A bit of a paper I'm working on that grew far too long and far too whimsical and babbly for the paper.
1.
Perhaps Charles Stross’s
Neptune’s Brood also deserves a fresh look. Stross emphasizes the debt theme within and around the book, and he’s drawn on David Graeber’s
Debt: The First 5,000 Years. But as he readily admits, with everything else he’s juggling in that novel, what he has written is definitely not
Debt: The Novel. The sense of the injustice of being born into debt certainly comes through, but besides that, things play out more or less within the conventional moral framework where by and large it's
wrong not to pay your debts. Economic obligations map onto moral obligations. That's a framework which Graeber explodes in ways too interesting to try to summarize (read the book).
On the other hand, Stross’s currency system is
also extremely interesting for a totally
different reason: the way it questions the relationship between money, liquidity and sovereignty in an inter-state system.
Stross has effectively three currencies, but for simplicity, I’ll forget about medium money. Fast money is the kind of money we’re used to: it’s a unit of account and a medium of exchange, it circulates readily. Stross supposes that this kind of money just doesn’t work on the vast timescale which interstellar settlement implies, so he imagines slow money, which can “survive the gulfs of time and space involved.” For colonising stars, terraforming planets, and so on, slow money is used. Slow money is extremely stable, has a very, very low interest rate, and is used for contracts on a timescale of millennia. Every transaction must be verified by a party in another star system. (Imagine that to update the blockchain, you have to wait for a progress bar that takes
decades. This is perhaps the first time I've encountered science fiction that uses the hard limit imposed by the speed of light as a kind of advantage, a resource around which a technology can be built).
Now, back in the real world, there is something quite mysterious about the way money operates transnationally. Let me try and estrange it a bit (if that’s the right word). This side of the room be Country A, England. And this side be Country B, Narnia. There are a set of institutions in Narnia that determine, by their own weird and somewhat arbitrary rituals, that some of
you have a certain number of points, and
you have a certain number of points, and so on. (Demand-driven money creation, we could call it). There are also institutions that say you
have to have a certain number of points at certain moments in your life – for paying rent, for paying taxes, perhaps – or you’ll get in trouble. There are also institutions that enforce (potentially violently) almost all agreements you Narnians make among yourselves when those agreements mention points. So: the sovereign exercises its monopoly on the legitimate use of force within a territory to nudge you into acting as if those make-believe points were real.
And indeed, in a way, they therefore
are real. So it makes some sense that you Narnians may be prepared to give up tangible things (Turkish Delight chocolates, for instance) in order to earn Narnia points, even if they are just arbitrarily made up.
But why on earth are the Englanders here prepared to give you their tangible stuff and labour in return for your points?
Why would they do that, when they can see plainly that you just made them up? You won't allow the
Englanders to make up Narnia points. (They have their own made up points, thank you very much). Englanders: don't you think accepting Narnia points in exchange for real things could be a bit of a slippery slope? You have
no say over how many Narnia points exist. So what if Narnia decided to make up enough points to own everything in England?
Perhaps what we’re seeing is a polite euphemism for a differential in military power: England is likely to offer things for sale in Narnia points in proportion to the number of military bases Narnia has in England. "Hey England, gimme that! Here's your
point, ha ha ha!"
Narnia won't push it
too much, of course, or England might start acting out. The delicate balance is to make them servile without making them sulk.
And perhaps there’s another delicate balance, as England accumulates more and more of these Narnia points, and therefore the possibility of gradually coming to own big chunks of Narnia. If you Englanders tactlessly spend your points on enough prime real estate -- buying up Cair Paravel and Deathwater Isle and Harfang and so on --
then Narnia may flex its muscles and say, "Now hang on. I think you’ve been taking these points a bit too literally. All points are
not equal. In fact, you could say there are two kinds of points: the
fast points, which is the day-to-day business of international trade, in other words (once the balance of trade has been calculated), you Englanders handing over some of your oil and GPS units and your clothing and getting nothing but points in return. But when you try to respond by gradually purchasing a big chunk of us, well! That’s more of a
slow points matter. That starts to infringe on reasons of state, on sovereignty. And for
slow points matters, we have Aslan on speedial." And Aslan swivels round in his swivel-chair and growls, "Sorry guys, there's no way we're going to let you redeem your long term trade surplus for a major say in Narnian civic affairs. We decide how much
slow you're allowed in return for your
fast, and it won't be much. We're the ones with the military bases, after all."
