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The Roots of Consumerism

The following story illustrates one of the deeper causes of the endless quest for growth that underpins our modern consumer society. The story and adapted comments are from the book The Future of Money (pp. 50 – 53) by Bernard Lietar. Your thoughts, comments and discussion are welcomed and appreciated.


The Eleventh Round

Once upon a time, in a small village in the Outback, people used to barter for all their transactions. On every market day, people walked around with chickens, eggs, hams and breads, and engaged in prolonged negotiations among themselves to exchange what they needed. At key periods of the year, like harvests or whenever someone’s barn needed repairs after a big storm, people recalled the tradition of helping each other out that they had brought from the old country. They knew that if they had a problem some day, others would aid them in return.

One market day, a stranger with shiny black shoes and an elegant white hat came by and observed the whole process with a sardonic smile. When he saw one farmer running around to corral the six chickens he wanted to exchange for a big ham, he could not refrain from laughing. “Poor people” he said. “So primitive.” The farmer’s wife overhead him and challenged the stranger, “Do you think you can do a better job handling chickens?” “Chickens, no,” responded the stranger. “But there is a much better way to eliminate all that hassle.” “Oh yes, how so?” asked the woman. “See that tree there?” the stranger replied. “Well, I will go wait there for one of you to bring me one large cowhide. Then have every family come visit me. I’ll explain the better way.”

And so it happened. He took the cowhide, and cut perfect leather rounds in it, and put an elaborate and graceful little stamp on each round. Then he gave to each family ten rounds, and explained that each represented the value of one chicken. “Now you can trade and bargain with the rounds instead of the unwieldy chickens,” he explained.

It made sense. Everyone was impressed with the man with the shiny shoes and inspiring hat.

“Oh, by the way,” he added after every family had received their ten rounds, “in a year’s time, I will come back and sit under the same tree. I want you each to bring me back 11 rounds. That 11th round is a token of appreciation for the technological improvement I just made possible in your lives.” “But where will the 11th round come from?” asked the farmer with the six chickens. “You’ll see,” said the man with a reassuring smile.


Assuming that the population and its annual production remain exactly the same during the next year, what do you think had to happen? Remember that the 11th round was never created. Therefore, bottom line, one of each 11 families will have to lose all its rounds, even if everyone managed his affairs well, in order to provide the 11th round to ten others.

So when a storm threatened the crop of one of the families, people became less generous with their time to help bring it in before disaster struck. While it was much more convenient to exchange the rounds instead of the chickens on market days, the new game also had the unintended side effect of actively discouraging the spontaneous cooperation that was traditional in the village. Instead, the new money game was generating a systemic undertow of competition among all the participants.


This is how today’s money system pits participants in the economy against each other. The story isolates the role of interest – the eleventh round – as part of the money creation process, and its impact on the participants. When the bank creates money by providing you with your $100,000 mortgage, it creates only the principal. However, it expects you to bring back $200,000 over the next twenty years or so. If you don’t, you’ll lose your house. Your bank does not create the interest; it sends you out into the world to battle against everyone else to bring back the second $100,000. Since all the other banks do exactly the same thing, the system requires that some participants go bankrupt in order to provide you with this additional $100,000. To put it simply, when you pay back interest on your loan, you are using someone else’s principal.

In other words, the device used to create the scarcity indispensable for a bank-debt system to function involves having people compete for money that has not been created, and penalizes them with bankruptcy whenever they do not succeed. . . No wonder ‘it is a tough world out there.’

In reality, we do not live in a world of zero growth population, output or money supply (as in the story). In the real world, there is typically some growth over time in all these variables…This dynamic makes it much harder than in the Eleventh Round story to notice what is actually going on. With this dynamic view, the money system is like a treadmill that requires continuous economic growth, even if the real standard of living remains stagnant. . . . This need for perpetual growth is another fact of life that we tend to take for granted in modern societies, and one that we usually do not associate with either interest or our money system.

Adapted from pp.50 – 54 of The Future of Money, © Bernard Lietar,

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If this is Human Action, I will eat my hat.

Mr. Nystrom, I promise this will be my last comment. Hope I haven't over stayed my welcome.

