Medium of Exchange

Every time I drive out of Syracuse on the NYS Thruway, I nearly always stop at a particular rest stop that features a common automated gypsy fortune teller machine, Zoltar. Cross his mechanism with pieces of silver, and he’ll dispense some random prognostic wisdom for you.

The true law of political economy is chance, from whose movement we, the scientific men, isolate certain factors arbitrarily in the form of laws. (Karl Marx)

Reflecting on the permutations of usage of the term instrument that I wrote myself through the other day, it occurred to me that I had neglected to think about financial instruments. The omission was a curious one, given the common thread I was attempting to pull was that instruments frequently are marked by their detached and arbitrary nature. Marx’s notes on John Stuart Mill are particularly helpful:

Mill very well expresses the essence of the matter in the form of a concept by characterising money as the medium of exchange. The essence of money is not, in the first place, that property is alienated in it, but that the mediating activity or movement, the human, social act by which man’s products mutually complement one another, is estranged from man and becomes the attribute of money, a material thing outside man. Since man alienates this mediating activity itself, he is active here only as a man who has lost himself and is dehumanised; the relation itself between things, man’s operation with them, becomes the operation of an entity outside man and above man. (Marx)

The concept of financial instruments illustrates this this in an interesting way. There are two primary types of financial instruments— those directly tied to capital (stocks, loan agreements, etc.) and instruments that are derived from them (index funds and things whose values are based on things related to actual cash value indirectly). It was real-estate derivative markets, a dense and impenetrable miasma of complex modes of financing, that were the dominant factor in the crash that brought the world to its knees in 2008, an entity outside and above man. Other crashes can also be tracked to financial instruments. Tulip Mania was linked to inflated values in purchase contracts, or the crash of 1929 tied to margin loan contracts. The latest disaster was even more disconnected, more alien from real events— this was an abstract dehumanized problem.

Owing to this alien mediator – instead of man himself being the mediator for man – man regards his will, his activity and his relation to other men as a power independent of him and them. His slavery, therefore, reaches its peak. It is clear that this mediator now becomes a real God, for the mediator is the real power over what it mediates to me. Its cult becomes an end in itself. (Marx)

The common characteristic of instruments as inherently detached from commodity values (and human beings), has taken some turns, mostly negative. Writing this as  “prosperity gospel” preacher has become a White House advisor, and on the 30th anniversary of Pretty Hate Machine is its own dark twist. Hollywood’s favorite goth was prescient.

God money I’ll do anything for you.
God money just tell me what you want me to

Marx’s materialist philosophy, derived from his studies of political economics take a curiously spiritual turn in his notes on John Stuart Mill. He suggests that money behaves in a way analogous to the holy trinity. The reasoning for this is that because objects only have value in relation to their mediator (money), the initial relationship (i.e. money is exchanged for objects) is inverted. Money is the estranged essence of property: “it is the alienated species activity of man, the externalized mediation between man’s production and man’s production.” Economics, in a sense I think, is the attempt to attach laws to the arbitrary and chance facts that one thing has a greater value than another because the actual workings of how things are valued is mysterious. Why are diamonds are more valuable than rubies, or glass more valuable than sand?

Marx’s theological explanation is striking:

Christ represents originally: 1) men before God; 2) God for men; 3) men to man.

Similarly, money represents originally, in accordance with the idea of money: 1) private property for private property; 2) society for private property; 3) private property for society.

But Christ is alienated God and alienated man. God has value only insofar as he represents Christ, and man has value only insofar as he represents Christ. It is the same with money.

It sent chills up my spine when I began to really understand this passage. What Marx is suggesting is the equivalence in character between the father (property), the son of property (money), and the holy ghost– the spirit essence of property that drives society, mediating value between commodities and working in mysterious ways. I think it’s important to note that this isn’t simply a matter of identifying money as a “false god” (mammon) but rather a necessary condition of estrangement, and estrangement that begins any time property is exchanged between men. Marx also identifies estrangement as a characteristic of barter. There is no society without exchange, and no exchange without estrangement.

Where do these first principles take us? There are levels of estrangement. At the base there is the exchange of property for property. In the middle, the median, property is exchanged for money; and finally, in the superstructure, money is circulated in exchange for money. This is the operative level of financial instruments, moving at a distance and detached from reality, spirits moving on the face of earth.