The Wealth Psychosis

Part 2 of a 3 Part Series: The Currency Paradox

The Fundamentals of Exchange

At their most basic level, economic systems are simply methods of exchange between parties. At the root of every exchange are the basic principles of the credit and the debit. In every exchange of value, one or more parties act as the creditor (the one supplying the products or services) and the debtor (the one procuring the products or services). In our current economic system, most exchanges at the personal level are resolved immediately to the satisfaction of both parties, so most people do not understand that debt is a part of every exchange. To illustrate:

If you go into a convenience store and decide to buy a candy bar, once you pick it up with the intention of purchasing it, you have assumed a debt. At that moment, the owner of the convenience store has become your creditor and you are a debtor. Most people usually have the means of resolving their debts immediately in the form of physical money or another debit payment, such as an electronic debit card. When you pay for your candy bar, you are resolving your debt to the owner of the convenience store. If you use an electronic debit card, it is possible to resolve the debt with maximum accuracy and the most efficient exchange will take place. However, if you use physical money, it is possible to inaccurately resolve the exchange. In other words, you may give a larger payment than what is being demanded for the candy bar. In that instance, the difference between what is being demanded for the candy bar and what you paid for it becomes a debt for the store owner and you become the creditor. In order for the store owner to resolve their debt to you, they provide you what is colloquially known as “change.” The transaction ends when all credits and debits equal zero.

When you understand the nature of exchange it is easier to understand the concept of wealth. What wealth provides is the ability to instantaneously resolve much larger debts. The wealthy live in a world of fast-to-very-fast debt resolution as well as fast-to-very-fast wealth creation. Debt resolution and wealth creation becomes progressively slower for those who control less capital.

However, the true key to understanding wealth is understanding that it is simply a construct of value perception. As shown earlier, market pricing is basically arbitrary because it is based largely on means and the perception of value. Is a $100,000 car actually better than a $25,000 car? There may be some objective factors that indicate that a $100,000 is “better” than a $25,000 car but, for the most part, it is merely the perception of value that allows certain cars to be sold for $100,000 or more. The value of a $100,000 car to most people is simply that some people can actually afford it at that price while it is well beyond the means of the overwhelming number of everyone else. The value is almost entirely a symbolic one.

The desire for great wealth is simply a construction of perception. It is more than possible to live comfortably and responsibly without the ostentations of wealth, even for the very wealthy. Warren Buffett, one of the richest men in the world, lives in what most in the developed world would consider a very modest home. Mark Zuckerberg, the billionaire creator of the world’s largest social network, Facebook, drives what most would consider a very modest car. Steve Jobs, builder of what many consider the world’s greatest company, Apple, lived in a beautiful, but unremarkable home in the San Francisco Bay area. There comes a point in the accumulation of wealth that a very high standard of living has been achieved. Once that level has been reached, value perception largely becomes one of symbolism. Larger homes, faster cars, and more expensive goods are not essential to a comfortable, fulfilling life; they simply serve as symbols to others that one has achieved a certain status, which is also just a perception.

But why? Why is it important not only for some to achieve great wealth, but also for some to advertise it? For a very simple reason: poverty sucks. Our current economic system does actual harm to billions of people every day. Millions of people in the developed world are either unemployed or working in low paying, unfulfilling jobs that keep them barely at the subsistence level. If this were not hard enough, politicians and the wealthy elite routinely scapegoat them, blaming them for their own misfortune while benefiting from a system designed to ensure that every cent they make ends up in the coffers of the wealthy.

To be financially unsuccessful has physical, psychological, and emotional ramifications that affect every aspect and corner of society. From unhealthy food that facilitates obesity and disease, to long working hours in dangerous or demeaning conditions, to the daily stress of trying to build a high quality of life in a system that thrives on the creation of debt, even the people in developed nations bear the brunt of an economic system that is rigged to exploit their time and effort for the benefit of an “elite” few.

