Where Did the Money Go? Part the Second

Now that there are some general statements made about how the system works, we can analyze a couple points that should be evident as problematic.

Continuing with the assumption that spending is the proper function of money, then an obvious problem would be the opposite: hoarding. The refusal to use money robs the Economy of all the activity that money would produce. It cannot be loaned out and no longer circulates. This can also be recognized as “extracting money from the system”. The term extractive processes has become more widely used in recent decades, but typically gets ascribed to industries like mining, forestry, oil & gas drilling, fishing, and even farming. When it comes to the economy itself, or the practice of draining money from circulation into private coffers, it has not been invoked. However, the extreme disparity of “wealth” using terms like “the 1%” are fairly common nowadays. What if even this framework does not adequately contextualize the problem? Here lies the central question prompting this pair of posts. To continue, there are 2 main culprits to address when it comes to extraction from the economy: the obvious and the obscure. The first, which gets attention, is tax havens, off-shore accounts, and generally "mattress money". This is why stories like the Panama Papers are important, but only partly the answer. Certainly, if money is not declared for tax purposes, there are additional issues with that. But for discussion here, the point is the removal from circulation and how that decreases what is possible for others when a single entity stuffs its own "mattress".

Now, for the second and more difficult to spot, issue: separate economies. This may conjure up thoughts of crypto-currency, but that is not what is intended. Here, we must consider another way that money is stripped from the shared or standard economy. One way to begin to picture it that many are already aware of is criminal activity. Mostly conducted with cash, this is often activity which happens along-side rather than with the general economy. Once money is spent on illegal drugs, guns, or other business, that cash has to be processed in order to rejoin the regular economy. This is called money laundering, and indicates that the criminal and regular economies are not entirely separated. A closer example would be "globalization" and the system beforehand. While this is a series of agreements, treaties, and laws which allow businesses to operate more easily across borders, many people see it as just a way for business to move away from their own area. This means that whatever money the business or worker was paid gets taken (or extracted) from that local area. Before globalization, many places did have separate economies; the spending in one town or country did not effect others. However, as many economic crises in preceding centuries indicate, the world was not entirely insulated. With these examples, we can appreciate the intended “second” factor mentioned above. In this case, it is something which operates alongside the regular economy, but has little impact on everyday persons. This would be the economy of the wealthy, whereby those individuals have created a separate pool of expenses and purchases. When it comes to entire office buildings, “super-yachts”, luxury items (cars, watches, clothes, etc.), or personal staff, the amount of money involved is absurd from a typical person’s perspective. Beyond that, however, is the fact of how much of this money is never seen in the typical person’s economy. Here is meant not the amount, but the actual dollars. Measured in millions of dollars, once this money is spent, it does not make its way back to Jane and Joe Taxpayer. These high-end items are produced, sold, and maintained by a group of people who are also wealthy (not the actual technicians, but owners of the companies, of course). The neighborhood mechanic is not working on a Bugatti; Bezo’s super-yacht is not moored down at the public dock. This is the separate economy mentioned before, the place money goes when collected by those rich individuals. Even when it is not in a tax haven, it still does little to benefit the regular Economy the rest of us deal with. It’s counted by someone, and included into the overall economy, but does it really—actually—count? If it never circulates back into the hands of a regular person who spends it at the corner market, does it really circulate? A bit like a tree in a forest that falls when no one is around, does it make a sound?

In addition to the embedded links, the citation below is a useful source of some of the information used herein.

 Robbins, R. H., & Dowty, R. (2022). Global problems and the culture of Capitalism. Langara College.

 

Where Did the Money Go? Part the First

This pair of posts will highlight some assumptions about and practices with money in order to challenge them.


