Inflation, energy, and magic

18 Nov

On a bicycle tour of Rome, in front of Fontana dei Quattro Fiumi, the guide’s words put me on an interesting train of thought. “Do you see a pile of discs down to the right? Those are coins, symbolizing the first gold imported from America, which was used for building St. Peter’s Basilica and other parts of the Vatican city.” (There might be objections to this historical account, but never mind, I don’t think they dilute my reasoning too much.)

What value did the imported gold have to the construction of some of the most famous buildings in European history? It wasn’t building material. It didn’t contribute any labor per se, nor any knowledge about construction of monumental buildings. The gold wasn’t really used for the buildings – except possibly a small part for decorations – yet it drove the process of creating them.

When the gold was issued as payment to contractors who built the St. Peter’s Basilica, the amount of “money” in Rome increased, and the gold economy was, to some degree, inflated. Like entropy, inflation is the result of energy dispersing in pieces that cannot be put together again. But inflation in itself isn’t the driving force. The force comes from a displacement of value, a local tension that yearns to be relaxed. In the case of the American gold import, the tension lies in the amount of “money” owned by the church. A local amassment of a kind of potential energy, which drives a process of economic activity, like the displacement of water causes streams to cascade down mountains and drive the turbines of hydropower plants.

Every second, the sun throws four million tons of mass-energy into space. A tiny fraction of it gets entangled on a rock 150 million kilometers away, where it’s trapped for a little while, feeding the ripples on the surface that we know as life. Solar energy is called renewable, but in the large scale of things, it isn’t. The sun shrinks. Mass and energy are smoothed out, and the universe cools.

The source of economic energy is more mysterious. There is no shrinking fireball of money. Whether money is tied to some perceived value of a rare metal, or whether it’s created as debt when a bank registers a loan, it’s an entity that exists only in our minds. It’s something we agreed on. Made up.

Yet it drives the wheels that power society. It’s magic. Real magic.

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