The madman -- Have you not heard of that madman who lit a lantern in the bright morning hours, ran to the market place, and cried incessantly: “I seek God! I seek God!”–As many of those who did not believe in God were standing around just then, he provoked much laughter...The madman jumped into their midst and pierced them with his eyes. “Whither is God?” he cried; “I will tell you. We have killed him–you and I. All of us are his murderers. But how have we done this?" -- The Gay ScienceA century later, it would be much more appropriate to place the madman running down Wall Street shouting, "We have killed money-you and I." Or maybe more appropriately through the halls of the Fed crying, "We have killed the dollar. How were we able to drink up the sea? Who gave us the sponge to wipe away the entire horizon? What did we do when we unchained this earth from its sun?" Good questions for our monetary priesthood as global currencies continue to roil in existential anguish. Greider's seminal book, "Secrets of the Temple", on the Fed and money, wasn't named by accident. Money is a faith based system, a social construct, and times where that faith is shaken, the priests questioned, and the Temple quakes, when the previous intrinsic value of money comes into question, these are always times of great change.
It is one of the great paradoxes of civilization that money, that most unreal of constructs, is at the same time, one of the great pillars of power and stability for most cultures. One can be assured when the accepted value/role of money in any given culture comes under question, much more than the value of money is at stake, but much of the established power structure, cultural norms, and the practices and institutions of political economy. Chris Whalen has a good thought provoking interview concerning the dollar with James Rickards of Omnis Inc. The interview is excellent because it ties together the role of the dollar, our military Pax Americana, and great questions facing the corporate globalization experiment of the last half-century. What happens as all established components weaken together? As Mr. Rickards states:
We have been operating in a dollar world for decades. Notwithstanding the demise of Bretton Woods in 1971, it's still a dollar system. All of the world's expectations, all of its productive capacity, all of its allocations of capital are built around that system. When the caretakers of that system allow weeds in the garden and for the system to disintegrate and fall apart, which is what I see happening in the U.S., the immediate reaction is first confusion, then panic and then self help. This gets to the heart of the national security implications of the financial crisis. Initially other nations were content to wait for the U.S. response, but now I see nations like China, Russia and Germany increasingly willing to act on their own.What happens in world where the dollar is no longer king? I don't agree with some of Mr. Rickards analysis on where things are going or should go, but he's definitely asking necessary questions. Most alarming is the thought that the US Treasury is pushing to strengthen the position of the IMF, particularly by having the IMF pseudo-currency the SDR(Special Drawing Rights) play a greater role in global currency affairs. This calls for a long discussion, but I'll make two short comments. The idea of some sort of currency standard devised from a basket of currencies, such as the SDR, and possibly including some commodities, for example I would think energy an essential component, is not necessarily bad. How it's done is a another matter, particularly if this standard comes attached to some powerful centralized institution, and most alarmingly if that institution is the IMF.
Leading to my second point, in direct contradiction to what was thought and acted upon by many after World War II, global stability will not be gained through centralized institutions. In fact just the opposite, while centralization can, maybe, provide some short-term stability, over the longer term it leads to much greater instability. We are not going to fix our current problems by creating massive centralized global bureaucracies, not only is this inherently undemocratic, it is massively unstable. We need to be much more creative in our political economy thinking. How does the world, through multitudes of connections, create a more distributed networked order? How do we take some of the ideas and practices we've learned concerning non-hierarchical natural systems, or the distributed order of the Internet and begin using these to reform our political economy? The money question offers an essential opportunity, and it's upon us whether we want it or not.