What Happens If the Money Runs Out?

That, dear reader, is the wrong question to ask, for money is a symbol, with no intrinsic value; hence, there no limit to how much money might be printed, (or, now, conjured up on the internet). It is what money symbolizes that is limited, and to grasp this we turn to a distinction made by Saint Thomas at the beginning of his treatise on the moral life (I-II, q. 5, a. 1), between two kinds of wealth:

There is natural wealth, which encompasses all the good things we desire: food, sex, housing, land, clothing. These all maintain, or fulfill, our nature in some way.

To streamline the trade and exchange in such goods, humans invented what Thomas calls artificial wealth in its various forms – seashells, coins, paper bills, plastic credit cards, and, now, the ones and zeroes of our modern bank accounts. Artificial wealth has no natural value; rather, its worth resides in its link to natural wealth.

There is a fine line between natural and artificial wealth, for we humans are never quite satisfied with just our basic needs, and our natural goods also symbolize something beyond themselves. Once we have a house, we want a finer one, architecturally well proportioned, roomy, spacious, signifying in some symbolic but real way, our status in society. We want beautiful art and music, scrumptious food and sumptuous clothing.

Even if money cannot buy all these things, it can buy some of them, and may be of benefit in gaining other more intangible goods (e.g., building a church in which we may pray). At the end of the day, money symbolizes – at a natural level – what we need and desire, and is a means of attaining them.

Hence, natural wealth imposes a natural limit on artificial wealth. When money becomes unhinged from the natural wealth it is meant to symbolize, and, ultimately, when it can no longer ‘buy’ anything – that’s when the trouble starts.

Hence, a better way to frame the question is not ‘what happens when the money runs out’, but ‘what happens when trust in money runs out’. At that point, money no longer signifies what we need or desire, and reverts back to its own intrinsic, artificial value – which is, in a word, worthless. A credit card is just a piece of plastic, unless you can use it to buy something (as those with cancelled cards soon discover).

Belief in the value of artificial wealth even has a term borrowed from Latin – credit, from credo, ‘I believe’. What happens when we no longer believe in money, or, more specifically, in the link between artificial and natural wealth?

At the extreme level, this is what counterfeiting does – create worthless money, in which the deceived place false faith. It is a serious crime, and until the modern era (and perhaps still in some countries) was punishable by death. It is a felony in the United States, with a $250,000 fine and twenty years in the slammer. Thomas was right: Money – artificial wealth – must always be linked to something real – natural wealth – and we have laws and policies to ensure that – at least, perhaps, until now.

The Problem of Debt

Neither a borrower nor a lender be is in general wise advice from Shakespeare, via Polonius, who is echoing Proverbs. There is nothing intrinsically wrong with debt, which is borrowing from the future to fund the present, so long as it is done for proportionate reasons, is productive, and can be paid back in due time.

Difficulties arise when we have little hope of every balancing the books. In the old days, for individual persons, there was debtors’ prison, where, as Christ Himself warned (albeit in a metaphorical and spiritual context) you would not get out until you had paid the ‘very last penny’.

The situation is different for states and nations, for, unlike private citizens, they have the licence to print money, including money they do not have, which means not having the natural wealth behind the money. Such fiat money – from the Latin, ‘let it be’ – is printed to pay off current debts or, now, the interest in debts, to stave off the day of reckoning when accounts become due. But more on that in a moment.

In the meantime, by printing more and more artificial wealth, we get inflation, as the increased money supply loses more and more of its value, that is, its link to natural goods, such as food, cars and lumber. It’s not that things get more expensive (as the word ‘inflation’ implies), but that such depreciated money – artificial wealth – cannot buy as much natural wealth. It has been de-flated.

When this gets out of control, we have hyperinflation – which, again, is really hyper-deflation – and has occurred any number of times in history. As artificial wealth becomes ever-less ‘real’ – less linked to natural wealth – we need more of it to symbolize what little link there is left. Wheelbarrows full of money were needed in 1930’s Germany just to buy a loaf of bread. And in Robert Mugabe’s failed-state Zimbabwe, they had to start printing trillion dollar notes.

We used to keep a brake on the money supply to prevent such calamities. Such was the gold standard, that we could not print more money than we had in the precious yellow substance, itself albeit a sort of artificial symbol, but one that was rare, limited and hard to procure. Any money printed beyond this standard would be counterfeit, even for governments.

When we realized that we ‘needed’ – or, more properly desired – more money than we had in such gold reserves, driven in large part by the great expense of the First World War, we gradually abandoned the standard. Franklin Roosevelt in 1933, to increase the money supply for his ‘New Deal’, spent his way out of the Great Depression, but at great cost, ordering every American to turn in their gold for an arbitrarily set ‘cash value’. The gold standard was finally and completely abolished by Nixon in 1973. Other nations have more or less followed suit, and now most money is fiat, simply conjured into existence, borrowed upon future generations.