“'Oh, by the way,' he added after every family had received their ten rounds, 'in a year’s time, I will come back and sit under the same tree. I want you each to bring me back 11 rounds.'”

And all the people said, “Okey Dokey”. I don’t think so. The premise is so absurd nothing else can have any inferential merit. If that is what Mr. Lietar wrote in his book, he has no understanding of human nature.

Michael Nystrom's picture

I beg to differ

First, you haven't overstayed your welcome. Let me address your "okey dokey" comment first.

What Mr. Lieatar described in his parable is a simplified version of what happens all the time, every day in America, and no doubt happened thousands of times today alone. The simplification is a way of helping us understand the more complicated (and thus better hidden) version that we encounter every day: When a bank "loans" a family money to buy a house, the family is ecstatic. They now have the American dream - a new house. But the bank did not have that money in their vault. Since you are familiar with the workings of fiat money, you know that the bank created the money from thin air the moment the family signed the mortgage. Say the loan was for $300K. Depending on the rate of interest, the family will end up paying back something like three times that amount in both principal and interest over the life of the loan. That is the essence of the eleventh round. Where will that 600K come from? Just like the banker in the story who never made the 11th round, the modern bank doesn't create the interest. The family will have to scratch and claw for it out in the economy, and take the money from another family's principal.

Does the family say - "No way! You #$#!@ banker - you're a cheat and a fraud!" I don't think so. More likely, they say, "Okey Dokey. What day is the first payment due?" Happens every day because the system is so convoluted that most people don't see what is going on.

I suggest that you try a little salt with your hat :-)

Second, there is nothing wrong with wanting to improve your lot in life, but that is something entirely different from Consumerism. "To consume" means to use up and destroy, which is what we are doing with the planet. An infinitely growing economy requires infinite inputs of finite natural resources (oil, minerals, wood, clean air and water). If everyone on the planet were to live like American consumers, we'd need six more planets for all the resources! It is consumerism that causes manufacturers to incorporate planned obsolescence into their products, so "consumers" will need to throw their stuff away and get new stuff every few months or years. Or say Hollywood makes a new action movie for kids, and comes out simultaneously with action figure dolls, story books, supplementa DVDs, Happy Meal toys and cereal box prizes. As a result, your kid wants all of this crap. Has that improved your own and your kid's lot in life? I could go on, but I think you get the picture.

Where you are correct is that fiat money encourages this type of behavior: The creation of all manner of junk, simply to make a buck. Bank and fiat money ensure that 1) everyone is in debt (government, corporations, and individuals) and 2) the money required to pay back those debts is artificially scarce.

Here is a link to an excellent 45 minute video that explains this sinister relationship:


Again, I don't disagree with you that people want to improve their lot in life, and there is certainly nothing wrong with that. I do, and everyone I know wants that. But be clear that consumerism is not the way to that end. It is simply an illusion towards that end, fostered by the fiat money system.

Michael Nystrom

He's the man.


Hi Michael, All,

I found a post on the DailyReckoning forum that discusses the "Money is Debt" video, and focuses on usury (charging interest on loans). The thread can be found at

The first post in the thread seems to argue that usury may increase efficiency in an economy, perhaps through increases in complexity (or perhaps by stimulating competition/innovation). Although this may be true, do you think these ends (i.e. better efficiency) justify the means (i.e. the mathematical theory that when usury is part of a financial system, some borrowers must default on their loans)? Thanks for any insights.


"How can I be sure,...?"

OK, Michael, I watched “Money as Debt”. Now, I am not an economist neither Austrian nor Keynesian. So, I had to listen in a kind of “as if” mind set. I listened “as if” the clip maker knew truth and presented truth. As I listened, some things made sense other things didn’t make sense. I wished, in short, that I had Dr. Paul’s knowledge or that he were sitting with me.

Then came the author’s conclusions:

The first was a question. Is there a conspiracy? The question was not answered but there was a resounding “Yes” uttered in my head.

The second was a solution: It is the task of government to balance the money supply.

I heard the founding fathers shouting, “No, no, a thousand times no.”

Anything, anyone that suggests the fear tactic of conspiracy immediately gets 0 points for forsaking reason.

Anything, anyone that suggests government capability immediately gets 0 points for forsaking reason.