At a basic level, most people recognize that money is a token representing some amount of effort—people work to “earn” money which is then used to purchase things the ‘worker’ desires; this also means that, as a token, money is meant to be spent. [The word “earn” is loaded with connotations about “worth”, “deserving”, and how society values different professions. While this post will not get into those weeds, it is important to recognize such beliefs as a part of the system.] In part, this means money does not drop from the sky, it always comes from an entity or person. The money you have came from someone who got it from someone else who got it from someone else, ad absurdum. The point being, it does not stay still. The purpose of a token is to be used, since tokens are exchanged for something else. For example, money has no use as food, but can be traded for food. Additionally, because its function is to obtain other items, it is not serving this purpose when hoarded. Of course, someone from a poor background will object that any unspent money must be safeguarded, and rightly so. There is an unceasing need for those savings to be used at a moment's notice, often for essentials. Generally, in such circumstances, it is held against need using the "hiding it in a mattress" method; the mattress is unimportant, as the expression only indicates someplace “secure” enough and easily accessible. Because people who are poor have short and urgent timeframes, this ‘saving’ is insignificant from the viewpoint of economics, as it will be back in circulation soon enough. Once again, the morality of people being made to live in these circumstances must be a separate discussion, despite the need to bring such underlying issues to the surface. The reason for stressing the point about spending is because “saving money” is treated as though it is a positive accomplishment, as well as demonizing those who spend. However, it is possible that this is backwards, and mere marketing. Hoarding tokens serves no purpose but bolstering the ego of the hoarder, after all.

Next we will briefly differentiate the personal from the business activity of economics. Basically, gaining possession of something with the intent to sell it is a business activity rather than a personal one. In keeping with the notion of money as a token, we can use event tickets for our example. Ticket scalpers can give a general sense of how the personal differs from business activity. A person will buy a ticket to attend the event, whereas a scalper has no interest in the event and only wants to profit from the ticket. Money is like those tickets, meant to provide the holder with something the person wants. One major difference is that money is infinitely transferable. Once the money is spent, its purpose is served for that person, and it becomes ready for the next person to use. This also fits with the idea that it is meant to “circulate”, a word to describe spending or making money available to the next person. One thing to note is that while the Economy is reported as Gross Domestic Product (GDP), approximately two-thirds (66%) of this is spending! It is not trivial to focus on the circulation of money as an important part of economics. Finally, we can briefly consider using extra money to invest for profit. It turns out that much of the banking system works to ensure money is available for use through lending. For example, banks do not just lock up everyone's money in a vault and wait for them to come claim it. There is a certain amount that any bank is required by law to "hold in reserve" and make available to customers. The rest is used to lend out, as lines of credit and loans for business, homes, et cetera. Additionally, there are private investors (such as "private equity firms") whose entire business is lending money. This all continues the circulation of money while it is understood that the ‘investor’ (lender of the money) is owed the initial amount plus some extra from the ‘borrower’, or person receiving the money. This is the ‘profit’ of investing, oftentimes based on an interest rate agreed-upon beforehand. The Federal Reserve controls interest rates on most loans with the goal of encouraging or discouraging borrowing, depending on their read of which will maintain stability more effectively. This same federal system supports investors to feel confident in loaning out that money with laws around default on loans, collections, bankruptcy, and such. Not all loans go to individuals, of course. Much of investing has to do with lending money to businesses. Because of this, it is accepted practice that businesses publish accounts of their finances for review, which allows investors to determine the risk of lending money to these companies. All these safeguards create more stability throughout the economic system. This also means that, generally, there are records of where money goes and what is done with it. A few years ago the Panama Papers lent greater context to the importance of this transparency.

In addition to the embedded links, the citation below is a useful source of some of the information used herein.


Bowles, S., Edwards, R., & Roosevelt, F. (2018). Understanding capitalism : competition, command, and change. Oxford University Press.

Thinking with Magic

What could be the harm of "magical thinking"? To ensure understanding of the topic, I will briefly give a definition, some context, and then describe what I see as the heart of our current predicament. First, "magical thinking" is simply a natural tendency for humans to ascribe supernatural causes to events. It can be referred to as "superstitious thinking" as well, because it is often found in beliefs about doing something to ward off unwanted consequences, despite having nothing to do with the situation. It is "natural" because it is an ordinary part of childhood development; most of us could likely recall early attempts to make sense of the world with very little accurate information. A few examples: when a child assumes that wearing a particular pair of socks causes rain to fall, a sports player believes a special ritual assures their success, or someone thinks a prayer sufficient to achieve a desired outcome. What separates this from an error is both its persistence and resistance to logic. It becomes a refusal to acknowledge reality—to the point of actively rejecting it by persisting in the belief despite clear contrary evidence. This gives some sense of problems which can arise.

