“Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished”.
– Barak Obama
The gloves are off:
Mr. Obama’s statement is profound; in a single stroke, he liberated social capital, creative capital, and intellectual capital from the oppressive arm of the financial markets. This sends a strong message to entrenched and corrupted financial operatives that they no longer hold a monopoly on American productivity.
The factors of production carried over from the last century; land, labor, and capital, can be now be challenged by social capital, creative capital, and intellectual capital as factors of production for an Innovation Economy.
The third option:
Q. So how exactly does a country meet a 50+ Trillion dollar obligation?
A. It depends on the social agreement.
First, we could default and let the system crash. Second, we could endeavor to pay it back by committing the next several generations to servitude of the debt. Or, there is the third option that nobody talks about.
Create a new currency.
Almost every country has done it. Mexico replaced the old “Peso” with a “New Peso” (worth 1000 old Pesos). Europe created a new common currency. Chinese Yuan is a “bridge currency” that gets them from point A to point B. Each of these examples is different, but they have one very important element in common; they are utterly dependent on a social agreement.
People must agree to exchange the new currency on the streets. Social agreement, creative agreement, and intellectual agreement drives entrepreneurship and all must be achieved completely or “black markets” will form undermining the entire system.
The Tipping Point
We know a few things about currency outcomes. If inflation occurs, people with “cash” will lose it, while people with “debt” will see it deflate. The US can erase the deficit by inducing inflation and deflating the debt if production capacity remains undiminished. People, organizations, and governments that have exactly as much cash as they have debt will see no net loss or gain. In fact, the entire world’s financial system is worth exactly as much as it owes to itself – minus the value of social capital, creative capital, intellectual capital and natural resources – now, set free.
As inflation progresses, there will be a point where a critical mass of the “social agreement” will hold the same amount of cash as they hold debt – their net loss will be zero. That’s when the system can reboot. obviously there will be serious consequences to any of the options, but this time, unlike any other time in history, social media will be the vehicle upon which the social agreement is catalyzed and not necessarily mandated by policy makers.
The Obama Factor
“Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America”
Mr. Obama is right – the outcome depends on us. We cannot expect government or corperations to attend to all of our needs because we are the ones who individually and collectively own and control the factors of production that will support the next currency. The road to opportunity has been cleared and the invitation has been cast. We must now reach deep into our imagination and define the new business system where social capital, creative capital, and intellectual capital are directly tangible in a new global economic imperative; the Innovation Economy.