Living in the Liars’ Economy

Elon Musk

It’s become a truism, at least in certain circles, that money doesn’t exist. That is, it doesn’t exist apart from our belief in it. Money, as a numerical representation of value, gains its worth from law, tradition, and our willingness to accept it. Kurt Vonnegut teased, in his 1985 novel Galápagos, what might happen if humans worldwide accepted money’s fictional nature. He posited that society would collapse, and take humanity with it.

Watching Donald Trump’s inability to pay his legal debts unfold in real time, I’ve reconsidered exactly what that means. The obvious position, long favored by progressives and reform-minded citizens, holds that because money is fictitious, our economy holds people artificially in poverty, and nothing but political will prevents us from fixing that. Yet we see now that Trump lied money into existence—and that, as his lies unravel, the money also vanishes.

When Trump lied to banks to collateralize his capital, that money came into existence. That’s how money originates: not through the Federal Reserve printing more currency, but through banks loaning promissory notes. Because well-off banksters saw Trump as trustworthy, they bestowed such promissory notes on his corporation, bringing money into existence. Had his lies remained covert, that money would probably remain in circulation today.

This phenomenon isn’t unique to Trump. America watched Elon Musk, purportedly a centibillionare in his own right, muster others’ financial backing to seize Xitter and transform it into his personal vanity platform. Now he’s paying interest installments on a massive underwater loan as the platform retains only hard-core users and White Nationalists. Worse, his high-profile mismanagement spills onto his other properties; Tesla and SpaceX have black eyes by proxy.

Mark Zuckerberg

Similar lies cascade down the tech-economy chain. Mark Zuckerberg lied about video engagement on Facebook, creating increased business and market valuation, which he reinvested. Then the lie came out. Innumerable video creators lost their shirts, and Facebook stock temporarily pitted. Again, had the lie been better managed, the money Zuckerberg fibbed into existence would’ve remained in circulation. In these cases, money is literally a lie.

I’ve casually observed elsewhere that supposed centibillionaires like Zuckerberg and Jeff Bezos don’t really have the money their supposed net worth implies. Their “worth” is mostly bound up in stocks, securities, and other financial devices. Though these devices have putative market value, the owners can never sell them, because they gain value by the illusion of scarcity. If they sell, the devices become less scarce, and their value will tank.

Because banks loan money into existence, loan practices are necessarily zero-sum functions. Banks loan rich people money at bargain-basement prices, and often renegotiate debt at a loss to keep rich people’s business coming. But borrowers with limited capital, fixed incomes, or a short borrowing history—the poor, the young, and the elderly—pay above market value for home, business, and student loans. Just another way it’s expensive to be poor.

This is ironic, because anybody who knows real poor people knows they’re scrupulous about repaying debts. Unless they’re truly destitute, actual working poor will work themselves into medical collapse to remain current on their mortgages, car loans, and person-to-person handshake debts. I’ve seen friends living hand-to-mouth, reduced to tears because they believe their insuperable student debts reflect their personal moral value.

Jeff Bezos

Thus, when wealthy people sink money into illiquid assets, like land or market futures, they don’t just bind money; they bind society’s trust. We invest our collective belief in the idea that capitalists know how to manage machines they’ve never operated, or coordinate teams they’ve never met. We believe it, and therefore it becomes true. Then they demand the law enforce their absentee title on capital they can’t physically possess.

Maria Konnikova writes that con-artists prey upon the very morals of trust and community which make organized society possible. Despite what high-handed moralists claim, falling victim to swindlers doesn’t make you weak; it actually means you possess an abundance of the morals which built modern society. That makes it especially important to arrest grifters, because they’re manipulating not individuals, but the very foundations of industrialized civilization.

When bad-faith actors like Trump, Musk, or Zuckerberg lie money into existence, they do so by manipulating our trust. Those who have faced such manipulation know that, when trust is severed, it grows back only slowly, only painfully. We gain human value—including financial value—only from the human community. Therefore these liars don’t just hurt themselves or the financial markets they manipulate. They scorch the roots of modern, settled civilization.