Allowing outdated notions like miasma or 'evil spirits' causing illness, ridiculous ideas like a 'flat earth' or 'ancient aliens', and just wrong beliefs like 'young Earth' or Geocentrism to thrive does more than frustrate scientists. If everyone knew that such ideas had no value or basis in reality, likely there would be no need to comment. Discussing such absurd ideas would be understood as satire, or something equally innocuous, and dismissed after the laughter faded. Many people have personal "theories", odd interests, or frivolous beliefs. Many do no harm such as "hunting Bigfoot", "studying" UFO/UAPs", or "positive thinking"—as long as they are relegated to humorous aside. When a person becomes serious about such a topic, to the point of insisting others are wrong or ignorant, problems arise. Much like addiction, where the problem is not the substance but the person's inability to exert control, the problem is not unexplained phenomena—rather it is the person's lack of boundaries or perspective. It is an inability to accurately evaluate any information that becomes truly problematic, and not just to the person believing the nonsense.

Something like the 'tolerance of intolerance' paradox, whereby intolerance ascends through forbearance, we are seeing ignorance become mainstream. While many have dismissed the "silly"or "harmless" nonsense that some espouse, this lack of critical thinking and "bullshit detection" is increasing illness and leading to deaths. Inability to recognize basic facts about vaccination has prompted a larger percentage of population in the U.S. (and elsewhere) to avoid vaccines so that public health risks are increasing, including a resurgence of dangerous diseases. Further, suspicion of any public health recommendations lead to increased deaths during the CoVID-19 pandemic. The allowance of outlandish ideas can blur the lines between "tolerance" and "enabling" by not acting to stop the harm they create.

Beyond this, there is a larger or more serious problem: the erosion of consensus reality and decision-making. Frivolous or ridiculous ideas become weapons once they are widespread enough to erode public debate or take time away from serious issues. If dealing with nonsense takes up time which could be spent actually solving problems or discussing real concerns, society is harmed. The time lost to dragging the debate away from absurd distractions uses up the patience of audience and participants. This is likely part of the "win" for contrarians, as attention or disruption feeds their agenda/ego. Additionally, delay allows those who benefit from the status quo to continue their activities for as long as progress is hindered.

Finally, where there existed one single group who could communicate easily and agreed on a majority of implicit and important topics, there now exists multiple groups whose identities are in conflict. It is easy to understand that arguing opinion or objective information is much easier than feeling attacked or having one's identity threatened. If one were incorrect about who won the 1983 World Series—even as passionate as sports fans can be—once the information is corroborated, the wrong person can pay the bet and correct their mistaken memory. However, arguing over subjective information and about identity is often an intractable dilemma. Many can easily think of how it feels to be insulted, and how no productive conversation happens afterward. This can be what happens when the discussion includes those nonsensical beliefs: it is not about the content or information involved, but about who the person is. This can be reinforced by an insidious change that takes place when lost people find community in fringe-belief groups: their loneliness and sense of rejection is healed by having comrades who support their unnatural opinions. This salvation is conditional, of course, and loyalty to the group must be repeatedly demonstrated to "belong". This creates a situation where a person's sense of belonging and identity is dependent upon the group. Many will do terrible things rather than lose their community. Contemporary complaints about men falling into toxicity is this same pipeline, as are many religious/spiritual groups; this is an aside, however, and should be dealt with separately. For this discussion, the focus is how identity can be threatened by accurate information and how that makes discourse impossible. So, rather than simply "correcting someone's mistaken information" by challenging the existence of Bigfoot or aliens, one can be 'attacking' another's identity. This is the problem of discussing basic information about the world when it contradicts someone who is out of touch with reality.

In the end, there is no problem with not knowing or having incorrect information. We can learn, we can grow as individuals and change opinions, and we can even correct our worldview. However, this takes a willingness that is challenging for many. The focus on arguing over the information involved is almost a distraction from the deeper issue of inability to evaluate information. However we proceed, it is important to recognize the component of identity and how it has been weaponized to prevent conversation. I hope that this post has illuminated some of the trouble we face, and that it is not too late to correct.

