As Good as Gold

Where does money come from? I am not talking about the ways in which we earn an income but rather of how new money comes into being. Does it grow on trees? Is it made by computers? Can we dig it out of the ground?

According to a video posted on the Bank of England website, central banks create new money electronically and use it to buy financial assets such as treasury bonds from banks and institutional investors. They describe this procedure, euphemistically known as quantitative easing (a smoke and mirrors expression if ever I heard one), as unconventional. The Knot Garden prefers irresponsible.

This method of managing a country’s monetary base, which has parallels in the ancient practice of coin clipping, might be compared with the behaviour of an individual who takes out a loan and then prints counterfeit banknotes to repay it. The perpetrator would be convicted of a serious fraud and thrown into jail.

Governments have granted themselves the legal right to create money out of thin air using a sort of electronic alchemy. Ben Bernanke notoriously proclaimed in his infamous 2002 speech addressing the spectre of deflation that “The US government has a technology, called a printing press, that allows it to produce as many dollars as it wants at essentially no cost”. This assertion reeks of arrogance and complacency and presents a dangerously unbalanced proposition.

By pursuing a philosophy of creatio ex nihilo, politicians and central bankers appear to be assuming the role of gods. We mere mortals, looking on in horror, would rather invoke the counter principle of ex nihilo, nihilo fit.

If you increase the supply of something in the absence of a commensurate increase in demand, its price usually falls. You would expect this principle to apply to the value of money but, in the occult sphere of central banking, it does not seem to work in the usual way. According to the OECD website, the widely used M3 measure of money supply has been expanding in the G7 countries at a high – and accelerating – rate for the last couple of decades. The increase has been particularly marked since the credit crisis reached a climax in 2002, as central banks have turned to quantitative easing with a vengeance. And yet so far inflation has proven remarkably stubborn to provoke. Eventually, however, the piper will insist on being paid.

New money is made in the modern world using computers and thus the printing press, used for centuries to produce bank notes, is gradually becoming a metaphor. There is, however, another form of money, important historically but now considered a relic. It is of little relevance to today’s economy and is universally reviled by central bankers. The monetary role of precious metals has diminished to the sole function of acting as a store of value for a small number of individuals. However, gold and silver may have the potential to form the basis of fully fledged currencies once again.

Last week I opened a GoldMoney account, purchasing a little over an ounce of gold. Unlike conventional arrangements for holding precious metals with banks, which operate the scam of fractional reserves, GoldMoney deposits are backed by the full amount of metal, which can be withdrawn for physical delivery at any time. Customers can make electronic transfers of precious metals to other holders of GoldMoney accounts. They can also purchase goods and services using a prepaid GoldMoney card, although this requires conversion of precious metal into the relevant fiat currency.

While we do not yet have a true gold or silver-based currency, The Knot Garden believes that we are heading in the right direction. Such a currency, offering stability, security and practicality, would truly be a cause for celebration. Except, of course, for the central bankers and politicians.

The Apprentice

I have a great job. I work as a temp in a clothes shop. You must be wondering exactly what I do there. Am I a sales assistant? A security guard perhaps? Nothing quite so glamorous I’m afraid. I am an administrator. Of what does not matter. Admin is admin – full stop. But I like my colleagues. We all get on well together and generally have a good time.

In spite of the attractions of my current position, I am looking at throwing it all in and doing something completely different. That’s right, I’ve decided to make a career change. Not right now, but in a couple of years. And, true to form, I have chosen two vocations for which I am poorly qualified.

What precisely are these forms of employment? Let’s just say for now that one of them is purely creative while the other is considered by most people to be a form of gambling – a view that has some validity.

Why am I doing this at my time of life? Well, the two fields of endeavour meet a number of criteria that have particular relevance to The Knot Garden. They satisfy the principle of self-reliance. Thanks to the Internet, they take place on level playing fields, at least to a certain extent. They require minimal investments of capital. And they both offer tremendous scope for self-fulfilment.

There is a very significant downside to both occupations (I would hesitate to call them professions). They present formidable learning challenges and therefore attaining a level of mastery takes many years  – if it is ever achieved. Fortunately they both lend themselves to self-training. Input from others, the genuine experts in their fields, is nevertheless indispensable, whether in the form of mentorship or by examining their work. Formal courses and certificates, on the other hand, are not necessary. In these domains, the letters that come with a university degree might be more of a hindrance than a help.

So there you have it. I am simultaneously undertaking two apprenticeships. In case you think this is all just pie in the sky, I can tell you that I have already invested thousands of hours of effort in both of them. I have been working on one of them for five years and the other for seventeen. That is an average of eleven years and I still have some way to go. Contrast this with the apprentices in the famous television programmes (which I do not watch), who race through their apprenticeships in a matter of weeks. Clearly I do not have their personal qualities and so need somewhat more time. And I thought I was a fast learner?

As my friends are well aware, I tend to do everything backwards, and this time is no different. I am contemplating not one, but two new vocations at the wrong end of my life. I have chosen extremely demanding occupations that most people would not even consider as sensible ways of earning a living.

What makes me believe that I will succeed, against the odds? That is an easy question to answer. The two activities have become so fundamentally important to me that I cannot envisage a future without them. And what are they? One is writing and the other is options trading.

