It is fascinating to watch the behaviour of our political and business leaders as they attempt to cope with the world’s deepening financial crisis. It is becoming clear that they don’t have a clue what is actually going on. Their blindness is explained by confusion about what actually enables economic growth. The shared delusion is that money makes the world go round.
As share and asset values crash we hear talk of deflation. Many nations are trying to counter this by expanding their money supply. However, they seem to have forgotten the most basic fact about money that we are taught in school – that it is a medium of exchange. Money allows agreements on relative “value” (how much of one thing will be exchanged for another) but it has no intrinsic value itself. It is simply a mechanism that allows the distribution of real “stuff”. So if the economy is crashing what is this “stuff” that is disappearing? It can be summed up in one word – energy.