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On the End of Money

[Es gibt auch eine deutschsprache Version des Artikels]

Franz Hörmann, professor at University of Economics in Vienna, has rocked the boat with his theses on the breakdown of the monetary system [1|2|3|4, in german]. The breakdown shall happen this year. And then? WienTV made an interview with Hörmann after a screening of the new movie Zeitgeist Moving Forward (with english subtitles):

What should one think about this?

Beside the concrete date stamping of the crash (there have been other collaps theorists who failed) I see some problematic points in Hörmann’s theses. Here, I will list only those points which spontaneously come to my mind when watching the interview (disclaimer: I have not read Hörmann’s book on the same topic).

1. Hörmann treats money in a way, as if it actually has nothing to do with real economy. He thinks, money creation is an arbitrary act of private banks. Problems arize from treating money as a substance (a jar full of gold pieces) and by putting interest on it. In reality, however, money is a pure counting unit, simply information. It doesn’t show any substance, but only relations, Hörmann thinks.

It is true, that money only depicts relations, but these relations are exchange relations of commodities, which incorporate effort to produce them. In traditional political economy there is a notion for that: value. While the price may only be a number, the value expresses a relationship. To emphasize this aspect Marx named the societal relationship expressed by value (following dialectical philosophy of Hegel) »value substance«. If one understands substance in a colloquial sense as »matter« then one is wrong.

In real history there have been a special commodity which becomes the money commodity. Therefore it suggest itself to think of money commodity as a »thing«. In fact, historical money commodity expresses relationships between exchangers. In the following the materiality of money was dropped, and finally even material backing through gold stored in a bank deposit was removed. Today money seems to be only a »number« which has nothing to do with real exchange relations. But this is not the case. Indeed, the financial sphere has been relatively decoupled from real economy and generates new »financial products from nothing« again and again, but these products remain — mediated in space and time — related to real economy. The process of partially bringing both spheres in accordance is named crisis. Crises are generated with necessity, and they are generated with necessity on levels going up and up.

The built-in escalation dynamic (money must steadily turned into more money) actually has total crash potential — this is where I go with Hörmann. However, this does not result from interest, but the other way round. Interest is only an expression of the built-in growing coercion of capitalist logic. Interest is — so to say — the slice financial sphere wants to cut from real economy. And due to real economy not being able to »deliver« as much enough, it will be simulated beforehand inside relatively decoupled financial sphere itself. Relatively decoupled, because any time the balance will be coerced, and then all houses of cards and pyramid schemes collapse.

2.Hörmann wants to reintroduce money — which he thinks is only a counting number — after a crash as new money (by social ministry), in this case including a basic income for all. Then cooperation instead of competition and justice instead of injustice will rule, he thinks.

Why should this »new« money »behave« differently compared to the old one? All relationships in which money plays a role remain the old ones: separate private production, exchange, markets, and thus value relations. Competition and profit maximizing is gong on. But also cooperation, because there is cooperation already. There are already cars which are produced in a lego-like way (this was an example of Hörmann). Justice — understood as just equivalent exchange — is already there, too. Solely the basic income would be new, it would help a lot of people.

3. »Dead things« will no longer payed, but only human efforts and abilities. There is an extra circulation for raw materials. Unpopular tasks will be rewarded with extra bonus, while popular tasks do not yield so much. Due to money only being a number human behavior can be governed this way.

Shall »dead thing« be declared »valueless« by law? Here we have the fallacy, that money is a functionless arbitrary issue, which can be re-defined at will. This is not the case. If basic processes of commodity production and distribution do exist further on, then money will fulfill its function therein. Products »having value« is nothing which is established by agreement and thus can be removed on the same way, but with the necessity of exchange (and exchange is necessary as long as production is taking place privately) there is a necessity for money which mediates the exchange. This is not an agreement but a process behind our backs, which Adam Smith already knew.

Funnily the arbitrary weighting (unpopular tasks high, popular ones low) reminds me of Christian Siefkes‘ old auction model of Peer-Economy (which he no longer follows). But this is only noted in the margin, otherwise the approaches do not have much to do with each other.

There would be some more points, but I leave it that way (cue: bank employees as psychological coaches — an horrible imagination).

Why do those, who basically recognized money as a fetish — and not many are able to do this — finally need to adhere to money? It seems to be an overlarge mental leap to image circumstances, in which we are not plagued by material power — the coercion to »make money« — but we are able to take our life in our own hands.

Kategorien: English, Reichtum & Knappheit, Theorie

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27. April 2011, 08:34 Uhr   3 Kommentare

1 Vom Ende des Geldes — keimform.de (27.04.2011, 08:49 Uhr)

[…] [There is also an english version of this article] […]

2 Martin (29.04.2011, 11:48 Uhr)

I think that theses like Hörmann’s are not helpful, and that they will prove to be dramatically false in a very short time. If critics of capitalism rely on theses like these, they will look ridiculous in a few years and no one will listen to them anymore as soon as the next growth period has started. Traditional economic science, then, will be able to monopolize the discussion once more and to dismiss critical discussions as ‚the usual apocapyptic murmurs surfacing in crises‘. Let me explain why:

The money system will not collapse before capitalism collapses, because it has in-built regulation processes preventing that: There’s inflation, the change to other currencies, and – in the worst case – to long-standing alternatives like bullion (precious medals like gold and silver). If all that fails, as in the case of dramatic breakdowns of the real economy, for example in war areas, spontaneous new currencies (e.g. cigarettes) are generated. Furthermore, today many regulatory systems (e.g. Central Banks) are exercising strict control over money markets.

People think that money has become independent of the real economy, but it hasn’t. That people lose part or all of their savings in economic crises is normal, as evidenced by the „Great Depression“ from 1929-33; it is a prerequisite for the next growth period (because it forces people to work even harder, creates insecurity and submission). More importantly, if frees labor from the necessity to support the immense capital ressources created in growth periods, which need to be sustained by „investment possibilites“ (= people working hard to make more money out of the invested money), which at some point of the growth period simply becomes impossible. Thus, crises are inevitable, they have happened many times in the history of capitalism, and they always generate prophets of doom.

But after each crisis, a lean and invigorated capitalism emerges, sometimes even more detrimental to human health, natural ressources and long-term sustainability. These are the real limits to capitalist growth. As long as a rebound of capitalist economy happens, money will be there, and it will have essentially the same properties as today.

3 P2P Foundation » Blog Archive » Franz Hörmann on the End of Money (05.05.2011, 19:45 Uhr)

[…] Here. […]

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