I used to work for a bank called ATB Financial, which was really just a “doing business as” name for something called the Alberta Treasury Branches. I have some of my fondest memories of my life from ATB, and met some of the best people on earth, period, during my time in Alberta. ATB is essentially a regional bank (although please don’t tell the Canadian federal regulators it’s a bank) owned by the Province of Alberta, making it unique in North America as a full-service banking institution owned by the people of a state or province (there is a Bank of North Dakota which is state-owned, but doesn’t offer a full slate of banking services and doesn’t have an open-ended mandate). I loved my time at ATB but a friend of mine reminded me tonight that I really loved the concept of ATB – the bank itself is, alas, just another human institution.
ATB was founded in the 1930s by a slightly crackpot group that assumed political power in the province after the collapse of the economy in the Great Depression and the subsequent en masse withdrawal of large eastern Canadian banks from the province, which essentially ended access to credit and banking services for what was a largely rural population. The new party in power, United Farmers of Alberta (which is no longer a party but continues to run a chain of gas stations and feed stores), espoused a doctrine called Social Credit, which was a utopian blend of bad economics, revolutionary monetary theory, and vaguely Christian millenarianism which proved completely incapable of implementation in its pure form. However, its monetary theory has proven to be somewhat durable: it was one of the first coherent expressions of the principle that money, in a banked economy of fiat (that is, not directly backed by some external asset like gold) money, is not so much a means of exchange which allows the transfer of value across different transactions in space – though it conveniently functions as such. In fact, money is a social construct which exists to store value across time. Banks (in their various forms) create money by making loans which are then simultaneously deposited in the same form by the person to whom the loan is made. Keynes was making a similar observation at the same time and because he was a mainstream economist, he gets credit (excuse the pun) for the concept, but the SoCred guys were there at the beginning.
Albertans tried to put this theory into action by creating a bank which made loans which were then deposited into the bank – this “bank” was legally a branch of the Alberta Ministry of the Treasury – and customers who “borrowed” money in this way were given scrip which were meant to function as money. Legally, this was dubious – the Canadian constitution denied provinces the right to engage in banking, so on its surface Alberta was breaking federal law. Moreover, because the economic operations of monetary creation and the multiplier principle of bank capital were poorly understood, the Canadian government (and on appeal, the UK as well) also believed that this “creation of money through loans” was an attempt to assume the power to print currency by the provincial government.
I’m not going to argue the complexities of what constitutes “banking” under the Canadian Bank Act of 1871 as amended, but the courts got it wrong on the currency printing argument. Individuals and companies already had the power to “create” money by writing promissory notes and discounting them with one another, but such “money market operations” were thought to be intellectually distinct from the printing of currency by governments. I’ve commented before on what “money” is, though, and demonstrably, while printing currency creates money for government – it in essence borrows from currency holders the rights to tax payments that they will be forced to make in the future – what the lending-deposit relationship creates is a value storage mechanism, with the balance sheet of the bank, or central bank, or government being the box in which the value then exists.
This concept is intellectually difficult – how can value be created simply by the simultaneous creation of a loan and a matched deposit? And if the loan isn’t repaid, doesn’t the “deposit” potentially still exist? What happens to the mismatch? I think people struggle with this because “value” is thought to exist as an independent concept, inherent in things via the application of human labor to the found world. This, however, is incorrect: value is created by society’s assignment of a concept of value to human interactions. Some of these interactions involve human labor (physical or intellectual) but some are purely arbitrary and involve no human process except the thought exercise of collectively agreeing to something being “of value”. We value, for example, scenic vistas, and go so far as to assign a monetary value to them when an individual sues another for a blocked view. The vista qua itself has no value, however – it only has value in light of our collective assignment of the concept to itself. There is no inherent value, in other words; all value is relative to the interpretation of the thing or concept or whatever by humans acting as a society which recognizes itself as such.
“Value” is a slippery term here, but if we look at other definitions of “value”, we find this same problem: values are universally and in all cases assigned by humans, and is not present in the universe itself. We sometimes pretend to some universal “values” but these fall apart quickly – human life is demonstrably valued differently at different points in time, for example. We don’t like this, though, as human beings – but partially that’s because some kind of stability or absolute quality to value has such tremendous utility to us in communicating our intentions across time and space and between individuals who hold a diversity of mechanisms for determining what value “means” to them. By behaving as though “value” is constant in its instantaneous expression, we can then apply principles of continuity – using mathematical tools such as the calculus, for example – to make its operation seem suprahuman.
But it’s not. At all times, there exists an increasingly complex web of human agreements – most of them implicit or at least simply defined by a carryforward of past practice, very few of them operating in the open at any time – that defines the value “field” of our world, and we are constantly but rarely consciously discarding old agreements, creating and testing new agreements, and reassessing the interrelationship of the rule set as a whole. All of this happens across the human species as a whole so that as individual creatures, we don’t perceive what’s happening – but it doesn’t mean it isn’t happening. It is supra-individual, but not supra-human: all of this remains a completely human system.