These people are made to believe that they have a choice, that their success is tied directly to their effort, but the truth is that the primary factor for great financial success today is simply luck. The opportunity costs for cultivating the skills for success are becoming overwhelming for some, particularly those obtaining privatized, advanced education, which generally leaves them with crushing student loan debt. These same persons end up having to compete against people from poorer regions with high-quality, subsidized educations, who will often accept less compensation and do not carry high, education-related debt. Additional challenges from automation and technological advances further marginalize workers, increasing labor competition and suppressing incomes. Even educated workers live in a world of increasing uncertainty and the stress created fuels billion-dollar industries of legal and illicit drugs and intoxicants.

However, the challenges for educated workers in developed countries pales in comparison to those of less-educated workers worldwide. Billions of them live in modest to truly impoverished conditions. In those conditions, crime and humiliation fester like open sores. Sex trades, voluntary and forced, trap thousands in cycles of abuse and degradation. The fight to survive often breeds violence and misery. Even for those for which crime and violence aren’t frequent occurrences, the fiat currency system makes life tedious, demeaning and unfulfilling. To them, “an honest day’s work for an honest day’s pay” is mostly an empty euphemism. The reward for doing the grunt work of society is not appreciation, but scorn and disdain. In a society that supposedly values work and adherence to the rule of law, the working poor are treated as burdens, moochers, or freeloaders, particularly if they require any form of public assistance to supplement their income. Their wages are artificially suppressed in the so-called market system for the benefit of business owners, traders, and investors. They are treated as replaceable cogs in a machine that feeds the fortunes of a select few.

The Wealth Psychosis

It is through the crucible of poverty that the concepts of wealth and privilege are forged. Ostentation related to wealth and privilege is a visceral response to the indignity created by the current economic system. Very few people have jobs or careers of which they can be proud. As previously stated, over two billion people live on about $2 per day. Capitalism as it is practiced today, while beneficial in many regards, also facilitates a rash of societal ills, such as crime, violence, and substance abuse. Factoring in debt burdens, the overwhelming majority of people live their lives at subsistence levels relative to the prosperity of their country.

Many of the financially powerful are aware of these conditions, at least on a primal level. Their lives have become a celebration of being beyond the struggle associated with acquiring the means for a high standard of living. Their lives reflect what they view as “victory”; victory from hunger, strife, suffering, premature death, and, most importantly, indignity.

The further down the financial chain you are, the more likely you are to experience the effects of living in a world that demands your effort, but vilifies and humiliates you for the simple act of survival. Fear of that suffering causes those higher on the chain of financial success to ruthlessly judge those below them. This creates a self-justifying, self-perpetuating cycle of feigned superiority and shame.

For those who work long hours struggling to provide a high quality of life for themselves and their families, the current economic system de-incentivizes them by severely penalizing them for whichever course of action they take. Attempting to be responsible by doing productive work often leads to long hours, both in the work itself and the related commute. Work (in the developed world) also leads to work-related expenses such as car ownership (resulting in car payments, gas and maintenance costs) or other transportation costs, child care, and business-related clothing and other incidentals. Actually having a job oftentimes is more stressful and financially draining than not having one.

The alternative is unemployment; social safety nets in developed countries ironically provide a slightly more attractive option than working for many people. While politicians often criticize welfare and food assistance programs as de-incentivizing work, it is often the arduous, low paying work itself that is the culprit. Faced with the choice of humiliation either through low paying work or no work at all, many will choose to at least have the relative freedom that welfare programs provide. In a world where the only commodity that every person possesses is time, the value of other people’s time, in the form of quality of life, is often not respected by people who place a great deal of value on their own.

Crime, violence, and substance abuse are direct results of the shame created by the struggle to build a life of high value. Those who overcome that challenge or are fortunate enough to be born beyond it still experience it at a primal level. Many of the wealthy tend to live their lives in a state of perpetual celebration of victory over the struggle, while still secretly fearing that the victory is only temporary.

