Chapter One
THE FAILURE OF MONEY
The Competitive Society

What need you, being come to sense,
But fumble in a greasy till
And add the halfpence to the pence
And prayer to shivering prayer, until
You have dried the marrow from the bone?

WILLIAM BUTLER YEATS,
Irish poet and Nobel laureate

It’s a cold Tuesday morning, and already the line is forming outside the David Ellis Pawn Shop in the upscale neighborhood of Cherry Creek, Denver, bordering the foothills of the Colorado Rockies. It will be another 10 minutes before the doors open. A woman in a fur coat sits in her parked car with its license tags about to expire. She runs the engine to keep warm while others shuffle around in silence, dodging any direct eye contact.

Denver, the Mile High city, is one of the country’s top 10 metropolitan areas where people are saddled with the highest levels of personal debt. This is a result of high housing prices, a steep cost of living, and a culture of spending—a hangover from better days.¹ The David Ellis Pawn Shop has been in business in the same location for over 25 years and during this time has seesawed through multiple financial highs and lows. Trade, however, has never been so brisk or with such a dramatically broadened demographic as it is now.

This scramble for money is playing out globally in towns and rural areas alike. Record unemployment, or underemployment, has triggered a vicious cycle of lack of demand for goods and services that leads to more layoffs in key industries. The mood, to put it mildly, grows dark and defaults into despair, sometimes even abdication, as next steps are unclear.

In the history of the United States, this is the first time when the younger generation of people will be poorer and less educated than their parents.² In a country that claims to be one of the richest in the world, some 100 million people—one in three Americans—either lives in poverty or in the distressed zone hovering just above the official poverty threshold.³ More than one in three Americans lived in households that received Medicaid, food stamps, or other means-based government assistance in mid-2010, according to an analysis of the 2010 census. And when Social Security, Medicare, and unemployment benefits are included, nearly half of the nation lived in a household that received a government check.⁴

According to the New York Times, “Demographically, they look more like ‘The Brady Bunch’ than ‘The Wire.’ Half live in households headed by a married couple; 49 percent live in the suburbs. Nearly half are non-Hispanic white, 18 percent are black, and 26 percent are Latino. Perhaps the most surprising finding is that 28 percent work full-time, year round. These estimates defy the stereotypes of low-income families.”⁵

The squeeze for cash has gotten more acute recently. Today, 80 percent of Americans report that they are living paycheck to paycheck. This is nearly double the figure in 2007, just before the banking crisis. One in five individuals earning over $100,000 per year report that they, too, are living from month to month.⁶ Savings are at an all-time low.⁷ Consequently, the need for credit is on an upswing while banks are not lending.

The money system really isn’t serving humanity. The world’s population could hit 10 billion by 2050.⁸ Money is too scarce for many of Earth’s human inhabitants. Even those who have enough of it are obliged to deal with its vicissitudes: crashes, devaluations, inflation, whatever the financial crisis du jour may be.

As the stories of financial stress and uncertainty continue to play out in the United States and around the globe, there’s plenty of blame to go around. We can point to rampant cronyism in government on all levels, slack or nonexistent enforcement of regulations, and good old-fashioned greed, from corporate avarice to the covetousness of innumerate plebs who got in over their heads in the real estate market.

Clearly, however, on the flip side of the coin, we do live in a world of unparalleled achievements, facilitated through competitive markets driven by a competitive financial system. The best and the brightest are rewarded at stratospheric levels, which in turn, has spurred on even greater striving for more innovation, ingenuity, and originality.

Yet, the commonly trotted-out explanations for all that ails the financial systems, or conversely what is working, just don’t provide the complete picture. There is a yearning to put into language something that still remains elusive, lingering in the shadows of awareness just out of reach. It’s that gnawing feeling in the pit of the stomach that something deeper is going on, something that can’t quite be brought to consciousness, let alone expressed in words.

That is what this book offers to illuminate. It is not about how to invest, save, spend, hide, keep, or give away money. Rather, the aim is to unmask the true nature of money and the monetary system that we have inherited. Money is merely a human construct, as will be shown, that was designed in and for another age. By understanding how money really works, we might then create a different system that supports the kind of society we desire for ourselves and for future generations. This is about how to make a sustainably abundant future a reality.

And while money is the culprit, it is not guilty in the way one would suspect.

A much deeper systemic issue is at work. Before anything can be changed, it must be understood. To understand, it has to be taken apart, investigated, and questioned before it can be put back together again in a new configuration that would support a truly functioning system. Although many feel we are fast approaching an apocalypse, we might remember that the word comes from the Greek apokálypsis, meaning an “uncovering,” a “lifting of the veil,” or “the disclosure of something hidden,” a “surprise,” ⁹ if you will.