The True Purpose of Philosophy

    Given the current state of things, I was impelled to expand on the topic. I was brought up with a fairly common attitude (I judge) about Philosophy, what it is, what it does, and what it is for. Essentially, the belief is that Philosophy is for stuffy old men who have no real-world skills and it exists within a closed system—a bit like a snake eating its own tail—passing itself as science. This leads to a number of outcomes: it discourages any respect or appreciation for Philosophy, disconnects it from "the real world", discounts anything associated with it, makes the pursuit of, or ever interest in, Philosophy "silly", and undermines the contributions it has made to society and the world. I had minimal exposure, as I think is common, in my education and it mainly left me with the impression that it was something that happened 'long ago and far away'. Words like "ancient" and "lofty" would come to mind if I had been asked to describe Philosophy. Now, this may seem backwards or absurd to those who had any kind of broad education (as I expect most often happens outside the U.S.). I understand if that is the case, but want to be clear that even if this is not universal within my country of residence, it is common enough. In part, I make the point for outsiders looking at the U.S., potentially wondering why so many clearly incorrect beliefs and so much false information continues to make the rounds. In part, at least, I can attribute it to a lack of critical thinking skills because of the above attitudes about Philosophy.

    We come now to the reason and title of this post. If Philosophy is not just an erudite, ego-stroking, idealistic pursuit of useless nonsense, what is it? In actuality, it is a means to determine truth despite being flawed humans. This is my own simplistic way of explaining, of course, but I came to understand the value of Philosophy once I began to study Psychology and Neurobiology. We learn that human brains are not actually "thinking machines", but are error-riddled assumption devices. There are numerous popular books nowadays which explain that our perceptions are filtered through expectations, our brains manipulate sensory information to make "sense" of reality, and we can be completely convinced within our own thinking of something that is patently false. In fact, all these things happen within every individual everywhere all the time every day. We are not "observing" reality, we are actually "interpreting" the world around us. Once we understand this, it behooves us to find ways to correct for these automatic, internal processes and potentially construct ways to counteract the errors they create. This is, in effect, the basis of Philosophy: to check the things we think in order to error-correct the innate ways our brains process information.

    Let us take a couple practical examples, because there are certainly more esoteric areas. On first exposure to Logic, it can look like a collection of silly "if, then" statements. However, it is a part of Philosophy dealing with how to establish if something holds true and if the steps in arriving at a conclusion actually make sense. Recognizing this, it begins to have more utility to everyone. Next, Epistemology is a big, unwieldy word that seems to bear no resemblance to any other (again, a simplistic excuse to dismiss it). In actuality, it deals with establishing how we know what we know. Quite fundamental, and useful, one might begin to think. Instead of assuming the factual nature of whatever pops into our consciousness, we can interrogate this idea and establish if it does agree with reality. The way that philosophers approach and use this system is part of what makes it rigorous, along with actually making it the basis for much science—in addition to a science unto itself.

Hopefully, this is helpful in some way, and possibly can demonstrate to others who still hold the attitude I did previously how important and practical Philosophy can be. Instead of relegating it to history or uselessness, as it seems happens with most of the education around this topic in the U.S., we might better integrate this into our curriculum. In many ways, it is an oddity that this has not happened already. I do not need to attribute this to any sort of nefarious conspiracy, but it does seem to aid in making fools and dupes out of the citizenry.

Art of the Handshake Deal

It is understandable why one would trust another person when making a deal, as there has to be a certain amount of understanding between the parties. Yet, the expectation is also that there are limits to this trust. Simply taking the word of a stranger that there is a warranty, payments can be missed with no consequences, or even that the item is returnable for a full refund may not be the case, unless there is a written document saying so. The laws about sales, consumer protections, and faulty or misrepresented items can vary greatly from place to place. Especially nowadays, with so much being bought online, and no opportunity to inspect merchandise, the old adage holds true.