So far, people have still sort of trusted money, even as it drifts more and more into an ever-more ethereal realm.  The United States debt in 1933 was $20 billion, which was a hefty figure back then. It’s now upwards of $22 trillion, which is more than a thousand percent increase, and no one knows quite what that means, with the Federal Reserve currently printing $1 million every second. Canada is in the same leaky boat drifting out to the deep, dark sea of debt, ballooning into its own trillion-dollar stratosphere under Trudeau (with one-tenth the population to pay it off.)

Money may not grow on trees, but we’re certainly using paper from those trees to make endless wads of it.

Personal finances are analogous: most of us are in debt well beyond our eyeballs, drowning in it. (A current estimate says that Canadians owe $1.77 for every $1.00 they bring in). We borrow money from the future, to pay off our debts in the present, or even the interest on our debts.

We, as individuals and as a society, keep racking up more and more artificial wealth, without any real hope that there is, even remotely, enough natural wealth to back it up, now, or a hundred years from now. We have adopted, even subconsciously, the fateful adage of Keynes’ ‘borrow like there’s no tomorrow’, for, after all, eventually ‘we’re all dead’. The obvious reply to Mr. Keynes is that our grandchildren may not be.

Money as Motivating

At the end of the day, money symbolizes not so much natural wealth, but the energy and motivation to work for wealth. And by ‘work’ is meant not just menial jobs, but drive, initiative, creativity, invention, all that has built our culture and civilization, from indoor plumbing to jet airplanes.

In other words, money is motivating, and there are few of us – the saints, perhaps, and mothers, the two groups overlapping quite a bit – who will work for nothing, motivated by the pure love of God and our fellow man. The great cathedrals were constructed in an age with a lot less money, but a lot more energy, derived from the great faith of the people, with countless peasants hauling stones up to the worksites with primitive wheelbarrows. They believed in the future, and the transcendent, and were the antithesis of Keynes.

The vast majority of people need, want and deserve a return on their work, and we may presume the master stonemasons of Chartres received fitting remuneration. But if money becomes worth less and less, or eventually worthless, what is left but to revert back to natural wealth, and getting what we can – a messy, brutish business, as various failed states evince (as in the aftermath of the Russian revolution, and China’s Great Leap Forward). There might be a sort of black market of bartering, but how does one exchange fairly? What is a dentist’s visit worth in chickens or eggs? How about math tutoring and piano lessons?

The government would likely step in and ration goods. But, as Stalin and Mao found out, it is difficult to force farmers to grow grain with the barrel of a gun. And try running that same farm with government workers, who will be paid whether they work, or not, or somewhere in-between.

And things may get even messier. Just imagine if, instead of going to the grocery store, and paying politely for your bread and cheese with your hard-earned money, everyone just grabbed what they thought they deserved, or needed, off the shelves? The produce would not last long, the weak would languish or starve, while the strongest and most violent would dominate. And they would not stop at food, but why not just usurp people’s homes and land?

The End Point?

We may hope things don’t descend that far. As Pope John Paul II pointed out in Centesimus Annus, the State has a limited role: to ensure the legal conditions exist that people may gain private property by hard work; the protection of that property and its fruits; and to safeguard the stability of the currency, that is, money.

I will leave the reader to ponder how well our governments are succeeding in that, if they’re trying at all. As our benighted leaders fail in their fiduciary duty, people turn to such options as Bitcoin. But some have their doubts about what that ethereal currency is linked to; like regular money, it’s only as good as the faith people put in it. And, unlike the reams of paper money rolling hot off the presses, faith is in short supply these days. (See the dodgy business of ‘quantitative easing’)

What happens when we can no longer pay even the interest on our loans, which is all our governments are doing at present, as we mortgage our children’s children to the umpteenth generation? What will unfold, not so much when money is no longer worth much – already here – but when people start realizing this, that there isn’t much holding up the house of cards, and no longer believe in the giant quasi-Ponzi scheme we have built? When will the state be charged with counterfeiting? Quis custodiet ipsos custodes? What might happen when our creditors come knocking?

As one pundit put it, we’re all sliding off a cliff, and the loss in the ‘value’ of money is only part of our unmooring and unhinging. But there is hope, for we haven’t slid off yet. There are a few branches and rocks we can grab, and claw our way back to terra firma. But it will be a long slog, to convince people made dependent and indolent by socialism that it is only by hard work and living within our means that we will survive, to say nothing of prosper and thrive.

But like so many addicts – the easy crack of borrowed money – we may have to hit rock bottom first.