What is money, anyway?
lynalden.com
lynalden.com
* https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
Money: The True Story of a Made-Up Thing by Goldstein (also of NPR's Planet Money):
* https://www.goodreads.com/book/show/50358103-money
* https://en.wikipedia.org/wiki/Jacob_Goldstein
And The Power of Gold: The History of an Obsession by Bernstein:
> In this exciting book, the late Peter L. Bernstein tells the story of history's most coveted, celebrated, and inglorious asset: gold. From the ancient fascinations of Moses and Midas through the modern convulsions caused by the gold standard and its aftermath, gold has led many of its most eager and proud possessors to a bad end. And while the same cycle of obsession and desperation may reverberate in today's fast-moving, electronically-driven markets, the role of gold in shaping human history is the striking feature of this tumultuous tale. Such is the power of gold.
* https://www.wiley.com/en-us/The+Power+of+Gold:+The+History+o...
* https://en.wikipedia.org/wiki/Peter_L._Bernstein
Bernstein was also the author of Against The Gods: The Remarkable Story of Risk.
I also recommend “The Invention of Coinage and the Monetization of Ancient Greece”. It succinctly covers second order effects of money. I got a good understanding of histories of phenomena that we take for granted such as salary. It’s fascinating to read about the transition.
As a meta, I’ve been fortunate to witness a similar momentous transition computers and internet/communication. I wonder what other transition we are going through right now.
Seconded ^_^
I have read Graeber's Debt and it's a great book but always thought that it left out many so questions unanswered. His anthropological treatment of money is quite nice until feudalism, but when he starts explaining the start of the Enlightenment and the gold standard in Europe things seemed very rushed and inadequately explained. Also it only touches upon our current system (post-Bretton Woods neoliberalism) briefly in the last chapter, which was a letdown since I though Graeber would have many comments about our current configuration of society.
Another book I’d like to throw into the mix here: Central Banking 101 [0]
Fantastic overview of how the current central banking system works, written post-Covid so it has some context for the extensive QE that’s been happening over the last 2 years. Author worked on the Fed’s trading desk for over a decade in various capacities so he has a deep experiential knowledge of the plumbing in action.
[0] https://www.amazon.com/Central-Banking-101-Joseph-Wang/dp/09...
If anyone wants a quick '101' primer on monetary systems, Cullen Roche has a good paper:
* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
As does the Bank of England:
* https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
Graber misinterprets the history and ideas of mainstream economics, calls the safest securities on the planet a debt that will never be paid and spins bizarre conspiracy theories about the Iraq invasion. You might learn about the quaint cultural practices of remote tribes but I strongly disagree that it is a good book to understand money in the real world.
A far better resource is Perry Mehrling's Economics of Money and Banking course: https://www.ineteconomics.org/education/courses/the-economic...
I can totally get down for this interpretation. When you think of Humanity (collectively-singular) as an entity destined to invent everything, we will obviously eventually invent the concepts of money, interest, debt, etc. The money can reproduce faster than Humanity can, so we're effectively in debt to ourself and have spent so many years trying to pay it off that we've forgotten we're truly One.
And that is not what Graber is talking about. The point was about US Treasuries. Everyone treats them as cash equivalents because nobody believes that the US Government will default. But Graber says and I quote:
> American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
And this is the kind of nonsense that is sprinkled all over the book.
And if I Google "united states per capita debt", I see a box:
According to the last data point published, United States per capita debt in 2020 was 84,850 dollars per inhabitant. In 2019 it was 70,557 dollars, afterwards rising by 14,293 dollars, and if we again check 2010 we can see that then the debt per person was 46,284 dollars.
I guess this comes down to semantics. Paying off an old loan with a new one isn‘t ”paying off your debt“ in my eyes. You are still in debt afterwards.
The total amount of debt will never come down again without hyperinflation. Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.
Graber's point is primarily about foreign holders of US debt and how this is the American empire extracting tribute from its vassals. Whether America is debt-free or not really relevant.
