Talking to My Daughter About the Economy
Talking to My Daughter About the Economy

Talking to My Daughter About the Economy

Table of Contents

the more scientific our models of the economy become, the less relation they bear to the real, existing economy out there. (Location 48)

seeking ways to disagree with myself in order to discover what my true thoughts are. (Location 72)

1 Why So Much Inequality?

Note: the economy lives because of surplus. Once society started farming there was a surplus of food. Writing, debt,money and the clergy were amongst the inventions from this. european countries prospered because they were forced to farm annd then built resiliance to diseases

All babies are born naked, but soon after some are dressed in expensive clothes bought at the best boutiques while the majority wear rags. Once they’ve grown a little older, some get annoyed every time relatives and godparents bring them yet more clothes, since they would prefer other gifts, such as the latest iPhone, while others dream of the day when they might be able to head to school without holes in their shoes. (Location 95)

Tags: inequality

Note: .inequality

For an economy to come into being, something else was needed: a capacity to go beyond just gathering bananas from trees or hunting animals – a capacity to produce food or instruments that would not have existed without human labour. (Location 135)

Farming took hold where humans would have perished otherwise. Gradually, through experimentation and observation, the technology that allowed us to farm more efficiently evolved. But in the process, as we developed the means to grow food, human society changed drastically. For the first time agricultural production created the basic element of a true economy: surplus. (Location 147)

Tags: economy

Note: .economy a true ecnomy needs surplus

hunting, fishing and the harvesting of naturally occurring fruit and vegetables could never yield a surplus even if the hunters, the fishermen and the gatherers were super-productive. Unlike grains – corn, rice and barley, which could be preserved well – fish, rabbits and bananas quickly rotted or spoiled. (Location 154)

the production of agricultural surplus gave birth to the following marvels that changed humanity for ever: writing, debt, money, states, bureaucracy, armies, clergy, technology and even the first form of biochemical war. (Location 156)

Writing We know from archaeologists that the first forms of writing emerged in Mesopotamia, which is where Iraq and Syria are now. But what did they record? The quantity of grain that each farmer had deposited in a shared granary. This was only logical: it was difficult for each individual farmer to build a granary for storing their surplus, and simpler if there was a common granary overseen by a guard, which every farmer could use. But such a system required some sort of receipt, for example, that Mr Nabuk had deposited a hundred pounds of grain in the granary. Indeed, writing was first created so that these accounting records could be kept – so that each individual could prove what quantity they had stored in a common granary. (Location 159)

Tags: writing

Note: .writing writing was invented to track the amount of grain stpred by farmers in a shared granary

Now the thing about virtual currency and these IOUs is that to work they need a great deal of … faith. Mr Nabuk had to believe – he must have had faith – in the willingness and capacity of the controllers of the granary to give him the grain he was owed once it was produced. And others must have believed that too before accepting Mr Nabuk’s shell-IOUs in exchange for oil or salt or in order to help him build his hut. This is the origin of the word ‘credit’: it comes from the Latin credere, which means ‘to believe’. (Location 182)

Tags: belief, money

Note: .money money is all about peoples belief in the value

Debt, money, faith and state all go hand in hand. Without debt there is no easy way to manage agricultural surplus. As debt appeared, money flourished. But for money to have value, an institution, the state, had to make it trustworthy. When we talk about the economy, this is what we are talking about: the complex relations that emerge in a society with a surplus. (Location 191)

Bureaucracies and armies were made possible by agricultural surpluses, which in turn created the need for bureaucracies and armies. (Location 198)

Without a large surplus there would be no capacity to create religious institutions with complicated hierarchies of clergy, since the ‘holy’ men and women did not produce anything. At the same time, without organized religion the rulers’ authority over the generation and distribution of the surplus would be very unstable and prone to insurrections by the majority, whose share of the surplus was usually tiny. This is why for thousands of years the state and the clergy were one and the same. (Location 210)

Tags: clergy

Note: .clergy the clergy helped rulers convince the public that the leader was special and prevent uprisings

slowly, over generations, the inhabitants of these societies managed to adjust to cholera, typhus and the flu and became more resistant to them. Of course, when they encountered tribes and communities that had not yet developed agricultural production, because of the millions of deadly microorganisms they now carried with them a handshake was enough to wipe most of the tribespeople out. In fact, both in Australia and America many more of the native populations died from contact with bacteria and viruses carried by invading Europeans than from cannonballs, bullets and knives. In some cases the European raiders even engaged knowingly in biochemical war: on one occasion a Native American tribe was devastated when a delegation of European colonists gifted them blankets knowingly seeded with smallpox virus. (Location 223)

