Excess Money

a problem for the economy as well as a problem for justice

Photo by Fabian Blank on Unsplash

Many people will undoubtedly recoil at the suggestion that there could be any such thing as too much money. Yet, an excess of money is the most fundamental problem of the existing economy. It is both a problem of economics — the functioning of the economy as a system — and a problem of justice.

As a problem for the economy, excess money is both a macro-level issue and a micro-level issue. It is a problem of justice at both levels.

Anyone who doubts that too much money can exist is forgetting about price inflation. That kind of inflation occurs, according to the standard definition, when ‘too much money is chasing too few goods’. (The other way around — ‘too few goods being chased…’ — the problem is on the supply side of the equation, not the demand side of it.)

We usually think of price inflation in terms of ‘consumer goods’. There is another kind of inflation that is also bad for the economy: asset inflation.

For consumer goods, all price inflation is bad. There is much talk of ‘moderate’ inflation actually being a good thing, but that is talk of people who are nowhere near the bottom of the scale of income. An inflation of 4% is generally considered ot be the upper limit of ‘moderate’. At that rate anyone who has not received a raise in five years has lost 20% of the purchasing power of one’s income (even without including ‘compounding’).

For holders of assets, inflation in their prices is a good thing. For the economy as a whole, that can be a problem.

Whether consumer prices or the prices of assets, hyper-inflation is the problem. In both cases prices come unmoored from underlying economic reality: prices are being driven upward by the upward movement of prices.

In both cases, that inflationary bubble must eventually burst. In both cases, when it does, the result is the collapse of the economic system. In both cases, a collapsed economy is the result of excess money.

Beyond the issue of the viability of the economic system, we have reached a point at which money is becoming economically meaningless for individuals and other entities at the monetary apex of the economy. Where no ‘income constraint’ exists to require choices on actions within the economy, microeconomic theory falls apart.

At the microeconomic level the problem for economics and for justice is to try to define ‘excess money’. Here is my definition: an individual or other entity in the economy with money he/she/it ‘can afford to lose’. Any person or business with money that can be lost without suffering any deprivation has an excess of money: more than is needed.

That definition makes no reference to how much money is needed, much less how much should be needed — what ‘needs’ should be. It simply recognizes that any person or other entity in the economy, whatever his/her/its economic level, has needs that must be met: ‘overhead’ (including servicing debt). Money on hand beyond those needs is money that can afford to be lost.

Of course, there is the issue of the future. There is no telling what it might bring. That is the irrefutably legitimate reason for people and businesses to accumulate more money than they need at the moment.

On the other hand, as a matter of justice there is no irrefutably legitimate reason for arguing that people and other entities with money they can afford to lose should be immune to catastrophe. People and businesses that do not have money they can afford to lose are constantly aware of the potentially dire consequences of one bad break.

Why should those with money they can afford to lose be any different? Better yet, why not absolutely, positively ensure a sufficient level of material well-being (absent total disaster) that everyone can rest assured will be present?

Heretofore, all attempts at providing a positive answer to that question have involved taking from some to benefit others. I have developed a way to guarantee, absolutely and positively, a sufficient level of material well-being (based on current total income) for every member of society without taking anything from anyone (or limiting income/wealth).[if curious: “Same Economy, Way Better Outcomes for Society” (here in Medium)

Embedded in that paradigm is the concept of excess money. In it people and businesses are allowed to retain a certain amount of money on hand, based on income. Any money on hand beyond that amount of money (at the end of a month for people and a quarter for businesses) is collected: sent back to its point of origin, (to be re-issued, as currency, as this monetary paradigm requires). There is no limit on income, only on how much of that income can be hoarded — after all requirements of overhead, whatever those might be, have been met and an ‘emergency fund’ on top of that has been set.

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Stephen Yearwood

unaffiliated, non-ideological, unpaid: M.A. in political economy (where philosophy and economics intersect) with a focus in money/distributive justice