Welcome to our A-Z of Faith Series: articles written by Peter Mansfield, an insurance litigator and member of our church leadership team. We hope you find these reflections on faith and religion insightful!
"Gold and silver are money," John Pierpoint Morgan, the American financier, once said. "Everything else is credit."
'Credit' in latin means 'he/she/it believes'. Given that we no longer use gold or silver as money, the modern-day meaning of JP Morgan's aphorism is this: our system of money is a system of belief.
We all know that a £10 note is objectively worthless. It is just a small rectangular mass-produced sheet of polymer. On its face it says that the Chief Cashier of the Bank of England promises to pay the bearer the sum of ten pounds. But this no longer happens. The Bank has not exchanged banknotes for gold since the 1930s. As such, a £10 note is simply an IOU from a bank that has no intention to pay.
Yet, if I go into a shop, I can exchange this objectively worthless brown rectangle for goods to the value of £10. Why? Because the shopkeeper believes that the note is not in fact worthless, but is valuable credit. In other words, he/she/it believes.
But that is just the beginning.
Let us assume that I am a building contractor. I am paid £1m in notes for a job and I pay this into a bank. The bank then lends this £1m - my £1m - to a borrower. The borrower then hires me to do some work on their house and pays me the £1m - my £1m. I pay that into the bank. I now have £2m 'in' the bank, even though the bank only has £1m. The bank then lends it to a new borrower, who again pays it to me. I now have £3m, but the Bank still has just £1m, the same £1m. Of my £3m, two-thirds does not exist and the other £1m consists of notes and coins with no objective value.
In short, money doesn't exist, at least not in the material world. A £10 note is not money. It is a symbol of money. Money itself is an idea. You cannot touch, taste, see, hear or feel money. As Yuval Noah Harari says, money is a psychological construct, a figment of our collective imagination. "Trust," he says, "is the raw material from which all types of money is minted." Money exists solely because we choose collectively to believe it exists.
This belief is so embedded within us, and we within it, that we no longer even realise that it is a belief. It has become reality.
Indeed, it has become a reality to such an extent that we additionally believe that money has the power to transform us. We see money not just as something that allows us to buy more stuff, but as something that improves our wellbeing.
And, what is perhaps more amazing is this: it does.
For those who have been in debt, having a bank balance of just $500 increases life satisfaction by 15%. A famous study from 2010 suggested that money makes us, on average, happier up to the point where our income hits $90,000 (in today's money), at which point happiness levels off. A more recent study suggests that even this may be wrong and that our well-being may continue to improve even after this $90,000 threshold.
Either way, it looks as though, on average, money may indeed help our overall levels of wellbeing. However, the key words in that sentence are 'on average'. As Nicholas Nassim Taleb says: "Don't cross a river that is 4 foot deep on average." Money, on average, may make you happier, but it can also drown you. A survey of Forbes' list of wealthiest Americans found that 37% were less happy than the average American.
I love this quotation, attributed to either Patrick Meagher or Bob Marley: "Some people are so poor, all they have is money". The wealth of our life is formed from our social interactions, our experiences and our own mental and physical health. To the extent that money is used to achieve these ends, it will benefit us. But money can too easily do the opposite. As Francis Bacon said over 400 years ago, "Money is a great servant, but a bad master."
Sadly, on a national level, money is too often the master. It drives policy. The wealth of individuals and companies is turned into political power. Every topic is allotted its place in a country's GDP. One unexpected example is to be found on The Friends of the Earth website, which provides us with 14 facts about bees. The first fact – the FIRST fact - is that bees save £1.8 billion for the UK economy as a result of their skills at pollination.
Our belief in money is so strong that even climate change and biodiversity arguments are often presented in financial terms. Is it possible that, for want of a profit, we will allow the planet to burn? If so, money, like an angry god, may ultimately smite us all.
Written by Pete Mansfield