Tags: virus, europeans

Note: .europeans .virus europeans built resistance to the diseases associated with aggriculture and then wiped out foreign tribes who were not resiliant

the geographical conditions in Eurasia – the nature of the land and the climate – meant that agriculture and surplus and all that went with it took hold with great force, leading to the emergence of rulers of states in command of armies equipped with technologies such as guns and made even more lethal by the biochemical weapons they carried in their bodies and on their breath. (Location 234)

Tags: europe

Note: .europe europe progressed quickly because of its great agricultural land

2 The Birth of the Market Society

Commodities, on the other hand, are goods produced in order to be sold. (Location 314)

Many blood donors take pleasure from the idea of giving blood, but when they are offered a monetary sum for it, the shift from contribution to transaction ruins the pleasure, while the sum being offered isn’t enough to make up for it, let alone the time and pain of having a needle stuck into one’s arm. (Location 344)

Tags: gaa, money, value

Note: When money is brought into the equation it can taint the gesture

Oscar Wilde wrote that a cynical person is someone who knows the price of everything but the value of nothing. (Location 346)

Tags: quotes

Note: .quotes

get rid of all those perishable crops, like beetroots and onions, that offer no access to the emerging global markets; build fences around their estates, creating in this manner large enclosures; evict the swarms of pathetic serfs and replace them with flocks of sheep, which were more submissive and whose wool could be sold for a mint internationally. Thus, Britain experienced one of the most violent transformations in human history, the so-called enclosures. (Location 453)

the labour market – a market in which humans lacking access to land or tools must survive by auctioning off their labour, by commodifying their toil. (Location 464)

Tags: favorite, labourmarket

Note: .labourmarket if serfs didnt have access to land or tools they had to sell their labour

once wool had an international price, all it took for the green and pleasant land of Britain to acquire one too was the eviction of the peasants and their replacement with nice fat sheep. (Location 474)

Industrial Revolution and was reinforced by it gave rise to the Great Contradiction: the coexistence of unimaginable new wealth and unspeakable suffering. As a result, the inequalities brought about by the agricultural revolution, which we encountered in the previous chapter, increased spectacularly. (Location 526)

3 The Marriage of Debt and Profit

4 The Black Magic of Banking

A brilliant economist once said that ‘the process by which banks create money is so simple that the mind is repelled’. That’s so. The bankers’ magical power that allows them to create money at the stroke of a pen or a few buttons on a keyboard makes us shudder in horror. Understandably. The reason is that it is hard to believe that value can be born from nothing. (Location 719)

Realizing how little trust the weary public have in central banks’ ability to constrain normal banks, and in order to settle their nerves and prevent bank runs, governments have had to go one step further: they have guaranteed the public’s savings as well, promising to reimburse them if the bank where they deposited it goes bust. Naturally, the only way that the state’s central bank can do this is to conjure that money from thin air as well. (Location 798)

To conclude this distressing story, we now come up against a fundamental paradox. The instability that bankers create in market societies can be reduced but it can never be entirely eradicated for the simple reason that the economy is fuelled by the thing they provide: debt. And so it is the case that the more successful the state is in begetting stability, the safer the conditions are for creating more debt, the more exuberant the bankers are allowed to become – and the greater the instability they cause. (Location 828)

The one thing that bankers hate most is cash: money sitting around in their vaults or on their spreadsheet not being lent in return for interest. But as has hopefully become clear by now, banks become precarious and vulnerable if even a few depositors want their money back all at once. At that point bankers need to have access to something that they can sell in a jiffy so as to pay demanding depositors. Government bonds are perfect for this. To the extent that everyone trusts the government will be true to its word, its bonds will always be in demand. Indeed, they are exceptional in this way – no other debt can be recycled quite as easily. This means that bankers love government bonds: not only is a bond a loan than earns a nice rate of interest very safely (so much so, in fact, that it can also be used as collateral for taking out further loans from other banks), it can also be used as a commodity – a piece of property exactly like a painting or a vintage car that can be sold immediately if the banker is in urgent need of cash. Bonds are, in bankers’ parlance, ‘the most liquid of assets’. As such, they lubricate the banking system to keep its cogs and wheels turning. (Location 920)

Tags: bonds

Note: .bonds bonds enable bankers to earn interest and can also be sold if banks need cash quickly

