In 1971, as US unilaterally closed gold window effectively destroying the linkage but retaining dollar is money footage, it eventually dropped the metaphorical 'Tsar Bomba' (codenamed 'Ivan' by Soviet Union, it is the largest, most powerful nuclear weapon ever detonated back in 1961) in global monetary world. However unlike other atomic explosions, there was no immediate casualty of this explosion in the form of this monetary bomb. And unlike any criticism against breaking the promise made in 1945, global leaders hastened to arrive at a damage control exercise by measures to stabilize dollar when the destabilization was effectively over.
Were there indeed no casualty and only benefits of this metaphorical atomic explosion in global monetary world?
No, there were casualties but not as we saw in Hiroshima and Nagasaki. Gold was a casualty as an investment class (though it gained spectacularly in the 1970s). But that did not matter as long as human civilization grew and prospered on planet earth. So why should we bother and unnecessarily chew our heads about the nuclear analogy in the beginning?
There were other casualties and those came up eventually. It showed the shortsightedness of our policy-makers, expectedly. The biggest of them all was Mother Nature. What followed next over last 35 odd years is a mad rush of pumping of paper money all over the world. If US could do that and still sustain, why not Japan; and if Japan could do that why not China, and India, and all the rest. True that few suffered in-between in over-doing money circulations, but those were incomparable against the magnitude of benefits globally human beings saw in last 35 years by following Henry Kissinger's model, who called the gold standard 'that barbarous relic.'
And from whom do our Governments and central bankers borrow? Well from some stupid people who save for future uncertainties inspite of their poor consumption levels, and also from some rich people who can't consume as much as they earn. Otherwise how do we explain high savings rate in China (40% of GDP) and India (20% of GDP) and other emerging developing nations to be much higher when compared to negative savings rate of US (-1%). But that source of savings increasingly proved to be inadequate against the shortfalls our Governments ran year after year. So what did they do they, matter of fact, borrowed from Nature, directly by creating money or indirectly through rest of us. They state that it's their right to create money as the economy demands. But little probing would show that they create that money from air by borrowing from Nature. And presently the level has gone up so much that further increased borrowings clearly show that they don't even have the intention to pay it back ever.
However as Nature per se don't give credit at all, we aren't sure whether she receives the pay-back without any collateral damages. Effectively it means the pay-back needs to be much higher, not purely in monetary terms but probably in other Natural terms as well.
If we begin with the fundamentals - why do we need money for? The answer would be for easy and convenient transactions in buying goods and services to consume. Can we think of any goods or services that's not sourced from Nature directly or indirectly? Probably not. And I am not alluding to the fact that mankind by virtue is also part of Nature. Even if one takes IT and BPO outsourced services, the money paid is eventually used by the employees in India and elsewhere to consume more goods made from Nature again. So when we transact with significant amount of borrowed money out of total available money, as encouraged by our Governments and central bankers year after year, we effectively consume more and more.
We even consume things that we apparently don't need, but because others in our society consume them. So new needs are created, new products come and well, we feel that we need them as badly as ever.
And till yesterday we were living happily without any such need! How strange...
And no one owns Nature. Aristotle said about common goods "that's which is common to the greatest number has the least attention bestowed upon it. Everyone thinks chiefly of his own, hardly ever of the public, interest". And thereby our Governments took care of respective citizens and economies, business organizations took care of their shareholders, and no one as such bothered for poor Mother Nature. We all eyed Her resources to build our resources before it is too late for us to join the party the party of exploiting and raping Mother Nature.
And thereby most of us increasingly created more and more assets out of these two still free natural resources.
And then many realized that pure drinking water is no more available free of cost. And if things continue this way, sooner than later we will realize that refreshing clean air too comes at a price. Sounds incredible isn't it? But the writing is on the wall that if things continue the way it's been continuing now Mother Nature would collapse in her way to sustain human needs against credit money where we consume today what she is supposed to make available to us sustainably tomorrow.