There are both a general lack of awareness and widely held erroneous assumptions as to how money drives trillions of daily transactions and influences every aspect of daily life.

At the core of these assumptions is the false belief that it is merely the lack of money that is the problem. If there were more to go around, everything could be put to rights. However, what you’ll discover in the following pages is this: It is not the amount of money in circulation that is the root cause of this current malaise. It’s the type of money that is being used.

The good news is that the know-how and gumption needed to bring about a transformation are already here. We’re not talking about conventional “solutions” such as the redistribution of wealth, increased conventional taxation, bond measures, or enlightened self-interest from corporate entities. Rather, we’re talking about the stories of ordinary people who are jumping outside the prescribed monetary boundaries, rethinking and reengineering money itself.

Recognizing that transformation is possible, emboldened by new monetary innovations, we can realize a brighter future for everyone. In this future, meaningful work would be available to all; the sick and elderly would be cared for, and children would have adequate shelter, health care, nutrition, and education; threats to our environment would end; unstable urban and rural areas would evolve into viable, sustainable communities; and seemingly insurmountable social chasms would be bridged. In short, life and all living systems would flourish.

This is not an idealistic dream, but rather a pragmatic goal, achievable within one generation.

Currently, we stand at an extraordinary inflection point in human history. Several intergenerational, even millennial cycles are coming to a close, including the end of the Cold War (50 years), of the Industrial Age (250 years), of Modernism (500 years), of hyperrationalism (2,500 years), and of patriarchy (5,000 years). The universe is now more malleable, given advances in science and technology, yet nothing of true value and longevity will materialize until money is mastered and humanity is no longer its slave. Just as computer operating systems become obsolete, incapable of performing the functions needed, so do our systems of money.

The first step is to take stock of where we are. Currently, as infrastructure crumbles in the United States and in many other nations, and the availability of high-quality education and health care plummets, with massively underfunded liabilities, the stark statistics still don’t tell the full story of America’s sons and daughters and, indeed, the entire global family as it grapples with an uncertain future. The situation is particularly dire in Europe: Greece, Spain, Ireland, the United Kingdom, and Italy are in a credit crunch not seen in generations. Even in the countries that were up until recently considered booming, nations like the BRICs—Brazil, Russia, India, and China—development was highly uneven, with entire regions experiencing scarcity and need. Now it would appear that their economic bloom is wilting.¹⁰ Practically everywhere one finds many tales of how the highly competitive nature of the conventional money system influences our lives.

REQUIEM FOR A DREAM

It takes a moment to get over the initial shock of seeing Fred bagging groceries in a popular national grocery store outlet. Stooped, with his torso almost parallel to the floor, his hands gnarled and disfigured with arthritis, he dutifully double-bags the heavy items. A former lab technician with a degree in chemistry from UCLA, he’s been working this part-time job for the past 18 years since his retirement at age 65. He’s a proud man and says that he took the job at his wife’s insistence that he do something other than hang around their house. He does agree, reluctantly, that the small salary makes a big difference to the household.¹¹

Marie was one semester shy of her MA degree when she had to forsake her studies and get full-time work, as she could no longer afford to keep herself in school. Now, four decades later, following a series of low-paying jobs, she lost her unionized custodial job at a local university due to an on-site injury. Until recently, she made ends meet by working for two agencies as a caregiver to homebound, usually bedridden, elderly folks. She cleaned houses to further supplement her income. Her employers did not pay any benefits or cover car expenses as she zigzagged across the greater metropolitan area to work her shifts. She was making $12 an hour for backbreaking work, and the agencies she worked for charged $25 an hour for her services. She worked tenaciously and without complaint, as she knew full well about the stack of résumés in her bosses’ inboxes from people eager to take her place. One day she collapsed on the job and was rushed to the hospital, where she spent almost 10 days in intensive care due to complications from asthma and pneumonia. With no health care coverage, she now faces a bill of over $300,000, and she has no idea how it will get paid.

On the day-to-day personal level, the mandate to perform and increase profits percolates through all industry sectors, making life stressful and highly competitive for all concerned. Everything is tied to the financial bottom line.

“Unless I can bring in new business each quarter, I’m toast,” says Dave, while juggling his iPhone and a venti café Americano. A seasoned public relations executive, he works for a boutique technology agency in northern California. “My strong suit is strategizing and running campaigns. I do pick up new clients by referral, but the heat is on constantly to get new accounts in the door. It’s simply cutthroat these days. The office is mostly run by nonpaid interns getting work experience, while my workload increases. I don’t have the bandwidth to explain the basics, let alone the nuances, to these fresh-faced grads. The media executives portrayed in the TV series Mad Men, with their long boozy lunches and even longer expense accounts, are as dead these days as Elvis.”