5 Two Oedipal Markets

If Maria is like most smart businesswomen, she is more likely to think the following: Oh! My! God! For trade unions to be considering a voluntary wage cut of 20 per cent, imagine how tough things must be getting out there. Much as I’d love to pay 20 per cent less in wages, now that all of those workers will be getting paid so much less, who will have enough money to buy my fridges? And if Maria is an especially smart businesswoman, which it so happens she is, she might even think, Even if I were still confident of there being enough people out there to buy my fridges, this piece of news is bound to shake the confidence of other entrepreneurs. And if they stop hiring, then there certainly will be fewer customers, so I had better do the same. In short, Maria is highly unlikely to offer Wasily a job. (Location 1029)

It follows from this that, taking the money market as a whole, the lower the interest rate, the lower the price of money, the more that people like Miriam can borrow; the higher the interest rate, the higher its price, the less that will be borrowed overall. (It is for this reason that in times of crisis the central bank tries to reduce interest rates in order to make borrowing cheaper and help the Miriams of this world get their businesses up and running or back on their feet.) (Location 1055)

When Miriam, Maria and other entrepreneurs see wages and interest rates falling or low, they prophesy that economic activity will go down or remain slow and so avoid borrowing money and hiring workers, thus ensuring that wages and interest rates stay low or fall further and fulfilling their own prophecies. Instead of recovering, the economy falls victim to their pessimism, which only perpetuates itself and intensifies. (Location 1095)

Tags: interest rates, wages

6 Haunted Machines (Location 1119)

The reason the machines cannot afford to let us die out is that, before they took power, we humans had exhausted the Earth’s energy resources and covered the planet in an impenetrable black cloud that blocks solar energy. The only power sources that remain are our human bodies. Having imprisoned us in special pods, where we are fed and watered like hydroponic plants, and from which the heat generated by our metabolism can be captured and harnessed to power their machine society, the machines have found that, even if we are fed all the right nutrients and kept in optimum conditions, humans encased in pods, denied interaction, hope and freedom, die quickly. That’s why the machines create the Matrix: a computer-generated virtual reality that can be projected into the brains of the enslaved humans, allowing our minds to experience life as it was before any of this occurred, keeping us unaware of our state of absolute slavery and exploitation. (Location 1184)

Tags: matrix

Note: .matrix

‘The love of money as a possession … will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.’ (Location 1380)

Tags: money

Note: .money

7 The Dangerous Fantasy of Apolitical Money

One night Allied bombers hammered the area where the camp was located. The bombs landed closer and closer, some falling in the camp itself. All night long the prisoners wondered whether they would live to see daybreak. The next day the exchange value of cigarettes had gone through the roof! Why? Because over the course of that endless night, surrounded by exploding bombs and consumed by anxiety, the prisoners had smoked cigarette after cigarette. In the morning the total number of cigarettes had shrunk dramatically in relation to the other goods. If previously five cigarettes had been needed to buy one chocolate bar, now only one cigarette was needed to buy that same bar. In short, the bombardment had caused what is known as price deflation – a decrease in all prices as a result of a reduction of the quantity of money in relation to all other goods. The opposite, a general increase in prices as a result of a larger quantity of money in the overall system, is known as price inflation. (Location 1487)

The weather and other natural phenomena do not give a monkey’s about what we think of them or what we predict they will do. If it is to rain, it will rain regardless of what the Met Office has said or what you and I expect. But as we know from Rousseau’s stag hunt and from the two Oedipal markets, the economy, unlike nature, is influenced, buffeted and indeed shaped by what we think of it. (Location 1517)

Tags: economy

Note: .economy the economy is heavily influenced by what we think

Cigarettes have emerged as currency units in concentration camps and jails the world over; for those at liberty there is a wider choice of materials to choose from. Shells, salt and precious metals such as iron have all been used. Gold’s magical chemical properties, which prevent it corroding and allow it to retain its shine, has made it an all-time favourite. (Location 1536)

Tags: gold

Note: .gold gold does not corrode ann maintains its shine

8 Stupid Viruses?

any attempt to depoliticize the regulation and management of the money supply would choke the economy and prevent recovery in the event of a crash. (Location 1860)

Our market societies manufacture fantastic machines and incredible wealth, astounding poverty and mountainous debts, but at the same time they manufacture the desires and behaviours required in us for its perpetuation. (Location 1968)

We shall not cease from exploration ,and the end of all our exploring will be to arrive where we started and know the place for the first time. (Location 2051)

Tags: travelling, perspective

Note: .perspective