I first understood this concept when I was in high school, although I had no concept of how the system which created value worked – and that was why I got into finance. I moved from derivatives, where I started, to finance (initially securities lending, then proper depository banking), and finally to global banking, as a means of exploring the complexity and richness of this process. I quickly realized no one on earth could understand it in its entirety – mathematically speaking, individuals cannot fully understand systems which consist of other individuals as well as themselves – but I came to see the deep historicism of the system, its deep inherent conservatism, in addition to the constant innovation and change that was a necessary part of it. It was beautiful – really, to a mathematically inclined mind trained and well read in history, it was the most beautiful thing I had ever seen. I remain unable to communicate what this beauty is, but the fact that human beings, who individually are so frail, could collectively assemble such a magnificent created object, dynamic yet inertial, grindingly cruel yet capable of releasing us to greater cooperation than anything we could create in ourselves, is nothing short of an act of grace.
Working in banking, I found very, very few people who gave any thought to this. This was in itself a thing of beauty – a system run by people who didn’t even know they were running it, sort of a “Logan’s Run” scenario but without the event causing the runners to forget what they were doing – but as the banking system was in a real way the steward of the “value system”, the lack of self-awareness was puzzling. Partly I was just naive, but also, I didn’t care that much about the social aspects of the value system. I wasn’t particularly interested in what I would call today the “blandishments” which exist alongside the monetary value system-object. As I grew older, and because I thought about these things I did quite well in making my little parts of the system-object work better, I had more and more contact with this other part of value. My paychecks got bigger, sure, but the status I had – in the form of titles, in the form of the access to the language of spending (recognizing what a good restaurant was by name and being able to use that to impress others, for example), in the form of being viewed by men and women as more attractive because of my mastery of value – all of these things weren’t financial in and of themselves, but they were awfully nice to be given nevertheless.
But I grew up in Maine, and in Maine we generally view people who put on airs as being a bit foolish, and I wasn’t that impressed. I was, in other words, not utility-maximizing my social value. I declined promotions that weren’t valuable to me but this made me looks strange within the overall social value system – even as I made more or less flawless decisions about how to invest and spend my financial value. I took jobs that made similar amounts of financial value for me but were thought of as socially inefficient.
I was angry about that for a while – my frustration really being an expression of confusion, of fear of not understanding the world – but over time and especially as I reached a point of diminishing marginal new learning about the value system-object, I came to realize that social value is, in fact, no different from money value in its operation (although its effects and reasons for existing may have been subtly different). Social value is also created by taking out a loan and making a deposit simultaneously. I don’t claim to know how to do this in practice, however, which has made me a puzzle to lots of people, especially in banking but also, I’ve found, in places where social value has predominance: the arts, for iexample, where human arbitration of “quality” is not essentially different from human arbitration of financial worth. And I’m not immune to the dazzle of social value: the girlfriend and I have had a running discussion of what “glamour” is, and while I don’t know why, I do perceive my fascination with glamour in others even as I don’t find it at all relevant to me personally.
There was something else, though. My parents loved me – any reader of this blog will know that – but more than that, they taught me a concept of love which was, truly, absolute. There was a value to loving others that required no recompense. It was a concept in which there was no borrow-deposit action to initiate value creation: you didn’t even need to interact or let others know of your love to experience the grace of it. What they taught me was very Catholic in form, but as I grew older I came to see a truth in it which exists outside of my “relationships” and the social value system-object. I could love others – could love my dog – love the value object-system itself, in each case doing so purely because it felt good to do so, purely because in doing so my own vision of those things became clearer, brighter, more colorful (oddly for the color blind guy that I am, but there you have it).
Having access to that is a real gift, but it does divorce you essentially from the social value system-object. That’s hard, kind of, because we are caught in the web of value creation whether we like it or not. We’re all part of the constant, never-ending transformation of what value is – for the social value system, we do so by praising others or rejecting them, by recognizing others as beautiful or not, by shaming people or idolizing them. For the money value system, we do so by earning money and spending it – whether beggars on the street hustling for beer money, or investment bankers moving contracts around for millions.
Love gives us a pathway of stepping outside of this system, but because social value is so all-encompassing, I think most of us lose our way. A friend of mine suggested to me that those who don’t learn about this transformative nature of love are doubly trapped – they are left only with the self-referential systems of social and money value to define whether they are “good” or “bad” – and I think he’s on to something, but even when you think you’ve got a good hold on things, the constant participation in both systems can come to dominate us. You have to make a practice (a favorite word of my French yoga teacher) of living in the alternative, non-self-referential process of love because we have built such amazingly complex and potentially all-encompassing systems. I’ve been dazzled by their beauty, yes, but I’ve also forgotten, at times, that a more amazing beauty – which requires nothing other than an action, not a transaction – exists which is much more fun, much more interesting, and which gives you meaning which is your own. Loving lets you create value which is real to you – not defined for you (even if you’re a tiny cog in the process) by the social value systems of the species and its history.
I remain a banker by trade. Banking was my window into how this human capacity for systems building came about. And taking deposits and making loans – even though the SoCred guys would reverse the order – remains the basic way in which we create the units of value for the money economy. But my heart, thankfully, got captured by love when I was still a little boy. Before high school and multiplier effects and the incorrectly credited Keynes. I’ve created love from nothing – and for nothing other than the joy of doing so – ever since.
Or at least, I’ve practiced doing so. I could use more practice.
I’m heading to Seattle on Thursday – I get a long weekend with my son this time. He’s turning six in a few weeks. He is lovely. It’s daunting to practice when the stakes are another, real, life.
Endnote:
I’m told that the provincial Legislative Assembly officially renamed it to “ATB Financial” as of the end of last year. It’s sort of too bad, frankly – saying “yeah, I work for the Treasury Branches” had a way of charming older Albertans into a welcoming smile. Not that it takes much for Albertans to smile…