A review of The Natural Order of Money by Roy Sebag (Goldmoney Publishing, 2022).
To Be Featured in New Polity Magazine Issue 4.1
A few years ago, Douglas Rushkoff pointed out the impotence of protestors throwing rocks at the bus schlepping Google employees to and from work. The protestors were upset with the rising prices and increased rents that the gargantuan wealth of Google brought to the San Francisco area. They were regular citizens trying to scrape by with respectable jobs in a city that now had the prices of a world capital.
But were the Google employees responsible for that? Not really. They were mostly coders, passionate about algorithms and metrics, working exciting new jobs in an expanding sector in order to provide for their families. Were the executives to blame? Sure, to some degree. But Google is a public company explicitly tasked with continual growth in stock price. The executives receive their orders from the board of directors. Was the board to blame? Yes, but the board of directors, made up of Google's largest shareholders, is an entity tasked with promoting the interests of all shareholders—everyone that owns Google stock. This includes parents, lawyers, city workers, and all those school teachers who receive 401(k) benefits from the public system. That is, it includes the people throwing rocks at the Google bus. So, who is to blame for such abject economic changes? Well, all of us. By setting continual growth as the inspiration for our economic production, we have set other values below it. It has been our collective decision to put growth before neighbor, business before family, Mammon before God. And our culture shows it.
Roy Sebag’s The Natural Order of Money offers an incisive reconsideration of macroeconomics. Instead of choosing a side between various ideological theories of the economy (is money a commodity? Is it credit?) Sebag answers such controversies by returning to reality—to a given, created order. As he puts it, “No matter how economically or politically complex our human societies appear, they nevertheless remain accountable to the regularities and vagaries of the natural world.”
F.A. Hayek said in 1960 that, “The aspirations of the great mass of the world’s population can today be satisfied only by rapid material progress.” That we are satisfied is questionable; that we have made “rapid material progress” the goal of our economies and individual lives is not. And the primary way we achieve rapid material progress is by using money as if it were a purely abstract method of accounting, unaccountable to the natural world. Both those on the Google bus, and those throwing rocks at it, are responsible for their collective agreement to divorce money from this natural order.
Different cultures have created different types of money in accordance with their different desires. The Ancient Mesopotamians used pieces of clay in order for their store of value to be useless to outsiders (something Plato recommended in his Laws centuries later). The development of metallic coinage in later Babylon arose out of a need to trade with outsiders (as Aristotle would later describe). Why the Yap islanders used giant boulders and the Fijians whale teeth is more obscure, but the incredible diversity of monetary objects prevents us from ever divorcing money from the particularities of a given culture. Our culture is no different. Our money reflects our desires.
We created bank money and the fractional reserve system in a deliberate attempt to increase commerce and gain “rapid material progress” by proliferating available credit. We wanted a kind of money malleable enough to overcome any business obstacle: and so we made it. When this system got out of hand—through bank runs, credit scares, and monopoly control of the banking system by private individuals—we did not give up on our primary desires, on our love of commerce. Instead, we created the Federal Reserve Bank. Though it can be described as a check on the free market, it was a check designed to perpetuate growth. The Federal Reserve Reform Act of 1977 clarified and legislated that the Federal Reserve's function is to maintain “long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production.” There were other arguments put forward as to why we should found the Federal Reserve—such as the ability to stabilize business cycles, stabilize prices, and set interest rates—but these were all at the service of an ever-growing market. Again, we have the kind of money we have—centrally controlled fiat currency—because we love commerce. Sure, politicians and opportunists have seized the system—but our desire for unrestricted growth, without consequence, is what established the money-printing institution in the first place, enabling such abuse.
Because fiat currency is not based in the natural order, it causes the people who use it to suffer. The ability to print money as “needed” may be a boon to business, but in actual fact, most of the money printed is gobbled up by the banks. “The Cantillon Effect” describes the fact that the chief beneficiaries of the expansion of the money supply are the first recipients of the new money (usually the banks): they are able to spend the funds before they have caused prices to increase. Those next receiving the money (other major corporations jumping on the new lines of credit) face a small increase in price levels, and so on. The last recipients of the new money (the poor and the middle-class) face the greatest inflation in prices with the proportionally few dollars that trickle down to them.
In short, by printing and distributing money through specific corporate channels, central authorities have not only diminished the value of the common man’s savings but have drastically increased the wealth-gap between those associated with the state and those who are not. This was dramatically seen during the COVID-19 crisis when, between March 2020 and April 2021, the base monetary supply in the US increased by 29.9% and US billionaire wealth increased by 61.9%. Likewise, the top five Wall Street banks—JP Morgan Chase & Co, Goldman Sachs, Bank of America, Morgan Stanley, and Citigroup—earned an additional $51 billion that year compared with the year previous.
Sebag has a solution—a solution based on the natural order, the “regularities and vagaries of the natural world.” He breaks down the economy into two major categories: “the real economy… the segment of the cooperative system that engages in the production of energy embodiments beyond the producer’s individual needs” and “service economy… the segment of the cooperative system that engages in occupations and industries that do not produce and, therefore, solely consume energy embodiments from the real economy.” The foundation of every economy is the former: we first work to produce food and shelter, to find minerals and fuels because they are necessary for life. The service economy builds upon the surplus of the primary economy: only because we have enough food to eat, shelter to protect ourselves, and fuels and minerals to warm ourselves and farm can we also have Netflix. If the primary economy is the baseline of all economies, then we need a money-item that emerges from that—not from the service economy. The precious metals, Sebag argues, fit that bill.
The precious metals, and gold in particular, is the best measure and reward for labor because it truly symbolizes it. To some extent, gold is what it represents: the energy necessary to acquire it and incorporate it into the social order. That is not a trite congruence between energy expenditure and its representation; it is an adherence to the primacy of the real economy. Gold represents value with something valuable; it can represent embodiments of energy because it is an embodiment of energy; it is bound by nature—as all our economic strivings should be. It is not the money of indefinite growth in commerce any more than a clay tablet would be: but it could be the money of a people pursuing a secure, limited, flourishing within the real economy.
All abstractions, including money, are based upon reality. Man cannot create a new world, only products and ideas crafted out of what is already given. All attempts to overcome nature, as a Descartes or a Bacon or a Federal Reserve would have us do, come at some expense. In The Abolition of Man C.S. Lewis argued that they come at the expense of future generations. In the case of fiat currency, that couldn’t be more clear. The fiat system, which declares the existence of valuable units without reference to the energy expenditure and labor which enable human life and which money ostensibly represents—this has come at the expense of the middle-class and the poor. Our custom of declaring value, rather than representing it, has deprived them of work within the real economy and forced them to work within an expanding service economy, where their middling incomes are supplemented by never-ending rounds of money-printing—the lion's share of which does not reach them.
Sebag’s charge to return to gold is not another boring policy suggestion. It implies something more fundamental: that we change our desires. Our attempts at continual expansion, at infinite growth, are attempts at surpassing nature. The cycles of drought and bounty, discovery and loss, are natural. Instead of finding stability within them, we have attempted to overcome them. Instead of receiving the world as a gift, we have attempted to overcome it as a curse. We have attempted to play God, and found the only way to obtain such power is to enslave. The return to gold will only happen if we hope to cultivate our humanity, not overcome it.
If we don’t change our desires, we’ll continue throwing rocks at the very people who are helping us to grow our own portfolios. The enmity built into our current economic system is absurd. A return to the basic principles of nature is in order, and Sebag offers us a sensible argument for making it.