The Necessarily Moral and Psychological Basis of Money Systems

Posted this over at the MacroBusiness SuperBlog site, in response to this article (comments section, of course!): Overruled

My thoughts:

1) Money is firstly a moral phenomenon; and then it is a psychological one (built on the chosen moral foundation – trust, etc). ie. the value of said money only exists because of perception, belief, trust, etc…else it will fail as money, as a medium of exchange.

2) Secondly, we look to govts too much – they can only “make” things happen monetarily as much as the people who use the currency/money every day ACCEPT (read: believe, trust) the money to have moral and psychological value; else, again, it will fail as money. Hence, their abilities to “fix” (read, regulate, etc) are limited by the points of Point (1), which they cannot, largely, control.

Hence, my conclusion is this: if govts cannot “regulate”/form/etc a system of money that people can and do trust (to hold its value, be stable, etc), then they will, eventually, fail in all their monetary pursuits.

It is therefore, i contend, why all fiat systems, systems based on fractional reserves (etc), leveraged meta-money-systems and the like will all eventually fail…because one day people realise that the “promises” that the system, its components and its users make, are seen and rendered as no better no part-truths, often unwise, presumptuous and sometimes outright lies…and people lose confidence in them, thus devaluing them as mediums of exchange and “assets”.

So, if we want govts (as opposed to people, from the ground up, which is another perspective) to make and regulate for us a monetary system, it needs to be one that is both morally and psychologically robust – that is, one not built as notions of money as debasable/inflatable, leveraged, allowing immoral dilution (in effect, theft) of people’s holdings, allowing people to on one hand make what seems to be a fair promise, but on the other actually promise more than they can rightly, in the long run, deliver.

Additionally, if govts want stable money systems, then facilitation of escape, partially or even fully, for those that are responsible for the mistakes, should not be permitted. Grace to helping those that have made mistakes is another issue, so help can still be extended – but allowing rationalisations to avoid consequences for one or few is, essentially, an unjust, unfair practice.

And that is all a fundamentally moral issue, like it or lump it.

Hence, if we look to govts for our money system, it must be on a fundamentally just moral framework…and do they have what it takes? Do people at all? More food for thought, eh?

My 234cents.
Stewart

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2 Responses to The Necessarily Moral and Psychological Basis of Money Systems

  1. newson says:

    sounds a fairly austrian perspective. if you’ve not already done so, i recommend hülsmann’s the ethics of money production:
    http://mises.org/books/moneyproduction.pdf

    a good paper on bad paper!

  2. Stewart says:

    I’m not a hardcore Austrian at all…but I will confess to two things:

    1) I have significant Austrian sympathies

    2) I believe that the Austrian-type axioms are a better (more accurate, robust) basis for reasoning about economics than the current mainstream paradigms…

    🙂

    Thanks for visiting and thanks for commenting,
    Stewart

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