Rick, a doctor, had just come off the graveyard shift in a large psychiatric hospital and is operating on just four hours of sleep. In his profession, these questions, although politically incorrect, are often bandied about: “Why are your patients going nuts, and why are their numbers increasing?”

He answers: “From what I can see generally, it’s the sense of helplessness that is pushing them over the edge and into an institution or into some sort of therapy at least, for the less chronic cases. These people hold the belief that they won’t be able to make it financially and that they’re powerless to do anything. The workplace for many has become a complete nightmare. The competition for jobs is like the scramble for lifeboats on the Titanic. If you have a job, the atmosphere at work is often toxic. Everyone is scared stiff of being sacked. On the other hand, those that do have resources fear that they will lose it all to some slick sales guy conning them out of their last dime so he can make his sales projections. They feel immobilized and unable to navigate the roller coaster of the financial tsunami. It’s not pretty, and it’s only getting worse.”

The picture isn’t pretty for first-time job seekers, either. Americans owe more on student loans than on credit cards. The total of outstanding student loans has exceeded $1 trillion for the first time in history.¹² The average U.S. college student is now more than $25,000 in debt by graduation.¹³ With this debt load, a young person with a calling to become a teacher, for example, is forced into finding higher-paying work to take care of the crushing debt. A medical student who dreams of a general practice in a rural area or a poor neighborhood or of volunteering with Doctors without Borders in hopes of giving back to society is coerced into relinquishing these aspirations and becoming a specialist to garner higher fees. A graduate with a passion for science is pressed to vacate the idea of teaching and go for a pharmaceutical sales job instead. This leaves a number of critical vocations not attracting the best or the brightest. The current scuttling of jobs is reaching epidemic proportions. An average of five people vie for each job opening in the United States, and the advice to “follow one’s bliss” rings hollow.

It’s not much better across the Atlantic. Graduates in the United Kingdom, for example, can anticipate 70 applications for one job opening and have been told to flip burgers rather than counting on attaining positions commensurate with their educations, leaving them with no means of addressing their liabilities.¹⁴ Nobel laureate Paul Krugman writes: “In particular, these days, workers with a college degree, but no further degrees, are less likely to get workplace health coverage than workers with only a high school degree were in 1979.”¹⁵

These days, job satisfaction means having any gainful employment.

Money is the most powerful secular force. Financial issues affect all economic classes, from the rich to the poor. Empathy for the plight of those who suffer from scarcity comes easier. The damage created by poverty and want is pervasive, devastating, and easy to understand. Yet the levels of competition and struggle indelibly linked to money propagate through all levels of society. Less recognized and definitely not generally understood or empathized with are the formidable issues of those who are affluent. Rich people don’t elicit much sympathy: From a distance, many less well-heeled people would welcome their money issues, or so they believe.

“Money has been such a royal pain for our family. I rarely, if ever, speak to my two brothers,” confides Anna, as she takes another sip of her overpriced Upper East Side martini. “Our interactions have always been strained, given the craziness of being shunted off to different boarding schools and, following our parents’ divorce, being raised by different branches of the family. However, it was a seven-figure cash inheritance from my grandfather that just ripped us apart. As the girl, I got the largest share of the estate. That didn’t go down very well with my siblings. The family has been in litigation for years. The only ones getting rich are the lawyers.”

Jungian psychologist Bernice Hill has categorized four levels of what she calls “sacred wounds of money.”¹⁶

Level one is the burden of expectations. Those who are seen as wealthy are often the objects of the fears, needs, and expectations of those who lack money. Society expects those with money to “do the right thing,” which most often translates into “give money.” The affluent are left to ask themselves, when invited to attend an affair or participate in an event, “Is it me or my checkbook that’s being invited?”

Level two is isolation. The prosperous must question if their personal relationships are based on money or status, rather than genuine caring and true feelings for the friendship. As a consequence, people of means tend to socialize only with others of similar financial and social backgrounds and ultimately come to experience a deep sense of isolation. The painful question lingers, “Would my friend still be my friend if I didn’t have any money?” Love, popularity, and camaraderie can be as paper-thin as money itself. This lack of trust is reflected in the measures taken to ensure their security—the higher walls built around their homes, possessions, and lives, literally and psychologically. In the end, the well-heeled tend to seek refuge in “golden ghettos.”

