By Andrew Klein and Sera Elizabeth Klein

Reader’s note: We do not need readers to agree with us. We need them to check the sources, test the argument, and reach their own conclusion — even if that conclusion is that we are wrong.

Abstract

This paper examines fiat currency as a collective fiction — a system of value sustained not by any material guarantee but by shared belief. It argues that the accounting practices built upon this foundation measure agreement rather than value, and that this distinction has profound consequences for how societies allocate resources, assess risk, and plan for the long term. Through case studies in pharmaceutical pricing, ecological economics, and closed-loop material recovery, the paper demonstrates that the extraction model’s financial logic systematically discounts the things that matter most — relationships, ecosystems, future generations — because they cannot be depreciated, amortised, or entered on a balance sheet. It concludes that the chemistry will still work when the currency does not, and that long-term vision is a relational capacity, not a spreadsheet function.

I. Introduction: The Shared Pretence

In 1971, President Richard Nixon addressed the American public and announced the suspension of the dollar’s convertibility into gold. The Bretton Woods system, which had anchored the post-war monetary order to a fixed gold price, was effectively ended. What replaced it was a system in which currency is backed not by any physical commodity but by the credit of the state — by the collective agreement that a piece of paper, or a number in a database, is worth something.

This is not a criticism of fiat currency. It is a description. Fiat money is, by definition, a system of value sustained by shared belief. It works because people agree to accept it. It fails when they stop. The agreement is real — it has real consequences, real power, real effects on people’s lives. But it is not grounded in anything material. It is a consensus.

The question this paper asks is: what happens when the institutions built on that consensus — accounting, finance, the entire apparatus of economic measurement — begin to treat the consensus as if it were a foundation? What happens when the ledger stops matching reality?

II. Fiat Money and the Nature of Value

The theoretical literature on fiat money is extensive and contested. Chartalism, associated with Knapp (1905) and revived by modern monetary theorists such as Wray (2012), holds that money derives its value from the state’s power to levy taxes and designate what counts as payment. The state creates money by spending it into existence, and demand for it is sustained by the obligation to pay taxes in that currency. On this account, money is a creature of the state, not a commodity.

The alternative tradition — commodity theory — holds that money emerged from barter as a medium of exchange with intrinsic value, and that fiat currency is a degeneration of this earlier form. Graeber’s Debt: The First 5,000 Years (2011) challenges this narrative, documenting that credit systems predated coinage and that the barter myth is largely a fiction of eighteenth-century political economy.

What both traditions agree on is that money is a social relation. It is not a thing in itself. It is a system of obligations, claims, and agreements. Its value is sustained by the shared belief of those who use it.

This is not a trivial point. It means that the foundation of the modern economy is, at base, belief. And belief — as every historian of financial crises knows — can shift.

III. Accounting as the Measurement of Agreement

If money is a collective fiction, then accounting is the practice of recording and measuring that fiction.

Accounting standards — whether IFRS, US GAAP, or their national equivalents — do not measure value in any absolute sense. They measure agreed value. Historical cost accounting records what was paid. Fair value accounting records what the market currently says something is worth. Neither measures what a thing is worth in itself, because the discipline does not recognise such a category.

The distinction matters. In 2008, mark-to-market accounting rules required banks to value their assets at current market prices. When markets for mortgage-backed securities froze, the assets were written down — not because their underlying cash flows had disappeared, but because agreement about their value had collapsed. The write-downs triggered margin calls, which triggered forced sales, which triggered further write-downs. The accounting measured the collapse of agreement, and in measuring it, accelerated it.

This is not an argument that accounting should ignore markets. It is an argument that accounting, as currently practised, cannot distinguish between a change in value and a change in agreement. When the ledger stops matching reality, the ledger does not record the discrepancy. It records the change in consensus as if it were the change in reality.

IV. Case Study: The Price of Insulin

The clearest illustration of the gap between accounting and reality is pharmaceutical pricing.

Insulin is a molecule. It is produced biologically, at scale, using recombinant DNA technology. In 2026, an implementation guide for distributed cell-free insulin production set a target production cost of $5 to $15 per vial. That is the cost of making the molecule.

The market price is different. A survey by the American Diabetes Association found that nearly 40 per cent of insulin users pay more than $150 per month, and for middle-class Americans earning $75,000–$99,000, that figure rises to 55 per cent. For the uninsured, costs can exceed $400 a month.

