By Noni Mausa
Let me remind you what a very weird idea money is.
The IOU is a simple idea. Money is like an IOU, but carried beyond
the boundary of reason into an entirely different and peculiar
If I write an IOU, it has my name on it, your name, perhaps a date,
and some indication of the future services which are owed between us.
It’s a minimalist contract, easy for anyone to understand.
But money is an IOU, a promise, with no names. The future benefit is
merely an abstract number whose value is not defined. A dollar does
not equal a loaf of bread, or an hour of babysitting, but is
determined by the usage of all the people who accept it.
This is almost theological in its weirdness.
This sort of a promise has value only to the extent that real goods
are delivered when promise-money is tendered, or the defaulter is
punished when they default on their promise. An economy built on
promises — a capitalist economy — only functions when these promises
are enforced, and enforced multilaterally on all participants.
I have a significant advantage in a promise economy if I can enforce
the promises of others while defaulting on my own promises without
penalty. If I can also unilaterally manufacture more promises that
others will honour, how cool is that? Like counterfeiting, but
without the nuisance of avoiding the FBI.
Whose promise-breaking goes without penalty and whose is punished?
Whose stored-up promises are honoured or dishonoured,, and whose
multiply without effort? Those are the pivotal questions of a
Pensions are stored-up promises. Workers build up a backlog of
promises to be honoured at the time they finish their working lives.
The agreement would be nonsense if they thought there was no way to
enforce that promise, especially since at the end of working life they
have little leverage of their own, and little time to spare for
Businesses, not being alive nor having a fixed lifespan, body or
dwelling, have a huge advantage over individuals. Given the power
differential, who can enforce such promises? Organizations can
dishonour their promises to people, but if people try it they end up
bankrupt or in jail.
Barring violence by the cheated promisees, the government is the only
agent that can fulfill that role.
It’s not that the government stands behind one or another financial
institution – it stands behind them all. It is the promise which
upholds all the other promises, for good or ill.
And when it fails in its duty, choosing to only enforce some
promise-keeping, not all, punish some counterfeiters, not all, it
chops at the roots of capitalism. When they do this on behalf of
so-called capitalists, they are gnawing off the branch we are all
Because I think capitalism is marvelous, and necessary. Its roots in
the realm of theological-strength nonsense allow us all to make
promises to each other over generations, to slosh our commonly
generated wealth around, and to mobilize the energy of our people in a
way that a mere sack of potatoes could never do.
But useful nonsense is only useful when controlled. The weirder it
is, the more clear-eyed regulation it requires. The Great Recession,
and the many bubbles preceding it, demonstrated what happens when the
balloon has no string. It becomes a vanishing promise, last seen
drifting west over Las Vegas, Nevada.