However, here we are considering the more traditional scenario of buying something directly from another person. Sales are often in this mode, we agree to something verbally and then sign a document that is supposed to say the same—did you check that? Or a rental agreement, there's the "official" document, and then what the clerk says the rules are—which do you assume is true? These answers will vary, but one thing that can determine whether one trusts the person or the document more is the size of a person's hometown. There are still small towns where people actually have regular contact and their reputations are important. In these places, it is common for a deal to not be written because it is the full weight of the community which is enforcing the terms. This is because if the two parties have a difficulty in resolving any issue that results from dissatisfaction in their deal, the 'injured party' will tell people about it; family, friends, neighbors, and eventually the whole town gets the message that "so-and-so is a crooked dealer". That reputation becomes a real barrier to their life, because others will treat them with suspicion and disdain; they may be a few dollars richer in the short-term, but they lose the chance at future enrichment. This is the mode that persisted for much of human existence, until the advent of big cities where people no longer knew each other. If one never sees the same person twice, it becomes much easier to cheat and escape those reputational repercussions. This is also a trope: the big-city hustler or fast-talking salesman. While such stereotypes may prevent a few from falling prey, most of the time swindlers are aware enough to counteract those warnings. This is part of the reason so many con artists are amiable rather than overbearing. It is a matter not of their own confidence, but of winning the confidence of their target, that is the "art". Additionally, while people may be aware of this in a 'sale' situation, the problem extends beyond this small arena and actually applies to anytime someone makes a claim. Here we find the heart of skepticism: not simply accepting what is presented. Instead, making the effort to understand context—and get it in writing so the claim cannot be changed later.

While there are protections for consumers from some scams, bad deals, and rip-offs, and legal recourse to prosecute such sellers, there is no such protection for society. What I mean is that some people make a living off of telling people one thing and doing another, of selling false hope and quick fixes while collecting large payoffs. Whether this is a religious figure or politician, a celebrity or "influencer", they somehow experience no consequences for their lies. For every Theranos and Elizabeth Holmes, there are 5 climate-change-denying oil companies, cancer-causing-denying tobacco companies, or banking-fraud Enrons (a completely invented statistic, because the amount of scofflaws is likely higher). It takes so much effort and time to build and prosecute a legal case against the largest fraudsters that it overwhelms ordinary citizens. The machinations of these individuals and groups seem too blatant, brazen, and counter-intuitive; less "how did they do it?" and more "how did it occur to anyone to try such a thing?". Even more troubling, if possible, is the fact that the very principles and structures which protect these everyday people from such inconceivably large scams have been under attack for decades. The legal system has been eroded from the inside through influence campaigns like from the Federalist Society. Similarly, the Heritage Foundation has worked to change society by imposing doctrine through the legislative and executive branches of government. Personally, I did rot recognize the attack on education and schools until much too late. The call for "school choice" that has lead to siphoning public money to private institutions has been a tragedy not just for public schools and students, but also those who can no longer escape the ideological indoctrination of those private "schools". All this leads to our current situation, whereby those who say one thing and mean another have twisted the understanding of reality and perverted public institutions to their own benefit. These are, of course, large and complex situations with many repercussions, but the focus here is that somewhere in the process an argument was made as to why something should happen and those making that case may not have been totally honest or forthcoming. This is especially the case when they believe that "the ends justify the means". If someone is convinced that something needs to happen and is then willing to do anything to ensure that it does, we are more likely to encounter deceit and subterfuge.

We've had someone in the office of president of the U.S. who seems incapable of uttering a single truth, and—bizarrely, unbelievably—has returned to that same office. Any attempt to hold this person accountable has utterly failed and—equally incomprehensible—people seem to act like these blatant lies are somehow explainable and/or acceptable. While this is the epitome of our problem, let us not focus too long on a single individual. This is a systemic issue, as evidenced by the ascension of such an individual, and the only real solution is to prevent such criminals from insulating themselves from prosecution. To do this, we can strengthen our education system and include critical thinking skills as core curriculum, we should better define legal issues like "bribery", "graft", 'collusion", "profiteering", and "influence", strengthen governmental apparatus like courts and insulate them from monetary and ideological influence, and overall continue to expand democracy by elevating the many rather than the few.