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Monday, October 17, 2011

What would you do for a dollar?

Kids struggle with money. No matter what school I've been in, when it's come to understanding how money works, they're lost. It doesn't matter if they're children of privilege or children of hardship, they just don't get money.

It's no wonder, really. The reality of money is very abstract. Kids have been holding dollars in their grubby little hands since before they could be relied on to properly wipe themselves, but most of them have never thought to ask what it is. Money usually just comes to them. It comes to them from work, from family, from crime, and from fortune, but just like their phones and their TVs, the mechanics of the system are foggy even though the practical applications are readily visible.

But their futures don't depend on being able to understand how their phones work, and all of our futures depend on making sure that all of our children understand the realities of their currency.

Recently, one of my students was struggling with this issue in his econ class. Walter is an intense and thoughtful kid with a melancholy affect. He's studious at times, but is also prone to long periods of staring blankly at work and to the occasional loud forays to other areas of the room when he's frustrated. Economics had him doing both.

"What's the problem," I asked him as I shepherded him back to his seat for the fourth time that day.

He gestured to an article on the money supply. "I don't get it."

I reached into my back pocket and extracted a single dollar bill.

"Walter, what's this?"







"A dollar."

"What's it worth?"

"It's worth a dollar."

"A dollar is worth a dollar," I smile and he does, too. "What would you do for a dollar?"

"Nothin. It ain't worth shit, it's like a twentieth of a 'dub," he cocked his head, "I'd do somethin' for a dub..."

"Well if it isn't worth anything..." I pinch the dollar with two hands and begin to tear it, "then I should just throw it away."

He reaches out to stop me. "Shit man, you gonna rip up money, you should just give it to me."

I hand him the dollar, "So obviously it's worth something to you. What can you get with it?"

He told me. With one dollar, he could purchase a candy bar, a can of soda, a small bag of chips. Almost always, the answer comes back to me in food form. It's what kids buy for themselves, so it's what they know. Walter, like all people, understood the practical application of money and, just like all people, he intuitively understood resource properties --a dollar contains the dual qualities of scarcity and demand so therefore it has value -- but his knowledge of money was just as unconscious as a housecat's knowledge of physics. Unlike a housecat, though, Walter was capable of understanding the mechanics behind his actions.

"So, Walter, tell me. When you walk into the liquor store to get a bag of chips, why is the guy there willing to take this," I wiggle the dollar that I'm holding, "in exchange?"

He bulges his eyes at me a little and wiggles his head. "Cuz it's a dollar."

"Why?" I repeat.

He laughs and shrugs and looks at the dollar some more.

"But why?" I repeat.

He howls a little frustrated, strangled howl that gets the attention of the rest of the kids in class. "Is he doin' the dollar thing with you?" one of them shouts and then laughs. Walter's not the first kid I've done this with.

"Why what," he finally asks.

"Why do we all believe that that piece of cloth paper in your hand is worth a bag of chips?"

He shakes his head and gives up, "I don't know man... we just do!"

And this is the core truth of our economic system. They whole thing is an article of faith held together with spit, big words and bailing wire. The average person thinks of a dollar as an item with intrinsic value, but it's not. In our economic system, a dollar is a resource just like oil, gold, and bandwidth. Its worth is implied in what it can be used for, not in its simple existence. Walter, like almost all people, thinks of his dollar in terms of what he can purchase for it in a simple exchange.

But he needs to change his view because that's not how the 1% think about money. Throughout our history our long roster of the 1%'ers have understood that if you control a resource, you control everybody who needs it.

Carnegie did it with Steel. Rockefeller did it with oil. The railroad barons were masters of it.

But the average person at the time didn't need oil or steel or railroads in order to live a meager life.

But that's changed recently because now much of ourcurrent 1% are doing it with money itself.

This means that all of us are now dependent on them.

We borrow money from them. We owe money to them. They control our retirements, our pensions and our futures. And just as Carnegie explained in the "Gospel on Wealth," they insist that their existence in our lives is necessary and that what is good for them is good for us.

We struggle with how to push back against them because they own our houses.

Our entire nation has become a company town and we all owe our souls to the company store. And just like hostages of any other sort, we have begun to believe that our only hope resides with their contentment. We cringe when the Dow Jones goes down and cheer when it rises. A bunch of us are really sure that giving them access to more money through tax cuts and deregulation will really help the rest of us. But the one that bothers me the most is when we watch the CPI each month and we all hope that it doesn't budge.

We are delusional.

If we had just a little bit of inflation, if we had just a little less faith in our dollars, we could fight back.

A little bit of inflation would mean that those dollars that the 1% are hoarding would be worth less. Our debts would be worth less. Our houses might actually break the surface and we might be able to breathe. It wouldn't be a panacea, but it might be a palliative for the hurting classes right now. Inflation is only a problem if people owe you money. That's not a problem for 99% of us. For the 99%, it might be a lifesaver.

The

If money is worth less, it hurts less to lend it.

If money is worth less, it hurts less to spend it.

If you are worried that our wages may not keep up, evidence points to no. Inflation necessitates wage growth.


As you can see in this graph, even during the stagflation of the 1970's, wages grew commensurate with inflation.


It would also mean COLA increases for those surviving on government assistance and social security.
Inflation won't solve everything, but it could help us all just a little bit.

But it's not going to happen unless we change how we think about money.

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