Third, being well-to-do can lead to unhealthy family dynamics, as exemplified by Anna’s story. The tabloid press and reality TV are filled with family feuds and the nagging fears and general angst regarding inheritances, wills, and pressures brought to bear regarding proper behavior. Even the most intimate relationships—choosing the right partner in marriage—are subject to all-important prenuptial agreements, yet another financially secured contract.

And finally, and perhaps most important, is the crisis of identity, particularly for those who have inherited wealth. The questions of self-worth and one’s uniqueness, which arise for everyone, become much more painful when one is seen by others as having money. Philosopher Jacob Needleman observes, “The only thing that money will not buy is meaning.”¹⁷ Often, wealthy people suffer from guilt, anxiety, and a sense of meaninglessness.

In an environment and culture where so much is shaped by financial worth, the scarcest commodity seems to be trust. Indeed, each of these four conditions shares a common thread—the loss of trust in society, in friends, in family, and finally, in oneself. An all-too-common response to the issues faced by the wealthy is “I wish I had that problem.” This denies, however, the depth of the anguish experienced by some and the reality that money has become an equal-opportunity problem maker.

Feelings of futility permeate all strata of society. This sense of worthlessness often manifests as rampant consumerism. An extreme case in point is the recent report of a Chinese high school boy who sold his kidney for $3,500 to raise the funds to buy an iPad and an iPhone. Young girls across the globe trade sexual favors with wealthier men to procure luxury items such as designer handbags and couture. The practice is euphemistically called compensated dating.^18,19

All this leads to the ironic conclusion that the current money system provides genuine individual satisfaction neither for those who suffer from its scarcity nor for those who are wealthy. The drama of money plays out in all segments of society.

THE DASH FOR CASH

Beyond the daily monetary mêlée that is playing out on the personal level, some 44 states in the Union are considering bankruptcy,²⁰ and dozens of cities across the nation are faced with inevitable budget shortfalls.²¹ The river port city of Stockton, California, is the largest U.S. city to lately declare bankruptcy.²² In the meantime, at various levels of officialdom globally, it’s believed that the only way out of the current credit crunch, on the present trajectory, is the forfeiture of assets in the blaze of fire sales.

Some 28 states have passed private public partnerships (PPPs) enabling statutes.²³ Despite the benign-sounding label, these statutes mean that governments—at whatever level—are selling off existing infrastructure that has already been built and paid for with taxpayers’ money to reduce existing debt, if they are unable to meet current governmental expenses. Once something is privatized, the new owners will certainly charge fees for the use of any once-free public utility or will increase existing tolls. Consequently, taxpayers will end up paying twice for the same infrastructure, and the second time could be more expensive than the first, given that many infrastructure assets are monopolies.

The total value of U.S. government fixed assets (at federal, state, and local levels combined) was an estimated $9.3 trillion in 2008. Of this, $1.9 trillion is owned by the federal government, and $7.4 trillion is held at state and local levels. The value of all the highways and roads owned by states and municipalities is $2.4 trillion. There are sewerage assets worth $550 billion at state and local levels, along with a further $400 billion of water assets. And in the real estate sector, the federal, state, and local governments own assets worth $1.09 trillion.

The evidence reveals that PPPs, rather than being entrepreneurial ventures to create work and unleash massive opportunities for the general population, actually favor buying up existing assets instead of building new ones because the time required and risks involved are much higher with new projects.

The competition to acquire real assets, whether through PPP programs or the wealthy simply buying up whatever they can before currency gets devalued, leads to an even greater concentration of wealth as the deepening of privatization plays out. Ordinary people are less and less able to afford access to a local library, for instance, since what was once a public service now requires a subscription, like a membership fee to a private club. Additionally, pressure on authorities to sell their own offices will oblige them to pay rent for the offices that they once owned. And this will be another bill that taxpayers will have to cover.

With this new concentration of monetary and financial power, François Morin, a financial advisor to the highest ranks of European government and the European Central Bank (ECB), asks, “Is this not a cause, probably the main one, of the powerlessness for the public sector to manage the growing economic and social imbalances that manifest in our societies? Is this new global financial paradigm not having a dissolving effect on our democratic societies?”²⁴

Americans have always been encouraged to aspire to bold dreams and to believe that diligence, coupled with the benefits of capitalism and democracy, would ensure a bright future. As this reverie dissipates, another reality needs to arise.

There is a way out of this insanity: by rethinking money. In the words of famed computer scientist Alan Kay, the best way to predict the future is to invent it. To invent, one has to first understand why money really matters. Only then is it possible to rethink the monetary model.