The Truth about Money
My compassionate and skillful teacher, through the example of a hundred-rupee note, made it clear to my respectful yet confused mind that the mode of being or existence of all phenomena within samsara and nirvana is similar to that of such a clearly visible illusion.
- Geshe Rabten
Insights are leaps; they leave no tracks on the ground. The epigraph refers to such a realization. Simply by listening to his teacher explain, with the example of a hundred-rupee note, that a piece of paper could become whatever it was imputed to be, Geshe Rabten saw how all phenomena present themselves to us in the same way.
For those of us engaged in making a living, under pressure to make ends meet, seeing that money is like an illusion may not be as simple as it was for Geshe Rabten. Quite the contrary: calling into question the objective and separate existence of money is bound to evoke a resistance akin to that provoked when something questions the reality of our separate selves. It is precisely because of this resistance that the illusions surrounding money warrant exploration. Looking into the story of money, into its birth and its death, may shed fresh light on the story of our own birth and death.
To understand the story of money is to understand how it gets endowed with value. Usually that value is simply transferred from one form of money to another - as when I get cash with the help of an automatic teller machine. A sum disappears from my bank account, and an equivalent sum appears in the form of bills. When banks run out of bills, they replenish their stock in a similar way by debiting their accounts with the Federal Reserve (Fed). These are instances not of birth but of rebirth, and do little to illuminate the question of where money’s worth ultimately originates.
How do we catch money in the act of being born from scratch? When I recently borrowed twelve thousand dollars from my bank, the balance of my checking account increased accordingly. When bank loans expand, money expands, too. Banks are allowed to lend up to roughly ten times the amount of the funds they keep in reserve. The Fed controls this. It can make the reserves expand, for instance, by making loans to the banks. A stroke of the pen - or an electronic blip in a computer - and, abracadabra, brand-new money is born. Where does it come from? Surprisingly, it seems to come from nowhere.
Following the analogy of money’s birth, how then do we catch it in its vanishing act? As before, we must look at the credit the Fed extends to the banks. When the Fed fails to renew a loan to a bank, that money will die. Why should the Fed want to do this? Because it is its mandate to keep the growth of money in line with the growth of the Gross National Product and with the general level of economic activity. Insufficient growth of money (“tight money”) leads to hardship and recession; excessive growth leads to inflation.
Inflation can be seen as a different form of monetary death. In this case, it’s not that the total quantity of money shrinks - quite the contrary - but rather that the value of each unit is lessened. Some measure of inflation acts as a lubricant for the economic process, but beyond a certain point inflation becomes a disruptive force. It may sound O.K. to talk dispassionately about inflation in technical terms. But when the talk turns to“my”money, the prospect of its slow death has all the makings of a full-fledged catastrophe, even if we are devout Buddhists and apprehend the impermanence of all things.
When I choose to see myself as a solid, separate individual, the most immediate piece of evidence I grasp is the body I see myself incarnated in. When I choose to see money as solid and separate, what evidence do I offer to substantiate this? The usual answer is gold. Gold is the subtext of money. And this is odd, because even the formal connection that once existed between the major currencies of the world and gold was terminated over two decades ago. Before that, for nearly a century, the dollar was redeemable in gold at a fixed rate, but convertibility was actually a sham. The gold cover represented only a small fraction of the currency it was supposed to back. When the gold at hand became insufficient, the requisite fraction was readjusted. Furthermore, to forestall any possible run on gold, a law was passed prohibiting U.S. citizens from owning gold bullion. Nobel laureate Paul Samuelson puts it bluntly: “The modern student need not be misled, as were earlier generations of students, by some mystical belief that ï¿½gold-backing’ is what gives money its value.”
Yet in our psyche gold continues to back money. The gold cover for the dollar is not buried at Fort Knox, but implanted in our minds by metonymy. Metonymy is a maneuver, often used by Madison Avenue, by which the properties of one object are transferred to another, as when a car is pictured in an ad next to a stately residence, clothing is displayed on the enviable body of a model, or money is spoken of in the same breath as gold. Even plastic money partakes of this metonymy in the guise of the “gold” credit cards.