Fluffing up the Fluff

Comfort_logo2I promised you some thoughts on money, so here goes…

I guess the first question is: where did money come from?

Money developed as a medium of exchange. Barter wasn’t always convenient – goods may have been seasonal and available at different times – there was no “coincidence of wants”. Around 9000BC, to get around the problem, people started trading in “commodity money”, initially cattle, camels, grain and cowry shells.

Coins started around 700BC, with gold and silver the most common metals used, often minted by the current ruler in an early form of monarchic brand management, reminding the users who was boss every time they bought a flagon of best Malmsey or a bushel of olives. After Charles I seized £200,000 worth of private gold stored in the Royal Mint in 1640, merchants found it safer to stash their bullion in the vaults of goldsmiths and jewellers, who thus became the first bankers. They issued notes confirming the amount of the deposit and soon these notes began to be used instead of the coins. Providing they trusted the banks, merchants and shops were happy to take the notes.

Realising that they could issue these notes against the security of the coinage they were looking after and which, increasingly, wasn’t being used, the bankers started lending notes and charging interest. The coins stayed in the vault, as collateral. Now they knew they were onto a winner, the banks started issuing more credit notes than they had coins for, and control of the nation’s currency passed from the government and its coins, to the bankers and their seemingly unlimited notes. The banks had acquired the power to create money. Which is where we are now, with 97% of the money in the economy created by banks, and a mere 3% by the government.

Which is why most money doesn’t exist. It’s merely froth created by the banks. Made out of thin air. Here’s how they do it: when a bank makes a loan it creates a line of credit, temporarily on loan from the bank. Once the loan is paid back, the line of credit – and the “money” – disappears and meanwhile the bank has made a profit from the interest charged on the loan. So they want to lend as much as possible when people are able to pay them back; when they are not able to, the banks don’t lend. Sound familiar? Ten years ago, the banks got over-confident, didn’t properly check on peoples’ ability to repay their debts, particularly “sub-prime” mortgage interest payments, and precipitated the great crash of 2007. So Northern Rock came a cropper in September that year, as its customers lost confidence in its ability to give them their money, there was a “run on the bank” and the British taxpayer picked up the tab.

The froth flies in one direction only, with customers repaying their loans with real money, money that represents energy expended, real endeavour. The banks have thus achieved what centuries of alchemic endeavour has so far failed to do: to create something out of nothing.

And of course banks quite understandably want security against big loans, usually property. What’s interesting though, is that the value of this property depends almost entirely on confidence, the confidence we have in its value not just holding but increasing, the same confidence that underpins pretty much everything we do in the economic sphere – the value of shares, unlimited growth, permanent supplies of natural resources etc. And what underpins confidence? Optimism? Right. That shaky, Micawberish faith that either “something will turn up” or posterity will pick up the tab – sometime. Scary how insubstantial this is as a basis for sustainable human evolution. Amazing how quickly confidence can switch from high to low, how much fear lurks behind either mood.

How close we all sail to that Lorelei Rock of loss or liquidity – like it or not, as most of us don’t have a hand on the tiller.  That siren call is for those creating and then selling a dream most of us can only imagine, a dream that pushes the present far into the future, contaminating it for all time with a fearful confidence, and neatly dispensing with responsibility.

And even more extraordinarily, this funny money, this froth, is traded as a commodity, just like sugar, copper, oil and other real staples. Fantasy finance! We now have HFT, high frequency trading, or algorithmic trading, using superbly sophisticated techno tools and algorithms to speed up trades, making buying and selling decisions automatically and far more rapidly than a mere mortal. Frothing up the froth.

And here’s the killer realisation: in calling for all debts to be written off, Will Self, that brilliant commentator on our all-consuming, consumerist, image-fixated, technology driven world, points out that the $199 trillion of world debt is entirely founded on the sands of expectation; that “…mortgages, bank loans, government bond issues, they all work on the basis that in the years to come, our heirs will continue not simply to work and innovate, but also to extract the world’s natural resources as much, if not more, as we’ve done historically.” He calls this “[an] advance drawn on the future” and talks of our refusal to accept the true economic – and by extension political – fault line running through our society: “…the divergence in interests [lying] between the old and the young”.

So the can gets kicked further down that yellow brick road and, like Pilate, we can wash our hands as the world bleeds.

