There’s a very confusing argument that’s often made about money by those who discuss economics: whether it’s organic or inorganic — a way of describing it as healthy for the economy or harmful, figuratively speaking.
Similarly, it happens when they talk about what is the adequate supply or quantity of money, liquidity or circulation in the economy of a country, indicating that after a certain threshold it is an emission of inorganic money and it is denounced as a measure by the government to cover its fiscal deficit. This supply can also be increased through the exchange rate devaluation of the currency against the US currency to obtain more national currency for the same income in foreign currency and thus cover the fiscal deficit or to depreciate the currency and improve the country’s competitiveness in the international market and in turn correct a trade deficit. Nothing is said about the other private agents that modify the supply and value of the currency.
An economist once described the US dollar as inorganic in a discussion forum. Yours truly expressed confusion. “How can that be said?” he said, “when the USD is widely accepted and flows unhindered and unrestrained throughout the international monetary system, throughout the global financial architecture.” Furthermore, more than one politician and analyst in our countries has proclaimed it the universal panacea, the cure for all the ills of the national economy. Since then, this argument about whether money is organic or inorganic has seemed curious to this writer, an adjective that is somewhat far-fetched.
In chemistry, the terms “organic” and “inorganic” refer to compounds, depending on whether they contain carbon atoms in their structure or not, respectively. In agriculture and livestock farming, the term “organic” refers to the production methods used to produce these foods, from planting/care/harvesting to processing. These determine the organic nature of the produce, and from this, we can deduce whether they are harmful or beneficial to the ecosystem — that is, whether they contaminate needles and soil, or whether eating their products is better for one’s health.
But, in relation to money: when did the adjective “organic” emerge and what does it mean? There’s an essay on the origin of money by a Pole, during the Austrian Empire, back in 1892, a doctor of law, father of the Austrian school of economic thought, named Carl Menger, which offers a plausible explanation. He is of the opinion that the organic nature of money arises from naturalness, understood as the normality with which its use and acceptance as a universal medium of exchange in the trade of goods arose; that is, it is a social product, or more appropriately, it is a social institution resulting from the practice and evolution of commercial intermediation, from the satisfaction of the needs of agents and actors who establish social relations of exchange in markets. Today, it could be said that it is organic when it still retains this character, but instead of trade, in a broader sense, in the real economy – production and consumption. Another approach could perfectly include the financialized economy, with its financial products, which are also a driving force of the real economy — who can deny it? — and thus the term begins to become blurred.
Organic is understood as a synonym for “natural,” from a functionalist ontological perspective, but also understood as something that is part of a whole, a structuralist approach.
Seen in this light, the author maintains the thesis that the USD is organic because it adapted and created an international financial and commercial architecture tailored to its needs, functionally and structurally, so that the monetary systems of the countries of the world, especially those of the Global South, became part of it, their tributaries, barely subsystems, colonial monetary systems, despite their chronic and growing fiscal and trade deficits, their hypertrophied public debt and total debt as a country, their international position of net investment as a debtor.
Money is diluted
Money is happening Just as other ancestral forms of money, such as salt, spices, metal coins, paper money, being soft technologies of commercial intermediation, have been evolving, it will soon disappear from our daily lives.
Some recent signs of change: the wallet disappeared, and with it coins for retail payments — who remembers? At the same time, wallets were around, along with paper money. For various reasons, some cash in bills remained for retail payments, also for slightly larger amounts. However, these payments were displaced by so-called plastic money, such as debit and credit cards. In the late 90s, so-called home banking came along with computers and information technologies. It was quickly displaced with the emergence of smartphones, which became mobile applications for online banking. Thus, bank branches decreased in number, as did ATMs for withdrawing cash and making deposits. Curiously, each evolution in innovation overlapped with the sustained loss of the purchasing power of money.
Even cash is no longer tangible, it’s electronic. Instead of money, we talk about payment systems, such as: Mobile Payment, where the phone is the point of sale and the payment terminal; Biopayment, where the point of sale only needs the fingerprint. The Biopayment terminal will soon disappear and biometric access will be done from the smartphone. How many of those present use the fingerprint to enter their online bank?
However, three characteristics of money remain unchanged with these new soft intermediation technologies: the commitment of those who agree with, trust, and support the common financial system — the financial architecture and public accounting system that constitute it, among others; the promise of payment assumed in each social relationship of value exchange; and the security and guarantee of the system.
With digital money, does physical money and the term disappear?
It is very likely, at least many national monetary systems will tend to disappear.
International trade is already controlled by the international USD monetary system. The current goal is to co-opt retail and daily trade. What’s missing? They must take over the functions of means of payment and circulation — they are already units of account — and finally achieve the global certification of ownership changes when it comes to higher-value assets, goods, and real estate. And they’re working on this with technological innovations in the internet-based financial ecosystem, such as blockchain technologies and smart contracts.
Hoarding money is out of fashion
Despite all this, you want to accumulate and hoard money so that it provides security for you and your family, to cover contingencies and the future of your children.
You still believe that it is a store of value, a safe haven, despite seeing how the hegemon and his collaborators block and confiscate countries’ assets in international bank accounts, gold in the custody of international banks, companies abroad, and their savings are blocked during financial crises. Do you still believe in buried treasure or money under the mattress?
Money is a soft technology to facilitate trade, social relations of value exchange. It is not a store of value; at best, it is an equivalence of value, and only temporarily. Remember, value is social. Whoever creates and governs this financial architecture has the final say, and it is often not nation states.
Money magically expands its effects, multiplies the economy, and sometimes inflates it — magic! We’ll talk about that in the next reflection.