It is often stated that the poor hate the rich, but it seems as if the opposite is true. Many of the rich see in the poor the vagaries of fate. The difference between poverty and great wealth is largely the roll of the dice. We can’t choose our parents or how their genes mix to create a living being with a high level of innate ability to perform certain tasks that may give them an advantage in the current economic system. Could Giselle Bundchen choose to be beautiful or Warren Buffett choose to be born with the innate ability to manage capital? Can we choose what, if any, lessons are imparted to us to encourage the habits and perspective to become financially successful? What about the chance encounters that create the virtuous circle of friends, associates, and confidants which often fuel financial success?

The wealthy likely understand this at least at an existential level. In this regard, the less fortunate remind them of a world they cannot control, but desperately want to. In the less fortunate, they see their own faces, which creates fear and loathing. That isn’t to say that all people of means feel this way. But, it is very possible this feeling is what drives many of the wealthy to not only care little about the challenges faced by most people seeking to build lives of high value and quality, but also to ruthlessly operate against them.

Wealth, particularly as it has manifested in modern times, is a reaction to the suffering, shame, and indignity created by the struggle to fulfill our basic needs. Many of the “winners” flaunt their success through ostentation. Is it necessary to own mansions, cars, or yachts that can cost millions of dollars? What about other lavish displays of wealth, such as grand parties taking place in exotic locales… are such things truly necessary at the scale at which they are done? It’s an odd phenomenon that such displays of privilege are often showcased in media for all to see. What is even more telling is the response that such displays often engender: it is colloquially known as “hate.” Privilege that is conspicuously advertised is often greeted with anger and derision. The ones who display this privilege often lash out at the sources of these negative responses as “haters,” ones who are jealous of those advertising their good fortune.

However, let’s look at this from a different perspective: why would someone conspicuously advertise their good fortune? What purpose do overt displays of ostentation or privilege serve? It’s tough to truly understand the motives of people who conspicuously display their good fortune but it’s very easy to read such displays as acts of contempt against those less fortunate. They serve to remind others that their lives often are not as “fun” or “exciting.” Why post photos and videos of your good fortune if not for the purpose of reminding others of their ill fortune? Technology makes sharing those moments strictly with family and friends a trivial matter, so why make them available for all to see? When those moments are advertised publicly it is easy to interpret such actions as being pointed against the less fortunate. This is what likely creates “hate,” an aggressive backlash against those who conspicuously advertise their privilege publicly or in social and/or mainstream media. The reaction is not necessarily jealousy, per se, but a reaction against what is perceived as an unnecessary emotional attack. People with difficult lives do not have to be reminded that their lives are difficult. The responses of the less fortunate to these displays can be interpreted as the “hate” that hate makes.

The position of many of the wealthy is that those lower down on the economic chain desire an equality of outcomes rather than an equality of opportunity. Let’s set aside the notion that either is possible in the current economic environment because they are not. The wealthy increasingly exist in a stratified world in which their children, through benefit of the best, most expensive educations, develop social networks that lock out those on the lower rungs. The rich feel no obligation to support the value perceptions of those at the lower levels of the economy. As far as the financial elite are concerned, the system justifies itself; if the less fortunate are not satisfied with their lot in life, then it is not the obligation of the wealthy to change that. It doesn’t matter if the system is unfair or not, this is simply the way the world is. There are “winners” and there are “losers.” It’s not a perfect system, but it is not just the best we have, it is the best we’ll ever have.

The rich are 100% correct in one respect: the value perceptions of the less fortunate should not be their concern. However, they are absolutely wrong in another respect: our current economic system is not the best we can do. The key isn’t to guarantee that we all have an equal standard of living. The key is to raise the economic baseline so that the minimum outcome for anyone who acts lawfully, responsibly, and productively is a stable, secure, and dignified standard of living. Rather than being penalizing, degrading, or humiliating, our economic system should value all work as intrinsically important.

