Mainstream economic theory may be wrong

I recently read an interesting article online: Are students revolting, or is it economics? | Business Spectator. It seems like mainstream foreign exchange trading follows mainstream economic theory by not realising that there is a fundamental instability in capitalism, which is that there is a “tendency to transform doing well into a speculative investment boom”. Without the role of government spending more than taxes during a slump and less than taxes during a boom, a pure free market economy would end up in a terminal debt deflation after a series of debt-driven booms and subsequent slumps. It seems like mainstream fundamental analysis does not account for the role of private debt, which is crucial to determining when a debt-driven boom will turn into a slump.
For example, using leverage in forex trading is an example of such instability. Considering fundamental indicators such as GDP, inflation, employment, sales, housing and so on without considering private debt could be hazardous given an underlying instability to an economy.
Looking at the School of Pipsology, there is the statement: “interest rates make the forex world go ’round”. But do they? What about private debt?
What is money, anyway? It is a complete abstraction. This article says some things about it: The truth is out: money is just an IOU, and the banks are rolling in it | David Graeber | Comment is free | Let’s get rid of money altogether, we could do so much better without it.

add to that politics and religion and you are done.

Very good post btw

The way I look at money is that its a store of value that is widely recognized, accepted as the standard measure of value, and exchanged by the masses. My question is, what is a good alternative solution to measuring the value of an object or service, and what’s the mechanism to transmit that value between two parties that would be widely accepted by society?

I don’t think there are any right or wrong answers, but I’m curious to hear anyones thoughts on this subject.

This question is focused on the world as it is today.

Getting rid of money (and politics, and religions, i insist) requires a whole different approach to life. From such approaches there is one that really stands out imho and has been consistently gaining followers the last few years, especially after the 2008 crisis for obvious reasons. It is explained in details by a [U]strange old man[/U] whose views on the subject i have fully adopted. Therefore i would be totally shameless to try to replicate the whole story as a personal thought, let alone that this cannot be done in a forum’s post.
Instead, providing the sources’ hyperlinks for checking thoroughly [U]the original material[/U] is more appropriate and might be very convincing even for the most single-minded persons.

Money is only a tool. It can be a useful tool and it can also be a tool that can cause harm to oneself and others. If humans could get by without material comforts (food, shelter and so on) then money could be done away with and there could only be service, which by its nature can only be useful. This thought may be perceived as quite radical and impossible by someone who feels that they could not live without material comforts. There have been people of whom it is claimed that they have lived without eating food, such as Therese Neumann (Therese Neumann - Wikipedia, the free encyclopedia) and Gauri Ma as described in Paramahansa Yogananda’s Autobiography of a Yogi. However, if humans feel a need for material comforts then I don’t know if there is a better alternative to money.

If we get rid of money we won’t be able to trade forex anymore. This idea is not funny.