This is fundamental Econ 101 stuff. But it is great to see it explained so simply and understandably.
Nevertheless, the narrator makes a simplifying assumption: increases in the money supply gain their value from the existing money supply itself. This assumption is misstated. The value of newly created money is directly proportional to the trust that we place in the banking system and the measure of trust we place in the repayment of debts. When we stop trusting the system, we withdraw our funds and create a run on the banking establishment. And as we saw in the Great Depression, no bank could provide the funds required if all demand deposits were demanded.
So what is the #OccupyWallStreet movement? In my mind, it is an effort to diminish and/or destroy the trust that America has in its banking system. The threat of flagging trust in our system must be challenged. We must begin to trust each other to repay the debts that we owe. And we must trust our banks as institutional that we trust to fulfill the promises/contracts that we have made with them.
After submitting the above text for discussion on Google+, I got some very rousing debate on the issue of trust and the kinds of change that we should be advocating. Here was my response to one reader:
+Jonathan Xavier, I think we can all agree on the definition of the problem. Where we disagree is on the root cause of the problem and/or the solution that we would propose to address the inherent ills in the system.
At a macro level, the issues relate to a lack of trust. We do not trust the banks. And the banks don’t trust their customers. I know of many people that have simply walked away from the commitments that they made to bankers and their depositors. This is true of home mortgages as well as student loans. Any system that makes it simple to abandon promises is a flawed system. If you default on a loan, there should be penalties. But in today’s culture, walking away from your commitment to repay the people that have invested their savings in the bank is wholly unsatisfactory.
At the same time, our banks should not be treating us as a carcass from which they can nourish their bloated excesses. If you thought that current banking fees were unreasonable, just wait for transaction fees that are coming for ATM’s and for mobile phone transactions via NFC. The banking institutions exist as a public trust. And they should be held accountable for that position of trust.
But what are the causes of these troubles?
From my perspective, the challenge is not systemic but personal. We have lost our position as a moral authority in the world because we have failed to act in ethical and moral ways. We need to foster a culture where we work together – not separately. We need to act as communities – not collections of individuals. I need to honor my commitments and hold others to honoring the commitments that they have made to me.
But how do we foster a disciplined and moral personal life that can be replicated throughout out communities? Let’s deal with first things first. Hold yourself accountable for making moral decisions. This is not a question of legalities but of ethics. Our culture has become fascinated with “letter of the law” obedience. Instead, we need to hold ourselves to the “spirit of the law” in our lives.
As for me and my family, we will serve the Lord. And we will honor our commitments. And we will try to live intentional lives – not accidental lives. Let your every decision be something that you consider and decide. And make sure that your frame of reference is something beyond yourself. Too many of us live without a system of values. And then we are surprised when others don’t act compassionately or even honestly.
Our culture was based upon a shared view of ethics. And these ethics were personified in the Ten Commandments. [Note: I’m not advocating religious tests. I’m speaking of the Ten Commandments in their most basic and ethical sense.] If we hope to reclaim stability in times of transition, we must all be using the same moral compass as our guide.
Phew. I need to take a breath. Sorry for the screed. But I believe that in order to make substantive changes in our society, we need to address the root causes that are inherent in the system. BTW, I don’t know that we should impose this on one another until we enact it within our own lives. And as noted before, I believe that change starts within each heart. So I am covenanting (to myself and everyone who can read this) to live by a simple metric: WWJD.
I will be pondering this issue for a while as I think I have more to consider – especially as such conversations prompt deep thought over a protracted period of time. Here’s hoping that the musings and discussions will lead me to a deeper understanding of myself and my place in this society.