Dear friend—
I started working when I was 16, at a Walgreens that sat (and still sits) a five-minutes drive from my house. I had two work shirts—one, a light blue cotton t-shirt, and the second, a disgusting collared polyester number, also light blue. I learned regulars’ cigarette orders (Marlboro menthols. Virginia Slims. America Spirit, the dark blue please). How to do small talk. How to face the shelves so they all look full. How to unload a tote and make it last across the length of a mind-numbing shift. How to listen for a customer approaching the counter while in the freezer, 12 aisles away. How to count change fast (I’ve since lost this skill).
At that job, I made my first paycheck, which I took home in a little envelope. Once, I had to tell the scary store manager that I lost my check, and I thought I was going to pass out in fear. He was annoyed, but not unkind, especially after I found it a few days later, so shout out to Dan. Soon after, I got direct deposit.
With a single little form, in which I detailed a medium-sized string of numbers and signed my name, my paycheck was magicked into my bank account every two weeks. Every job I would have after that, I would get direct deposit. It was wonderfully convenient, and I would never risk losing a check worth several hundred dollars or more. One moment: BAL = $256. Blink. BAL = $893.
Bonkers.
My relationship with money is kind of fraught, but totally self-inflicted. I have a lot of guilt about it (as I do about many things). I was denied very little growing up. If I wanted a snack at the grocery store, I could put it in the cart. If I put something on my Christmas list, I would be sure to find it under the tree on December 25th. Working at Walgreens in high school was a choice—an opportunity for money to spend on gas and Wawa coffee. My mother, and her parents, and their parents, worked very hard for me to be raised that way.
I have worked hard, my friend, but not that hard.
All this to say that I have a hard time connecting the idea of money, especially since it is so digital these days, to the material goods and experiences that spring forth from it.
At the same time, I grew up Class Conscious™ because my friends and I all came from different backgrounds with different means. I grew up hyper-vigilant of money, but in a very abstract way. I was always very grateful for it; I knew it meant something, a lot of something, to many people; that it was the decider of who eats and who works and who gets what in the world. But I have never felt its squeeze. So there’s a large gap between knowing that money means something and feeling like it means something.
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A few days ago I told my boyfriend, “Money is kind of fake.” He made the face that he always does when I say something out of pocket.
“What do you mean money is fake? We just got Starbucks.”
Fair enough.
I’m not the money expert here. And by this statement, I didn’t mean to minimize folks for which money means a lot. I know money does mean a lot—who eats and who works and who gets what. But I guess what I meant when I said “money is fake” is that money does not mean what we are taught to think it means.
Money is not an objective tool to reward the hardworking and punish the lazy (As I think most of us know, especially since the pandemic). It is not an objective assigner of value nor is it an objective expression of supply and demand. There is some science to economics, but despite what a certain kind of economist would like us to believe (and which they probably believe themselves), money is mostly about storytelling.
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Once upon a time, prices on commodities—goods—were decided by their supply and demand. This system was imperfect, but it made some kind of sense. The rarer something is and the more people want it, the more expensive it is. The more abundant it is and the less people want it, the cheaper it is.
But then that relationship was taken for a spin. Take futures contracts. In the 19th century, farmers in the midwest all brought their harvest to Chicago at the same time. That brought a whole lot of supply to the market, which plummeted prices. Farmers struggled to make a living. They dumped their unsold grain into Lake Michigan.
The solution—futures contracts. Farmers signed contracts with buyers for the future. “In exactly 6 months time, you will buy X bushels of wheat from me at X dollars per bushel.” This was a good thing for farmers. They could ensure they would be paid, and plan ahead. They could buy the equipment and supplies they needed, usually on loan, with the futures contract as collateral. “This is why most economist see speculation as a stabilizing force in markets,” writes journalist Rupert Russell (more from him later).
Then, some folks enter the market not to buy goods, but to make money. By entering a futures contract, they are essentially betting on the price. The farmer offers the contract. The buyer (in this case, a speculator), enters the contract because he thinks the price for grain will have risen by the time it is to trade. He bought the grain at $150 in March, but by September, the value of the grain has risen to $200.
Congratulations! Thanks to that contract made in March, the speculator has gotten his grain $50 less than the current price.
He doesn’t need it. He’s not a baker. He lives in a lakefront mansion. So he sells it on the market at the current market price and pockets a cool $50. The farmer is just happy that she could secure a price for her harvest, make ends meet, and she does not have to dump grain into Lake Michigan.
