Magic Money

Faced with the limits on our actions that are beyond our choice, it is common for people to develop fantasy solutions that allow them to seemingly avoid those constraints.

A common fantasy solution is some form of “magic money”. Magic money is money that is conjured up from nowhere using a seemingly plausible convolution of the fiat currency system. There are various manifestations of magic money, including: debt, and quantitative expansion/easing.

  • Debt is the 20thC option for creating magic money. A little debt is not a problem, a lot of debt is a real problem. Once debts exceed a certain natural bound, they restrain growth and are never repaid and have to be forgiven.
  • Quantitative expansion is the 21stC preferred option for magic money. We have seen the real world practice of this already though central bank expansion post-2008 – this is a hybrid with the debt version because it claims to link the expansion to future contraction. The more futuristic 21stC version is outright expansion, promoted as either “helicopter money” or “positive money“.

All versions of magic money are captive to the foundational myth of post-industrial society: that all things can be represented by money. This is a self-defeating illusion that fails to recognise the proper role of money within a human economy, and falls victim to the deceits of financialisation.

In the end, you have to recognise that “money” is a human concept, and as such it is constrained by the same natural boundaries that everything human is: it has natural roles to fill, and only when it complies with its natural constraints can it fulfil those roles. Pushed beyond it’s natural boundaries, it ceases to function.

If you recognise that one of the foundational flaws in our current situation is the over-weight of finance, then proposing using more finance to fix the problems should be self evidently absurd.


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