Another way to put what Charles Hugh Smith is saying here is that when money is free, the expected return on investment goes to the prevailing interest rate, or zero. From Smith at oftwominds.com:
The only possible output of a system lacking any discipline is self-destruction.
Whatever is free is squandered. When water is free, it’s freely wasted. When electricity is free, there’s no motivation to use it wisely.
The same principle holds true for money. If money is free, or nearly free, there is no motivation to invest it wisely, or consider the opportunity costs of spending it versus investing it or preserving it as savings.
Money that can be borrowed for next to nothing is essentially “free” because the costs of interest are negligible. Money that can be borrowed in virtually unlimited quantities is also “free,” as whatever funds are squandered or lost to malinvestment can be easily replaced with more borrowed money.
Nothing enduringly productive can be built without discipline and a steady focus on the bottom line of production costs, revenues, overhead expenses and opportunity costs, i.e. what else could have been done with this capital and labor?
These dynamics are scale-invariant, meaning they apply to individuals and households as well as to companies, institutions and nation-states.
Thus we see the same poor results in trust-funders whose income is “free” (pouring in monthly whether the individual was productive or not) and national governments that can simply borrow another trillion dollars (or $10 trillion, hey why not?) when they’ve squandered all the tax revenues.
We intuitively grasp the necessity of discipline to corral impulses and desires that are self-destructive in the longer term. Eating chocolate cake and ice cream might appeal to our immediate cravings, but longer term the consequences of unbridled consumption of this kind of sweets are dire.
We also grasp the role discipline plays in learning difficult subjects/tasks and in accomplishing long-term, often arduous projects.