The notion that some work is more essential than other work is a fallacy. The goal of our economic system should be equitability for all rather than equality. You may be able to make the argument that all people should not be rewarded equally, but you can’t make the argument that everyone is not entitled to live their lives with dignity. Building a system that values the dignity of every person is the key to building a sustainable future.

The fundamental flaw of capitalism today is fiat currency. The paradox of fiat currency allows for a level of imprecision in determining value that has severely distorted the Capitalist system. To perfect our economic system, we must perfect the money. My proposition is a concept called… the “chron.”

Time (and Effort) is Money

Currently, money is mostly created by banks making loans. In this fashion, money is created “top down” in the sense that it is created on the supply-side and “trickles down” through an economy. For all intents and purposes, money is exchanged for the promise of goods and services. In other words, lenders lend money so that debtors can then procure and/or produce goods and services; the debtors promise to repay the lender the sum of the loan (denominated in fiat currency) plus interest. In order for the loan to be repaid, the debtor must either engage in one or more processes of exchange, known as trade or commerce, or some type of productive physical or intellectual effort, known as work, for which they are compensated. That compensation is then used to repay the lender. In this process, money is created first and value is produced afterwards.

However, what if money were created “bottom up” from the demand-side? What if money were created as a result of effort rather than vice versa?

Chron is money created as a result of productive effort. The simplest way to describe a chron is that it is the basic denomination created from a single minute of work.

Unlike other time-based currency systems, the chron is an actual currency that can be represented physically or electronically and operates exactly like fiat currency. In other words, chron can exist in physical or electronic form and be exchanged like fiat currency. However, its unique advantages relative to fiat currency have the potential to completely change the world’s financial and economic systems.

Better Money

Regarding the criteria for useful currency, the chron is very close to the ideal:

Regarding elasticity: It is better than elastic currency because, rather than being expanded and contracted to suit market conditions (and distortions), a chron is a pure, absolute measure of actual production represented in the most universally accepted and accurately assessed unit of measurement on the planet – time. Money goes from being created by banks to being created by individuals as a direct result of work. In other words, the payroll system becomes the means for creating money. Rather than being compensated in dollars, euros or other local/regional/national fiat currency, people are compensated in their own time as “chron.” These chron are direct replacements for fiat currency. To illustrate:

A person works eight hours per day; rather than being compensated an hourly wage or salary, they are paid 480 chron (8 x 60 chron (= minutes of time/effort)) per day. These chron are “printed” as a result of actual work performed rather than the promise of work.

To put it simply: everyone creates their own money through productive effort. Rather than a central banking system, a “validation” system is established to authorize entities, such as businesses and individuals, to validate the production of effort. The production of that effort is converted into the currency called chron rather than dollars or other fiat currency. Since chron has a direct correlation to both time and effort, the net effect is a system that allows a very high level of precision regarding the measurement of economic production.

Regarding efficiency: Time is the most accurately assessed unit of measurement in the world. It would make the ideal currency as it is already a universally recognized standard. The chron is not only compatible with the current financial infrastructure; it can also be integrated effectively with the same technology used for Bitcoin to form the basis of a truly efficient, universal currency system.

Regarding the chron as a store of value: the store of value problem is one faced by every currency. A currency must not only be worth something today, but tomorrow as well. That means it should be able to be stored indefinitely with little to no degradation to its physical form. People should also be able to agree that it has some form of intrinsic value that protects its relative long-term worth.

There are some things with such obvious intrinsic value that their worth cannot be questioned such as food, water, shelter, and warmth (fire). However, in the modern world, such things make poor mediums of exchange. We use money to make the exchange of goods and services efficient. However, because it is pretty much impossible to determine the absolute value of goods and services using today’s fiat currency, can any fiat currency accurately represent and retain the value of goods and services as measured both now and in the future? The reality is that they can’t. Because value is subjective, attempting to encapsulate the short-term and long-term value of goods and services using fiat currency is arbitrary, thus a relatively useless exercise. Doing so has forced us to live in a world of vague economic understanding where even our best mathematical models are nothing more than gross approximations subject to varied interpretation. There is no true precision in our economic models and can’t be due to the nature of fiat currency.