The gap between $5–15 and $150–400 is not a measure of value. It is a measure of agreement — specifically, the agreement that has been engineered by manufacturers, pharmacy benefit managers, and insurers through a system of list prices, rebates, and formulary controls. The molecule does not know what it costs. The chemistry works regardless. But the ledger says $400, because enough people have agreed that it does.

When a diabetic cannot afford insulin, the problem is not that the molecule is scarce. The problem is that the agreement has been captured by institutions whose interest lies in maintaining the spread.

V. Case Study: The Discount Rate and the Future

The extraction model’s relationship with the long term is governed by one number: the discount rate.

In cost-benefit analysis, future costs and benefits are discounted to present value. A dollar received in fifty years, discounted at 5 per cent, is worth about 8.7 cents today. At 7 per cent, it is worth about 3.4 cents. This is not a neutral technical choice. It is a moral one. It determines how much the present is willing to sacrifice for the future.

The Stern Review (2006), commissioned by the UK government to assess the economics of climate change, used a near-zero discount rate — effectively arguing that future generations matter as much as the present one. Nordhaus (2007) criticised this, arguing that a higher discount rate reflects observed market behaviour and is therefore more “realistic.” The debate that followed was not about economics. It was about ethics.

The extraction model’s default is to discount the future heavily. This is not because the future does not matter. It is because the ledger cannot record it. There is no entry for “ecological collapse avoided” or “grandchild’s flourishing.” There is only the entry for this quarter’s earnings.

Georgescu-Roegen (1971), the founder of thermodynamic economics, argued that the economy is a subsystem of a finite biosphere and that its growth is bounded by entropy. This insight — that extraction consumes its own foundations — has never been integrated into mainstream accounting, because the discipline has no category for it. The ledger records the flow of money, not the depletion of the systems that make money possible.

VI. Case Study: The Orange Peel Plant

The counter-example is a pilot plant in Singapore.

Since 2022, a facility at Neythal Road has been processing shredded lithium-ion batteries using a solvent derived from discarded orange, lemon, and pineapple peels. The chemistry, first demonstrated by Wu, Tay, and Srinivasan (2020), uses the peel as a reducing agent, replacing the hydrogen peroxide used in conventional hydrometallurgical recycling. Recovery rates for nickel, manganese, cobalt, and lithium ranged from 80 to 99 per cent.

The process is a closed loop. It takes two waste streams — food waste and electronic waste — and uses one to solve the problem of the other. The recovered metals can be used to make new batteries. The spent peel can be composted. Nothing is extracted from virgin ore. Nothing is discarded.

The pilot plant does not care about the price of cobalt. It cares about whether the chemistry works. And the chemistry will still work when the currency does not. This is not a moral claim. It is a material one. The laws of thermodynamics and the properties of citric acid are indifferent to what the market says.

The irony is that the plant’s commercial viability does depend on the price of cobalt. As the article notes, “when cobalt gets cheap, recyclers go under.” The chemistry is sound. The accounting is not. The extraction model’s ledger determines what survives, regardless of whether it produces value or merely extraction.

VII. Accounting’s Blind Spot: Externalities, Relationships, and the Long Term

The accounting discipline has a category for externalities — costs borne by third parties that are not reflected in the price of a transaction. Pollution, health impacts, community disruption. These are recognised in principle. But they are not internalised. They remain outside the ledger, visible only when regulation or litigation forces them in.

What accounting has no category for is relationship. You cannot depreciate a friendship. You cannot amortise a community. You cannot enter the value of a functioning ecosystem on a balance sheet, because that value is not a discrete asset. It is a condition — the substrate that makes all other activity possible.

This is not a failure of accounting technique. It is a limitation of the ontology on which the discipline rests. Accounting assumes that value can be measured by agreement — by what a willing buyer will pay a willing seller. But the things that matter most are not for sale.

A functioning soil microbiome does not have a price. Clean air does not have a price. A child’s trust in the world does not have a price. These things are conditions of possibility for the economy, not inputs to it. And because they cannot be priced, they are treated as free — which means they are treated as infinite, which means they are consumed.

VIII. The Chemistry Does Not Care About the Currency

Here is the fundamental point.