(By the way: does this ever happen? Basic mainstream economics of international trade tells us that trade imbalances are
self-correcting, because exchange rates adjust so that over time if you're exporting more than you're importing, your currency appreciates, makes your exports less competitive, and gives your importers more purchasing power. But there are a lot of factors involved, and this self-correction might not happen. It might not happen, for instance, if an institution in England decides it's going to mop up all those Narnia points that are washing around, for instance by using them to purchase Treasury bills from Aslan.
More fundamentally, though, I find it difficult to know how to assess whether there really is any self-correcting mechanism that ensures that the tangible stuff that Narnia and England do for each other tend to equalize over time. I think it's pretty easy to imagine scenarios in which the balance of trade self-corrects, but you can tell at a glance that there's still horrific inequality in what each country does for the other. You know: England exports millions of units of clothing, textiles, footwear, furniture, plastic products, ceramics, electrical gizmos, and to balance it out, Narnia exports one unit of "inspection of military bases by Aslan" of equal value).
Well, I think that is an important mystery about money in the international system, and Stross is bringing it out in a quasi-allegorical way by emphasizing the vast gulf between star systems. It's important that the military power differential idea
doesn't quite fit here. Stross insists that, “There is no sensible way to profit by invasion and conquest.” Nor is any tangible back-and-forth trade really possible: they’re mostly restricted to beaming information. (Beaming information, with Stross’s assumption of mind uploading, does also include what you might call human capital, or humans). It's a way of reminding us how weird it is that money even works at all across the boundaries of Westphalian sovereign states. Perhaps it's sort of a way of asking:
is there a way of explaining the feasibility of money across Westphalian sovereign states, except by reference to military bullying?
2.
I'm not sure I'm competent to reconstruct the finance and economics around Stross's slow money. Maybe one day I will be! Here's a stab at it anyway. Comments appreciated, of course.
Stross does seem pretty clear that these are different kinds of
money, i.e. different currencies, associated with different spheres of exchange or transactional orders (starships are never for sale in fast money, and ice-cream is never for sale in slow money. What we're grouping together as "fast money" might actually be various currencies, shortlived from the perspective of ponderous old slow money). So
let's imagine a conjectural conjectural history about the origin of slow money as a currency.
I think it might have to be a conjectural conjectural history about
establishing new a sphere of exchange. A powerful state charters a special new bank, which raises capital by selling perpetual bonds in the bank itself. These are bonds that never mature, so actually in a lot of ways they're like stock. Subscribers may take some heavy-handed persuasion to buy them, because although the perpetual bond itself is denominated in ordinary fast money (so you get fast money if you sell it on the market), it pays its coupons in slow money, which is an entirely new unit of account. Nobody knows what it is, and nobody trusts it. Even worse, the conversion between slow money and fast money is
just appalling: I'm not sure how you ensure that except via price floors, and then you run into the problem that slow money is supposed to be more enduring than any particular legal or regulatory regime. Never mind, perhaps that aspect of it doesn't need to last. The main difference between a perpetual bond and a stock is that, unlike dividend payments, the bond's coupon payments won't be discretionary. Every bondholder knows exactly what their future stream of slow money payments will be. Perhaps this is even hard-coded into the technology, a bit like Bitcoin growth. The bank doesn't need discretionary powers over the slow money it pays out, though because it's never going to run out of slow money. It's the source of the stuff, the wellspring, uniquely permitted to print slow money.
