New Money is Created with Promises

Ordinary people can help create new money by making promises. You constrain the future by making a plan, and a promise to keep to it. Money is created in response, because in making that promise you have created value. New money is created to represent that value. This is why it is possible for banks to fall apart when people don’t pay their mortgages back. Banks sell assets that are partially made of the future intents of borrowers. When borrowers do something other than promised, those assets no longer exist. An economy is like a cosmology. An expanding market, like an expanding universe, has unique laws and local phenomena. Growth is necessary in a healthy market, and it doesn’t have to come at the expense of the environment or other precious things we hold in common. Growth is merely honest if the goodwill of ordinary people is to be acknowledged instead of forgotten. That means a little inflation—not too much—is proper, as people get better at doing things in ways that are acknowledged to be good for one another.* This is such a basic idea that it can be hard to see.

Jaron Lanier, Who Owns the Future? (2013-05-07)

• economics
• good will
• society