However, what if it were possible to have a completely objective money, one with intrinsic value that is already universally accepted? The most effective store of value is time. The sum of the efforts of humanity is stored in its history and can only be severely altered or destroyed through cataclysmic events. Once an event takes place, it cannot be altered and its effects, for the most part, can be measured. Time is the most precious commodity in existence for a human being, so much so that we continuously strive to create more of it. We yearn to use time productively, for both work and leisure, yet our current economic system prevents true efficiency by subjecting it to market forces. Time as a commodity is both potentially infinite and definitively scarce from the human perspective; it is “mined” by existing and continuing to exist for as long as possible. Time is the ultimate resource.

By encapsulating time as a currency that is created from productive effort, we can physically and conceptually embody its value as a tangible resource. Instead of exchanges being subjective and largely arbitrary actions based on perceived value, they become ones of actual, objective value because the chron represents effort that has already taken place, the value of which is already established as a result of productive action.

The defining concept of the chron is that it is based on the premise that all productive effort is intrinsically valuable. In our current economic paradigm, markets supposedly determine the value of work in its various forms, but, as previously stated, market determination of value is arbitrary. Some forms of work are valued more highly than others based on scarcity of skill-set. But, the failure of that system is that it is impossible to judge the true value of work based on context.

For instance, most people would accept that, based on training and skill-set, doctors should be paid more than the janitors who ensure that the hospitals at which they both work are clean and sanitary. However, what is the intrinsic value of clean and sanitary medical conditions which enable the doctor to be effective at their job? It can easily be argued that the work of ensuring a clean and sanitary hospital is vitally important. The market assumes a glut of low-skilled persons capable of fulfilling the role, but what the market can’t anticipate or value is the motivation necessary to perform the job. In other words, the market cannot properly assess the value of people who want to do the job versus those who simply can do the job. A janitor who is diligent and takes pride in their work not only does the job, but does the job correctly. What is the intrinsic value of someone who does their job well?

The reality is that it is impossible to truly quantify the value of a job well done. For example, let’s look at a common occupation such as waitress or server. It’s indisputable that there are many, many people who are qualified to fulfill those roles, but how many of them are suited to performing them well? What is the intrinsic value of a server who is courteous, personable, and diligent versus one who is taciturn, disrespectful, and laggardly? How much better is the experience provided by the former versus the latter?

Let’s look at the example of the drive-through cashier at fast food restaurants: would you rather interact with one who is amiable, respectful, and performs their job with accuracy and diligence or would you prefer to interact with one who is sullen, brash, slow, and gets your order wrong? To judge the value of work based on scarcity of skill-set completely ignores how vitally intrinsic the experience of all work is. We don’t just benefit from work done; our greatest benefit is derived when work is done with pride, care, pleasure, and attention to detail. In that respect, all work has the potential for great value.

Another problem is when people choose not to perform essential, valuable work because it doesn’t pay enough. School teachers immediately come to mind. Nothing positively impacts the learning of students more than an excellent teacher, but how many people forgo the profession because of inadequate compensation? When people are not empowered to devote their energies to the things for which they have the most aptitude and passion, it creates inefficiency by nature.

The chron respects the value of all work by turning the precious commodity that is spent performing it, time, into a spendable resource. Nothing is more valuable than time, especially when it is used for productive effort. By moving beyond a compensation model for labor, which the institutions of Capital are always motivated to undermine, a validation model allows people to utilize the commodity with which everyone is born as a truly fungible currency. In that respect, every individual, through productive work, can create their own money allowing truly objective, value-for-value exchange using current fiat currency metaphors.

Even as a thought exercise, the chron reveals some interesting realities about the current economic system; it provides unexpected answers to questions regarding the nature of money as well as a few surprising insights.

James King writes on technology, economics, and philosophy. Read more of his work at The Currency Paradox and Rando Calrissian. Read other articles by James.