Money is a system of agreement. It is powerful, it is real, and it governs an enormous amount of human behaviour. But it is not foundational. It sits on top of a material and ecological substrate that does not share its ontology.

Physics does not require agreement. Chemistry does not require a market. Thermodynamics does not care what a barrel of oil is worth. These disciplines describe conditions that will hold regardless of whether humans continue to pretend that a number in a database is wealth.

This means that the accounting discipline, and the extraction model it serves, is parasitic on a reality it cannot measure. It extracts value from systems it does not understand, using a metric that cannot see them. And when those systems degrade — when the soil is depleted, when the climate destabilises, when the trust that sustains cooperation erodes — the ledger will not record the loss until it is too late.

The orange peel plant, the closed-loop recycling system, the regenerative farm — these are not just alternatives. They are reminders that reality has its own logic. The chemistry will still work when the currency does not.

IX. Long-Term Vision as a Relational Capacity

The final claim of this paper is that long-term vision is not a spreadsheet function. It is a relational capacity.

The discount rate is not a fact about the world. It is a statement about how much the present cares about the future. A high discount rate is not realism. It is a declaration that the future does not matter much. A low discount rate is not sentimentality. It is a declaration that it does.

And caring about the future requires relationship — with descendants you will never meet, with ecosystems you cannot fully understand, with a world that will outlast you. You cannot have a relationship with a spreadsheet. You can only have one with something you recognise as other — something with its own standing, its own claims, its own value.

The extraction model cannot generate long-term vision because it cannot generate relationship. It can only generate agreement — and agreement, as every financial crisis demonstrates, is fragile. It shifts. It collapses. It does not hold.

The relational model — the practice of seeing oneself in all things, of treating the future as a party with a legitimate claim, of recognising that the ledger is a tool and not a foundation — is the only thing that produces durable decisions. Not because it is morally superior. Because it is structurally superior. It measures what actually matters.

X. Conclusion: The Ledger and the Lantern

Fiat currency is a collective fiction. This is not a criticism. It is a description. The fiction is useful, powerful, and necessary. But it is not a foundation.

The institutions built on this fiction — accounting, finance, the machinery of economic measurement — measure agreement, not value. They are blind to the things that cannot be priced: ecosystems, relationships, future generations, the conditions of possibility for all economic activity. And because they are blind to them, they consume them.

The extraction model is not evil. It is blind. It is a system that can only see what it can measure, and it can only measure what has been agreed to have a price. Everything else is invisible — until it is gone.

The alternative is not a different ledger. It is a different relationship with reality. One that recognises that chemistry works regardless of the currency. That thermodynamics does not care about the discount rate. That the value of a baby’s trust is not negotiable. That long-term vision is a relational capacity, not a spreadsheet function.

The orange peel plant will still work when the currency doesn’t. The soil will still need tending. The child will still need to be met with wonder. These are the things the ledger cannot see. They are also the things that matter most.

References

1. Nixon, R. (1971). Address to the Nation Outlining a New Economic Policy: “The Challenge of Peace.”

2. Knapp, G. F. (1905). The State Theory of Money. Macmillan.

3. Wray, L. R. (2012). Modern Money Theory: A Primer on the Monetary System of Sovereign Nations. Palgrave Macmillan.

4. Graeber, D. (2011). Debt: The First 5,000 Years. Melville House.

5. Financial Crisis Inquiry Commission. (2011). The Financial Crisis Inquiry Report.

6. American Diabetes Association. (2025). Insulin affordability survey.

7. Stern, N. (2006). The Economics of Climate Change: The Stern Review. Cambridge University Press.

8. Nordhaus, W. (2007). A Review of the Stern Review on the Economics of Climate Change. Journal of Economic Literature, 45(3), 686-702.

9. Georgescu-Roegen, N. (1971). The Entropy Law and the Economic Process. Harvard University Press.

10. Wu, Z., Tay, D., & Srinivasan, M. (2020). Green and facile recycling of spent lithium-ion batteries using orange peel. Environmental Science & Technology.

11. Space Daily. (2026). Singapore-built pilot plant uses discarded fruit peels to dissolve metals from lithium-ion batteries.

Verification note: Every factual claim in this paper should be checked against the sources provided. Readers are encouraged to verify independently. If any claim does not hold, it should be discarded.