This seems relatively reasonable. But futures markets spawned different beasts. For example, index funds. With index funds, there is no delivery of goods (some futures don’t deliver goods, either—those are called cash-settled). There is no single good. There is just a bunch of goods, with their prices bundled together into a single number, called an “index.” And speculators can bet on the change in the index just the same way they can bet on the price of a single good. The speculators bet that, at some time in the future, the index price will rise or fall (usually rise).
But the thing about financial tools like futures and indexes is that they become increasingly detached from the actual market for the good. It becomes less about what the market looks like, and more what the speculators think the market will look like in the future. “There’s a story of higher prices”—Russell again—“so people withhold goods and restrict supply, causing the prices to rise, fuelling a self-fulfilling prophecy.”
Futures, prophecies, stories … it all sounds very mystical. A little fantastical. A little make believe.
In his book Price Wars,1 Russell compares the speculators and everyone else who gets rich off commodities trading and all manner of finance—including dictators in countries like Russia and Saudi Arabia, which, surprise, have added billions to their coffers because of oil commodity trading and perhaps that’s why they can spend their cash bombing other countries—Russell compares them to the minotaur, the monster in the Greek myth of Theseus. And the labyrinth it uses to wreak its havoc? Prices.
Because, of course, the prices that speculators play with are for things that people need. Grain, oil, perhaps even water, in a very near future. For example, around the time of the Great Recession, the world was producing more food than we ever had before. Yet prices were going up and up and up, because speculators thought the price would go up, at some point in the very near future. Supply and demand who?
Now, futures markets and commodities trading and index funds are a not-insignificant factor behind our current high food prices and the billions people around the world who currently do not have enough to eat.2
My friend, when I learned all this, I kind of lost my shit.
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The other day I started putting money into a Roth IRA. This is how I did it. I went to a website that I had heard good things about from several folks I trust. I typetypetyped until I had a Roth IRA account, which lives on the internet as a bunch of bits and bytes. Some pixels on my computer screen. I downloaded an app for the website that I heard good things about. I tapped the “Deposit” button. I typed a number. And then I hit “confirm.”
My friend, perhaps it shouldn’t be that easy to move money. The same little bits and bytes that keep me fed and clothed and housed can get dumped into the stock market with a little swiping and typing.
I put money in the stock market despite all my boohooing about futures and index funds because, as every financial person I ever come across on the internet likes to remind me, every moment I have money in my checking account it is losing value! Inflation is chugging along and if I hold onto excess cash, I am letting my money wallow there, stagnant, not even gesturing toward trying to keep up with the ever-rising cost of living.
Interest compounds! cry the experts. It is exponential. 2 x 2 = 4 x 4 = 16 x 16 = 256. In three easy steps, 2 becomes 256. You will be a thousand times richer if you start investing at 25 than if you start at 30! Hearing that kind of stuff puts the fear of God in me.
My friend, I do not want to be richer. I just want to stay on top of inflation. But we live in a world where the only way to do that is to be complicit with the same systems that send food prices sky high, that deepen the racial wealth gap, that starve people and gobble up the environment and starts wars … because some speculators tell each other bedtime stories and now the price of a gallon of gas is $5.3 (That is of course a reduction, but the thrust of it stands.)
In the mean time … The poor stay poor! The rich get richer! And I now have a recurring monthly deposit into my Roth IRA.
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This was a very long detour from me working at Walgreens at 16, but I wanted to take a kind of journey through how I came to say what I said in Starbucks the other day. I don’t think it would be off the mark to say that for many speculators and investors, money feels a bit fake for them, too. It’s just numbers on a screen. It’s an algorithm, filling their bank account and their boss’s bank account. They squint a bit at the DOW and now they’re millionaires.
When we talk about the S&P 500, about index funds that dependably grow year after year, it’s kind of like King Midas. You only have to reach out and touch them to get a little gold. Or, outside of the regular shmegular investing, into the Wild West of finance, you find out exactly what to touch to get a big ol’ mountain of gold. And often that means just listening to the story to find out what other people have touched before you.
Money is a story that, like all stories embedded in our culture and society, has very real consequences. But these stories aren’t immutable. They are entrenched, but they can be rewritten, just like all stories can be rewritten. Can’t they?
I’ll keep reading and report back.
mia xx
https://lithub.com/death-by-price-tag-the-commodities-bubble-explained/ , https://theintercept.com/2022/03/18/deconstructed-prices-wars-markets/. Russell also explained the origin of futures contracts so well that I draw the story in great part from his recounting.
https://m.thewire.in/article/economy/speculation-is-contributing-to-global-food-insecurity-significantly
https://www.energyintel.com/0000017f-92be-df49-abff-96fffe420000 , https://www.theguardian.com/environment/2022/apr/28/gas-prices-why-are-they-so-high-traders