Next time I might venture into the chaotic, confusing world of largely unregulated commerce. Or I might not, opting instead for something altogether more pleasing and real.

Go well!



Child Abuse

Comfort_logo2I promised you some thoughts on branding babies so here’s an extract from my soon to be published book “Who Needs a Proper Job Anyway?”.  It challenges creative types about to leave academe to be proactive in co-creating a future that is based on responsibility, compassion, kindness and sustainability for all.  It argues against “business as usual”, namely commerce which exploits people and planet, which is based on kicking the US$199 trillion debt can down the street for future generations to sort out, and which promises an unattainable dream in order to accumulate vast wealth for an unscrupulous few.

In researching for the book I wanted to set out some of the practices I was keen for my readers to avoid.  Marketing and the power of brands loomed large in this investigation, marketing as in taking advantage of and – at worst – abusing babies and young children.  Don’t believe me?  Read on.

The word “brand” comes from the Norse “to burn” and, reading some of the eager pronouncements of professional marketeers and brand consultants, you’d be forgiven for thinking that nothing much had changed, that just as cattle are branded with hot irons to establish ownership, so too some large corporations seek to “brand” us with an invisible but equally effective mark of ownership, a form of brain-washing far more potent than the archetypal Soviet model, since it is largely self-inflicted and we are hardly aware of it.

It starts very young.  A study in Adweek Magazine stated that by age 3, children in the US can recognise 100 different brands.  A telling quote: “Babies don’t distinguish between reality and fantasy, so they (companies) think ‘Let’s get them while they’re susceptible’”.  Jim McNeal, ex Professor of Marketing at Texas A&M University, says: “Kids become brand conscious at about 24 months.  Many kids can write the “M” for McDonalds before they can write their name.”  Rachel Geller of youth-oriented New York ad agency The Geppetto Group – boldly boasting that they can introduce their clients to The Youth Mindset – says: “There’s lots of evidence that the brands you are emotionally connected to as a child you remain connected to as an adult.”

Other market consultants recognise that brand loyalties and consumer habits that are formed when children are young and vulnerable will be carried through to adulthood.  The CEO of Prism Communications noted “…they aren’t children so much as what I like to call ‘evolving consumers’” and Toy’R Us President Mike Searles was quoted as saying: “If you own this child at an early age… you can own this child for years to come.”  A Ford executive apparently claimed: “Car branding indirectly happens at every stage of life…  Ford’s goal is to be there at every stage of the consumer’s life.  The earlier the better.”

Whole conferences are devoted to this stuff: one such held in New York in 2000 and entitled “Play-Time, Snack-Time, Tot-Time: Targeting Pre-Schoolers and their Parents”, aimed to help delegates “…create brand loyalty at an early age that will be remembered for generations” and included workshops on how to market to pre-school children and how to research their wants and needs.  According to media critic Douglas Rushkoff, “The fresh neurons of young brains are valuable mental real estate to admen.  By seeding their products early, the marketeers can do more than just develop brand recognition; they can literally cultivate a demographic’s sensibilities as they are formed.”

Which I imagine is why companies sell “…nursing linens, mobiles and crib toys decorated with brand logos or images of licensed characters…” so as to teach babies their brand logo before they can even say them.  In the 1990s, PepsiCo introduced a range of nipple-topped baby bottles adorned with 7 Up, Dr Peppers and of course Pepsi logos, in the hope that mothers would feed their infants and babies soft drinks and – yes – start their branding education.

So basically it’s open season on young minds, on sensitive and innocent “mental real estate”.  Surely this is another form of child abuse?

And while we’re talking about abuse, let’s not forget that it’s not just young minds in the crosshairs – young developing bodies are also targets on the corporate firing range.  Through the clever use of branding, food companies can also build taste preferences and brand loyalty early in children, preferences and loyalty for sweet drinks and unhealthy food which can last for the rest of their lives.  Tim Lobstein of the World Obesity Federation says in a paper published in the Lancet that “Fat children are an investment in future sales…” and goes on to claim that getting kids to eat badly and more than they need is worth some $20bn a year in the US alone.

Make you worry?  Make you angry?  It does me.

Next time we’ll talk about money, and the fact that most of it doesn’t really exist, that it’s so much fluff, created by banks to maximise profits. Really clever stuff this!


Go well!