In all this turmoil and uncertainty, the market sought something to be sure of. Volatility was good for traders, sure; but at the end of the day you had to have somewhere to hang your hat. Short the dollar— really? Short everything? Maybe, but where then did you hide your emergency fund in case everything went pear-shaped? The cash-in-the-mattress move wasn’t the same as going long, which actually at this point was looking almost impossible. This meant things were getting more and more existential, as it was a question of ultimate value, of trust in the act of exchange itself. And when definitions of value shifted from talking about interest rates to talking about social trust— when finance and theories of money fell through a trapdoor in daily normality, down into the free fall of philosophy’s bottomless pit— when people began to wonder why money worked at all— wonder why some people were as gods walking this Earth while other people couldn’t find a place to lay their head at night— it turned out there was no very good answer. Certainly no answer at all when it came to investment strategies you could count on.
Money was made of social trust. Which meant, in this spasmophilic moment, with everything changing and the ground falling under one’s feet in immense tectonic jolts, that money itself was therefore in limbo. And that was scary.
Vast amounts of paper turned to vapor. The banks of the developed Western world were too connected to fail; if one or two of the big ones went down, the rest would shrink in on themselves and wait for the state to reestablish trust before either lending money or even paying what they owed. Why pay a creditor that might be non-existent next week? Best wait and see if they survived to press that debt in court.
In other words, liquidity freeze. The various forms of paper that are in effect IOUs between banks all became worthless; the only money was cash. But that couldn’t work, because every day there were trillions of dollars’ worth of exchanges on the various markets, including the dark pools where people working in unregulated data space were trusting each other to pay despite the lack of regulatory oversight; and honor among thieves is kind of a feudal notion, more appropriate to Robin Hood and his merry men than to the world of contemporary finance. No. Since money is an idea, a system based on social trust, when things go south, and trust disappears in a poof, then there simply isn’t as much money as there used to be.
This was not shocking news to some; which was why much of the wealth on the planet was invested in property. Real estate values may drop, but ownership of that capital asset still remains, and will be there later no matter what happens. But property is not liquid. So the money problem remains even if the latent wealth problem has been solved in advance by buying up land, houses, apartments in Manhattan towers, and so on.
So with groans and clanks and huge ripping sounds, the world’s economy ground to a halt. A great depression was back at last and in full, after almost a decade of recession. The depression they had been living in up until now, now got called the Little Depression, or the Super-stagnation, and so on. This new one was the Super Depression, here at last. Very little money out there; and without money, people can’t be paid. No loans, no purchases. Unemployment quickly surpassed the 1930s high-water mark of twenty-five percent. Indeed, this time it looked like unemployment could rise to— to what? Fifty percent? Seventy percent? No one had any idea.
People spoke of barter coming back, especially in rural areas, where one could almost believe in it. But not really; barter was always mostly an idea in the minds of economists, a fantasy history. And in the cities it didn’t work at all. The pawnshop is the bartering site in cities. But that’s just money for stuff, stuff for money. It only works if money works. Same with the internet, only more so. The internet as a market didn’t work when no one trusted money.
Local currencies were proposed and introduced, backed by the town one lived in; but the town needed local banks; and the local banks needed central banks. A lively set of exchanges nevertheless began in many local regions, often watersheds big enough to support their populations; and people began to use their YourLock accounts as sites for digital microbanking that was of some real use, and showed potential for some kind of post-capitalist crowd banking.
But all this was too new, too provisional; there were too many people, and all of them strangers. Despite all the interesting efforts, as the economy circled the drain, it became clearer: for this moment, it was the central banks or nothing. They were the Dutch boy’s finger plugging the leak, the last stitch that might stop the hemorrhaging. The central banks spoke for the state. The states in question were there with their armies and police to back these central banks, all of them in theory owned by the public they reported to. If public banks held the line somehow— perhaps by creating more money, by keeping all the private banks afloat by way of even more quantitative easing— then all might be well.
Since some people had been pinning their hopes on the central banks anyway, this sudden onset of chaos and disorder was seen as an opportunity. Possibly the public could now insist on the right to be properly repaid for public money backing private banks, as they had been all along. Extract reparations from the profit takers; abolish profit if it was necessary to create the reparations. If the private banks objected, let
