Since 1971, after the ‘Nixon Shock’, money has become increasingly worthless, intrinsically, but whilst it does not mean anything per se it has a lot of influence, worth and power over people’s lives, opportunities and fortunes.
The Nixon Shock meant that the dollar, the reserve currency, was no longer linked to gold because the US – with pressures created from liquidating the system, known as the ‘Triffin Dilemma’, but also financing notoriously excessive policies such as the invasion of Vietnam – decided to stop this direct convertibility. This then ushered in free floating exchange systems, the systems we are so used to now – which ironically we are told are ‘inevitable’, ‘natural’ economic systems governed by ‘natural’ economic ‘law’ and ‘logic’ rather than being part of a US project.
In fact, if John Maynard Keynes had his way after World War II the US, as a big surplus creditor country at the time, would not have been given the option of using such contextual power to have its own currency as the reserve currency; Keynes was concerned with controlling against the creation of imbalances in the global economy between the surplus and deficit countries and his International Clearing Union was an attempt to try and address this. But the US, represented by Harry Dexter White, made sure this was not the case, with the US’s dollar becoming the international reserve currency key to providing liquidity to a crippled Europe in the face of the communist ‘threat’.
However, as Keynes predicted, problems did occur having one country as the reserve currency but despite the 1971 shock the US are still technically the providers of the international reserve but it is no longer tied to anything. This did provide the US great flexibility of power in helping it finance a highly indebted economy, with little savings, vastly expansive defence spending and low taxes especially for the rich. However, what this has resulted in are even bigger imbalances between countries such as China and the US.
Money means nothing in the sense that it has no set value – it’s basically represented as digits in a machine. Nevertheless, the power it has is unbelievable. As I will explore in my upcoming book, The Capitalist Production of ‘Ideals’, the power of ‘ideals’ associated with neoliberal hegemony that mediates between a context of neoliberal relations and choices available for people to act and survive in this system is pivotal to understanding the nonsensically ongoing nature of a system that relies on such maintenance of money meaning nothing but everything at the same time.
For instance, take the ‘ideal’ of work – we have to be grateful for work that is part time, low paid and insecure – because hey, it’s work – because otherwise we are scroungers, wasters and socially excluded with our choices for access to other means of income, especially benefits, rapidly decreasing. However, most people never stop to question the point of their work, with many jobs created to fill and create false needs rather than productive functional real economy jobs.
However, the system relies upon a poor real economy and a ‘strong’ financial sector with extensive private debt, including household/personal debt. The Centre for Social Justice have just released a report that doesn’t blame payday lenders, the housing bubble or the banking crash for high level of personal debt, rather “years of increased borrowing, rising living costs and struggling to save has forced many families into a debt trap that is proving very difficult to escape.”
Can they explain how they don’t relate? Financialisation since the 1970/80s, created through ongoing asset bubbles (such as the housing bubble) relates to the increasingly severe financial crises (like the 2008 crisis), is key to people and households having low incomes because of the need to depress the real economy through financing asset bubbles via fuelling credit and private/personal debt spending, thus meaning increased borrowing for ordinary people and increased debt. This all relates.
Again, money no longer means much in reality – rather it has become key to imbalances and high profits and consequential bonuses for the rich; however, despite this inner worthlessness it means everything to ordinary people that constantly worry how they are going to pay the bills, whether they should eat or heat their home and if not to make things worse are told that it was actually their fault for the crisis because Labour spent too much on the public sector and by proxy everyone needs to suffer through cutting welfare, public services and basic living because we are in lots of ‘debt’ – whatever that really means.
Let’s face it, this system needs debt. The US economy – still providing the reserve currency – needs debt, it needs people to spend, consume and have access to cheap credit – especially to keep creating asset bubbles that enables ongoing financialisation. The US economy is the bedrock for the international system, and as shown in 2008 when that goes wrong the international system feels the effects. However, the 2008 crisis is nothing compared to what could happen if the Tea Party get their way and the debt ceiling is not risen next year.
It doesn’t make any sense, though, that ordinary people – people that have only done what they have been told to do – are punished for mistakes of people at the top gambling with money that doesn’t really intrinsically mean anything, and even in reality often those who lost their bets ended up getting bailed out by the governments (to the tune of £1.5trillion in the UK) whilst ordinary people are hammered through intensifying privatisation, marketisation and liberalisation.
We have an entire way of life, thinking and being predicated on essentially nothing of worth. We need to be more critical about this, especially about the ideas that mediate such a system. As mentioned, I will be looking at this more in my book, The Capitalist Production of ‘Ideals’ – so stay tuned!