Fire. The Wheel. Double Entry Bookkeeping

An important inventor might have said that this are the greatest innovations of mankind.

To understand our complex economic systems, we need to dive into many things, but probably start with money. Its hard to believe, but money is created out of nothing by credit (debt). But, this is the fundamental principle that makes money work.

Economics should pay much closer attention to debt - but not as a variable disclosing the dark side of an economy.

Dirk Bezemer, University of Groningen, tackles the important questions and offers a concise and insightful explanation of how money works:

Debt, a great invention

In the following videos he describes straightforward that it's important where freshly created money goes to. Whether it's used to create income or wealth (by speculative investments). Speculative investments cause busting bubble because they run into a reverse price logic - raising prices create temporarily more demand.

But the recent crisis has shown that there is no common sense on how the money policy shall act in response. We've seen money creation by lending, but there's also central money printing. Is it enough? Where shall it go to? What about amount and inflation?

As a system person, I think of the underlying operating system fist. But wait...

Is the money system programmable?

Money is a symbol of credit and debt, as well as assets and liabilities. It's not a thing, not a piece of clay, gold, paper ... it's a contract. We use a bank debt as money and thus keep the economy going, which works in a interwoven form of contracts as the basis of exchange.

It would be trust building, if the money system could be understandable and efficiently programmed:

A quick trip to the plateau of abstract programming

In the understanding of the theory of complex systems, a system can be programmed, if it's solid enough to save and liquid enough to transform.

Computers store data and transforms signals. In a modern form of programming, Symbolic Programming, higher symbols are treated like data. Symbols are mathematical expressions, geometric objects, graphs...even programs.

Recently, a Digital Currency Initiative, with a strong commitment of the Media Lab at MIT, was established to explore whether a system can be built that treats money like data. Digital money, as Bitcoin, is already available. However, the initiative wants more.

They want to find out whether a user controlled technology such as the Internet, could act as a bank, creating money and do all the clearing, but, being not owned by any person, company, public sector…

Our money is capable of storing value and being a media for economic transactions. It should be programmable. But the money policy does not provide or use something like an operating system, a system that operates between the money system and its applications, managing memory, monitors, request and suspends processes, operates undoes…

Storage of value is an central point of the critic…it supports capital accumulation and misbalance, say the critics. If Karl Marx had known the quant finance jargon, he might have said: storing value is a long position that can be used to put pressure on the production system and workers. And in fact it can be used for a fix memory allocation or get processor priorities tar slow down the (economic) system.

I'll come back to this…but before, I'll put some thoughts on the complexity of economy and work…