Omnibus Aut Nihil

Several years ago I pondered the idea of adopting as a personal motto “Omnibus aut nihil”, imagining it emblazoned on a coat of arms divided into black and white quadrants. It was just a piece of fanciful nonsense but it had its roots in something concrete.

I have often embraced an “all or nothing” mindset in the belief that it reinforces positive personal qualities such as intensity, commitment and integrity. I still apply this mentality from time to time but, recognising the dangers it carries with it, I do so far more selectively than before.

The trouble with “all or nothing” when used indiscriminately is that it can paralyse your mind, blocking rational thought and preventing you from performing productive work – or enjoying yourself. It is a destroyer of value, sabotaging your self-esteem and wasting precious resources.

In its more extreme forms, the “all or nothing” view of the world, oddly described by psychologists as dichotomous thinking or splitting, is associated with types of abnormal behaviour like Narcissistic Personality Disorder or Borderline Personality Disorder. Certain politicians come to mind.

It is easy to think of everyday examples of “all or nothing” in action as a destructive force. And history is littered with examples of dictators or other abusers of power, driven by greed, their judgement distorted by an intransigent view of whatever “all” they are pursuing and by delusions of their own importance.

At the same time, we can find situations in which “all or nothing” is not only appropriate but actually necessary. Let us say that you are an options trader and require ten criteria to be met before entering a trade. One day, your outlook tinged by complacency after a winning run, you break your own rules, entering a trade with only eight of the ten factors in its favour. Not only do you lose your shirt but you cannot include the trade in your measurement program because it does not conform to the standard. So your metrics are screwed up too. Ironically, the “all or nothing” approach that should have kept you out of the trade was used instead for trade management, preventing you from exiting with a much smaller loss.

Consider also the case of a lady called Lucy who decides to design her own house. She hires an architect, Felix, who tries to persuade her to change her design. After all, what does a marine biologist know about architecture? However, Felix does not reckon with Lucy’s obdurate streak. She digs her heels in because she has a shining vision, developed over many years,  of her new house. Felix eventually resigns and Lucy continues on her own, calling on professional help only when strictly necessary. Lucy balances her “all or nothing” approach to the design with a resourceful mindset for getting the project done. The house is completed as Lucy had envisaged it and her family are delighted. The integrity of the building has been preserved.

I wonder where my own “all or nothing” ethos came from? Perhaps I was influenced by the highly principled, uncompromising architect Howard Roark in Ayn Rand’s brilliant novel The Fountainhead – surely one of the best examples in literature of a positive “all or nothing” character.

I now believe that “all or nothing” should only be invoked when your principles or integrity are under threat. The Knot Garden emphasises balance, understanding that the key lies in maintaining a constructive tension between the apparently contradictory mindsets of “all or nothing” and “pragmatic and resourceful”.

The Value of Words

The idea that words have some sort of tangible value appeals to me. I am not talking about their role in brands or Internet domain names but simply the written or spoken words that we use to communicate. For me, some words have a high value while others are not worth much at all. Other words have considerable value in one form of usage but not others. And then there are perfectly good words that, like currencies, have become devalued through proliferation.

A good example of a word worn out by overuse is “extraordinary”. It is hard to find a documentary that is not peppered with this adjective from start to end. Even the admirable David Attenborough utters it so frequently that it has lost its impact. After all, if so many things are extraordinary, does that not just make them plain old ordinary?

The word “leverage” has a high value for me when it is used as a noun, whether in a mechanical sense or in the context of financial markets or other areas of human interaction. But it seems awkward and inappropriate when used as a verb – typically in the annoying world of business jargon. Archimedes would turn in his grave, screw-like, if he could hear this buzzword being used in corporate conversations and presentations, typically as a simple substitute for the verb “to use”. There is an irony here as the same outcome is achieved using eight letters instead of three. Is that not the precise opposite of leverage? In any case, I had always understood the verb form of leverage to be “lever”. The extra three letters add nothing but a sense of bombast.

Continuing the theme of nouns inappropriately converted to verbs, we have the entertaining case of “podium”. I am truly a fan of athletics but sometimes our language takes a hit in a worthy cause. The idea (now reinforced by several dictionaries) that podium is a verb seems ludicrous to me. How are we meant to construct the various tenses? For the past, we apparently have the outstandingly awkward “podiumed”. Perhaps “podiated” would be better? And how about “repodiated” for someone who wins another medal?

Some words, for me at least, have negative value and contribute to a sort of “language debt”. We would be better off without them. For some reason that I cannot quite put my finger on, I feel uncomfortable with the word “selfie”, which was awarded “Word of the Year” by Oxford Dictionaries in 2013. It smacks of narcissism and instant gratification. The original “self-portrait” has more dignity. Slang has an important place in languages but there is something about this particular word that grates.

One of the worst of all modern words, bodged together in the form of a crude portmanteau, is so distasteful to me that I find it painful just to write it down or type it on the keyboard. I don’t know where “chillax” came from, but I wish it would disappear forever.  It is not a word – it is an abomination. If it entered a competition for the world’s worst word, I have no doubt that it would podium.

The Knot Garden, a supporter of Plain English, approves of the invention of new words where they contribute to the richness of the language.  But such a craft should not be taken lightly. Not all words are equal.