May I suggest this video: http://www.youtube.com/watch?v=iYZM58dulPE
Its title is “Money, Banking and the Federal Reserve” produced by the Mises Institute which has Dr. Paul’s respect.

Eating boiled crow.

I was out with my wife when I realized my gaffe. Michael, your kind response is appreciated. I will, nonetheless, have the salt with the hat--choke, choke. Had I been much earlier I'd have said with Rosann Rosannadanna, "Never mind". I won't apologize for wasting your energy because I sense a joy in your writing. Your response was kind. Thank you.

I'm not so sure that I agree or understand that the money will be taken from "another family's principal". But that an inflation of the money supply hurts the poor, those with fixed incomes and the middle class--those at the end of the food chain--who will have to scratch and claw, can't be argued. Well, I guess it can, but not by me.

A fire does consume as you describe. I don't believe animals do in their natural state. And I don't think that we as human consumers would be irrational consumers without the Federal Reserve's counterfeiting and the government’s tinkering. Property rights and free market cost would put an end to the irresponsibilities. But, maybe I’m wrong.

Still, I don’t like the way “consumerism” is characterized. It seems to me that those I hear it from most are those who demand more government control to limit excess. There is nothing wrong in my mind with having lots of toys—as long as they are earned. To that end parents have an awesome responsibility as do our country's leaders.

Michael Nystrom's picture

Thank you

Thank you for the kind reply. If you sense a joy in my writing, it is true. It is interesting & fun to share this secret information. If you haven't watched the video that I linked to - do try to find the time. I'll post it this weekend on this site as well. It really is a mind blower.

Those are interesting thoughts about consumerism. Again, I don't disagree with you about having toys, etc, but I think we need to think about how long all of this is sustainable, and what cost our toys are costing future generations.

As for me, I've recently gotten a little annoyed at always hearing about "American consumers." What happened to American Citizens? I think that is a more empowering way to refer to us who are supposedly the motive power behind the global economy...

Best regards,

He's the man.

Consummerism is a good.

Dear Mr. Nystrom,
If I understand you correctly, you are suggesting that“…the endless quest for growth that underpins our modern consumer society”, is bad. I’d like to suggest that growth is good. I for one would not want to return to the days of “Merry Olde England”; I prefer modern privies. The problem is not consumption nor consumerism. We all consume; even the beasts of the field consume. Consumption and its hand maiden "free" trade/barter has created a nation where the poorest is far better off than the most wealthy in “Merry Olde England”

The culprit is fiat money. When money is created out of thin air it loses its value and men soon lose the notion of their own value. Personal value then is not determined by our work and our savings, but by the manipulation of our credit. My father would never have been caught taking on debt in the recent housing boom. He knew how hard it was to make a buck.

Please, don’t condemn me for what is simply my nature—to want to improve my condition in life. Condemn rather those who teach me to be profligate. A child and a nation learn by example.

Roots of Convenience

Consumerism is more about setting standards based on safety and purity. Ralph Nader's issue with GM was that a producer has an obligation to the consumer to provide cars designed to deliver people safely, stylish or not.

I grew up hearing that "Money is the root of all evil", but I've come to believe it is not money, but it is convenience that is the root of the problem, displayed by your story.


Money, if I understand the Austrians correctly, is not made of thin air, nor is it made of cow hides. Lietar's error is not understanding that money is a commodity. Gary North in his essay "Misses on Money" writes " Direct exchange is barter. Barter is associated with a low division of labor. Participants expect to consume whatever it is that they receive in exchange. But in a more developed system of indirect exchange, participants exchange their goods and services for goods that can be exchanged for additional goods and services. Mises then explained why certain commodities become the widely accepted means of exchange, i.e., money." The essay may be found here http://www.lewrockwell.com/north/north83.html

big government vs honest money

There's still a huge big government attack on free market, honest money systems (not just e-gold) and both the Paul campaign and the news media need to notice the scandal, waste, and "Justice" department hysteria. More here: http://www.e-gold.com/letter3.html


If money is a commodity it cannot be honest nor dishonest; it can not be good nor evil. Money nor it's love as a commodity cannot be the root of all evil.

Fiat money--whether paper or cow hide--which is not a commodity but is big government's "life blood" is dishonest and may be understood as evil.