survive is driving the value of money down.  When governments print money, they devalue the currency.   

Have you ever put something onto eBay that no-one wanted to buy?   I have.  That is when you discover something fundamental about the value of goods and the value of money.  If you own a house, your equity and your mortgage are based on a perceived value.   If the perception changes (i.e. no-one wants to buy your house) its financial value disappears.   As a shelter you may value it, but its money value has gone.   Likewise, if all the money in pockets and bank accounts vanishes tomorrow, the world will be left physically unchanged.   

In recent decades we have experienced material growth.  There is huge manufacturing capacity and we are supporting more people on the earth than we ever have.   That’s the good news.  But the bad news is that we grew paper money much faster, issuing massive debts based on a fantasy about the inevitability that growth would never stop.  The reason that a stock market slide is inevitable (see Part 1) is that our money is not worth what it was supposed to be worth and those debts cannot be repaid.  The perceptual bubble has burst.    Some people have their heads in the sand and refuse to recognise this.    But the evidence suggests that many major investors are pulling out their investments in the productive economy.   The amount of money lodged in the US Federal Reserve at very low interest returns has leapt in the past year from its historically steady $200 billion, to $1200 billion.   Others are trying to make money for as long as they can from a broken system, either cynically or out of the desperation that they don’t know what else they can do, and they will call for more money to be injected into the system by governments in order to postpone the inevitable.   We may all be addicts who will fight with the determination of the alcoholic whose gin bottle is being taken.    

We are dealing here with a very complex system.   It is globally interlocked, requires an ongoing balance between Blue Order, Orange material success and a Green social care which is deliverable in its current form only if there is Orange surplus to pay for it.   It also requires a balance between stakeholders including not only multiple countries and human beings, but encompassing the planet itself, where both resource availability and environmental considerations exert pressure.

You may be wondering by now if there is a way out of this gloomy scenario.   I believe there is, but it is not only systems that must change.   Humans will have to change their Values and their behaviours.   The slide may now be inevitable, but our survival and the speed of our recovery will depend on how quickly we can accomplish such a radical realignment. 

I am not an economist.  But in my recent journeys into economic life I have discovered that few economists truly understand the world of money and that there is little agreement to be found among them.  This is because they think that money is in some way real and not perceptual.  They think that by manipulating money you can change the underlying reality.  This thinking is what drove the massive “derivatives” fantasy and it has not ended with the crash.   Those of us aspiring to functional second-tier thinking will need to become literate about how money works, not just as a lower-right system but in our upper and lower-left personal and cultural thinking.   I will take this further in Part 3 of this series.

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