So that's where slow money comes from. Where does it
go? Slow money is only redeemable for anything at all by the chivvying of the government. The government creates tax and other incentives for certain kinds of producers -- starship builders and their suppliers and their suppliers -- to do some of their business in slow money. If you're doing anything remotely connected to interstellar colonisation, you suddenly find you can do a hell of a lot better if you start invoicing in a mixture of slow and fast money, using the slow money to pay suppliers and fast money to pay employees. These are of course probably the same firms the government strong-armed when they raised the capital for the bank (or at least institutional investors who are associated with them).
But the slow money takes
horrifically long to move around. You can barely call it circulation. It oozes. Firms have to get used to a new way of doing business, where a significant proportion of their balance sheets is unconfirmed, beyond standard audit techniques. The whole thing is probably a logistics and an accounting nightmare.
But this government is strong and durable and pretty bent on driving these reforms through, and eventually you do get a new sphere of exchange and a new a banking infrastructure established. At that point, perhaps things can change. Perhaps the charter can be relaxed, and instead of a single creator of slow money (a slow money central bank) you can have many banks that issue those special perpetual bonds -- a self-regulating trans-epoch industry? -- perhaps? Anyway, assume that things are liberalised a little, perhaps by default as the particular government or civilisation that set the system in motion collapses, while the system itself survives. The way the sphere of exchange evolves -- whether it stays closely mapped to starship building and so on, or whether it becomes commensurable with other stuff -- is probably definitively shaped by its
slowness.
The notion that slow money is actually "slow" is problematic, because after all, what is to stop me from issuing IOUs denominated in slow money and circumvent the whole get-a-third-party-in-a-nearby-star-system-to-verify-it business?
The notion that slow money is "backed" by anything is also problematic, insofar as any legal regime or institution that could implement its redeemability must be more fragile and shortlived than slow money itself. (You could say the slow money banks are the exception, but we have to assume that their own fortunes rise and fall: at any given moment we can't rely on them to have any real power or assets other than slow money itself).
But slow money does have historical ties with star settling, ties which are so strong that by now we should be thinking of it as part of the deep technological know-how of that activity. To settle stars, you have to understand aerospace engineering, terraforming ecology, and slow money economics.
The notion that it is "stable" is also difficult to wrap my head around: it must surely be quintessentially volatile when priced in terms of any other asset, since on the timescales we're talking, those asset classes blink in and out of existence. On the other hand, perhaps from day-to-day the price of slow money in terms of fast money doesn't change much. It is pretty much immune to speculation. People don't buy slow money because they think the price is going to go up tomorrow. (They might conceivably buy slow money because the price is going to go up next century).
But before I go too far down this route: one of the problems is that Stross mentions slow money's very low
interest rate. He doesn't seem to mean inflation.
Is this an interest rate on a loan? Let's say that a special investment company that holds a lot of slow money agrees to loan you, a star settling enterprise, the slow money you need to get your colony up and running. It will take twenty years from the time the loan is approved for you to actually get the money for definite (it has to be signed by a nearby star). It will also take twenty years or so from the moment you repay the loan for the investor to know for certain that you really have repaid it. Then there's the bit in the middle, where you actually have the money and do something with it, which will also take years and years and years. One argument is that because this an intrinsically long term loan, so it's intrinsically higher risk, so the interest rate should be
higher.
Or perhaps we are, after all,
talking not about a kind of currency, but about a kind of bond. So instead you
could imagine that the three types of money are actually all the same currency, divided into three types of bonds. Or, fast money means "cash," medium money means ordinary bonds with 30-ish year maturities, and slow money means bonds with maturities of 1000 years. These bonds would be issued by star settling companies, and purchased by, say, pension funds that are trying to match their asset portfolios with their liabilities on that kind of time scale.
But then, wouldn't a bond only be as stable as the currency it is issued in?
Perhaps their yield contains some provision to deal with the vicissitudes of currency, including its collapses. E.g. (I'm just making stuff up now, there's no hint of this in the novel) they could be multicurrency bonds, and there could be a fixed formula by which certain currencies fulfilling certain criteria are added to or taken out of the bond along the way to maturity. When your 1000 year bond matures, none of the currencies you bought it in exist, but so long as they didn't all fail at once, your bond has gradually been translated into something of vaguely comparable value today.
3.
The whole thing could be an elaborate pun on "sunshine trading." In sunshine trading, high volume transactions are pre-announced to the market, allowing the market to prepare itself. This has the potential to reduce confusion, uncertainty, volatility, and get-rich-quick speculation. Perhaps slow money involves a similar attempt at transparency, using not just sunlight, but light bouncing between many stars.
Then again, even if we know a big transaction is about to be verified or not verified by a third party at a particular time, doesn't that just create
more uncertainty?
4.
Well, I don't know.
But
Stross’s conceit about slow money is intuitively plausible because (a) even if, like me, you don’t know that much about finance, you’ve soaked up the wisdom of financial economics enough to assume a three-way trade-off between risk, return, and liquidity (the ease with which an asset is convertible). So setting aside return, slow money feels solid, reliable, durable. And (b) this money asks us to do the same thing that interstellar colonization asks us to do, which is
be patient. It takes time to transfer any slow money, and it takes time to convert slow money into medium or fast.
So
can you design a currency to outlast the fall of a civilization? Not sure. The idea suggests to me the work of the Nazi legal theorist Carl Schmitt, and later left wing thinkers like Agamben and Mouffe who have been influenced by Schmitt, on “the exception”: the moments or frontiers where rule of law breaks down, and the question of whether a system of law can somehow include the exception within itself.
There could also be
an interesting comparison to be made with gold -- a kind of value which though socially constructed like all monetary value, also seems to have a peculiar tendency to outlast the societies in which it is constructed as valuable. It’s hard to get gold and it’s hard to fake gold, in the same way that it’s hard to settle new star systems and hard to fake settling new star systems. You could say that gold is more like money than any currency considered in isolation: at any given time and place, gold might be a store of value, a unit of account, and/or a medium of exchange; often it fails in one function or another, but if you zoom out to the big scale, it fulfills these functions better than the Zimbabwean Dollar, the German Reischmark, the Roman Denarii, the US Dollar, or the British Pound Sterling.
The puzzle about money in the interstate system is an important one, but it is also an artificial one, born by exaggerating the extent to which a state
is a circumscribed territory and a unitary actor (perhaps after the fashion of neo-realism in International Relations). In fact, states are not isolated atoms, sovereignty is not absolute, and the way monetary sovereignty works is an expression of that state of affairs. In the real world, rather than Stross's Freyaverse, the "stars" are overlapping and entangled. The institutions that make up points are likely to be multinational banks, sprawling between Narnia and England. Narnia and England are also implicated not only in a web of differential hard power and actual military conflicts, but in a web of other states like Belgium and Earthsea, as well as various MNCs, treaties, trade blocs, regional economic communities, International Non-Governmental Institutions, intergovernmental organizations. Secrecy comes into it as well.
And perhaps above all, the class and class fragment antagonisms
within Narnia and England are also really important motors here. Monetizing debt, for instance, can be inflationary, and while inflation can be brutal and even murderous to the poorest and most vulnerable, it
also has a tendency to erode
large fortunes and
large debts. So for those who survive, there can be a kind of leveling aspect to inflation: one of the reasons why mainstream economics -- which I have noticed, when all is said and done, is the science of toadying to the opulent -- is so fixated on keeping inflation low. (Not that we shouldn't care about price changes, or the kind of background unpredictability that makes it impossible to dream up projects and then realize them. Is there even a
concept to describe violent changes within the price structure rather than overall price rises or decreases? I’ve never come across it). To return to our earlier example, the Narnian elite may well prefer to have England gradually come to own significant Narnian assets, rather than risk devaluing their Narnia point holdings in relation to both Narnians and Englanders.
So I think
Neptune's Brood, whatever else it does, quietly points out the absurdity of thinking of polities as isolated, sovereign atoms. It's not just that globalisation has made it less true. Globalisation has only been possible because it was never really true in the first place.
That'll do for now.
Elsewhere: "In Neptune's Brood, how does slow money work?"
"Hard Social Science Fiction: Neptune's Brood"