In the context of meeting obligations to creditors, which is what is being discussed, it absolutely is.
> The total amount of debt will never come down again without hyperinflation.
What has fundamentally changed since the last time it did which was (checks) Q2 2019?
> Whether that is good, bad, or doesn‘t matter is up to economists. But that‘s how it is.
There is very little reason to believe that. In fact, to the extent that the debt and inflation are related, the same acts which drive the debt up drive inflation, not the other way around.
so what? Have they missed an interest payment? Is their economy unproductive and cannot pay the interest?
Having the debt means you are entitled to a portion of the economic output of the machine behind that debt. Why is it a must for the debt to be repayable in one go? Esp. if the debt was not all issued in one go?
each time a particular treasury bond is due in full, the US treasury has been able to repay it. Whether they repay it by issuing new bonds, or increase their taxes and pay it off, makes no difference to the holder of that bond.
Ironically, the people that are most opposed to MMT on the basis of outright lies about its content are the people that are most likely to argue against large deficits on inflation grounds even when there is no problem borrowing enough money to fuel it.
October: +100, finally paid back the 100 taken in March.
Anothet option: you have multiple personalities.
Btw. Semi joking
If you incur debts to your body, you'll pay for them in the future.
If we squander intergenerational assets, our children will pay.
The US already defaulted on their gold promises.
Right. So this supposed "revelation" that fiat money is debt created by elites out of thin air, has been the hocus-pocus story that every goldbug, sovereign citizen's movement and crypto-coin huckster has memorized to absolutely wow the gullible with conspiracy theories for the last 100 years. It's a guaranteed way to make a (fiat) buck if you sell a book along these lines.
But the ridiculous thing is, in every situation other than US dollars, all people understand that buying debt is gambling on the risk of not being paid back. Whether you're buying some Argentine note that pays 30% or a municipal bond (or a war bond) or a ticket to see a movie in a theater that might close next week, you understand that the paper is worth more at maturity but it comes with risk. Everyone outside America who actually buys US debt fully understands this and makes the risk calculation, so how is it that average slackjawed Americans are just dumbstruck, generation after generation, year after year, by the notion that their evil government or central banks together are pulling off some sort of fast one on the rest of the world? No one buys this shit who doesn't weigh the risk. To whatever extent it's a house of cards, that's on the investors anyway, so there's no reason the average American should trouble themselves about it until/unless they need to learn what a national default looks like.
At the level of the world's biggest economies, the concepts of debt (bonds), money, and interest rates are more abstract economic levers that central banks pull in order to keep economies chugging. They're not really the same things they are to individual people and corporations, e.g. in the way debt can cripple someone's finances.
The central banks and governments are the game masters who set the rules and issue tokens, and we're the players interacting within the game and responding to the environments that they create.
To restate: bonds and other loans are literally a policy tool to take in USD from or inject USD into circulation, in order to intentionally change the size of the money supply: "Open market operations (OMO) refers to a central bank buying or selling short-term Treasuries and other securities in the open market in order to influence the money supply." It's not like the central bank actually needs to borrow USD from the money supply; it's literally the issuer of USD and could create more at any time (or take it in and destroy it).
Why can the US do this? Because its bonds are denominated in its own currency, which world investors use. The demand for USD-denominated debt is a major benefit of the USD being the world's main reserve currency.
Interestingly, you can see the emergence of small-scale credit forming with things like how a group of mutual friends splits the tab when going out to meals. "I'll get mine, you get yours" doesn't usually survive as people get to know each other and start interacting more regularly, rather it's "I'll get this time, you get the next time", and it all works out as long as everything feels fair, because everybody has a pretty good memory for when they get shafted.
Not just humans. Chimpanzees demonstrate jealousy or a sense of fairness in experiment. I'm pretty sure I've seen dogs show it, too.
Is exactly my point which is why said that Debt is a terrible book to understand money in the real world.
> deserves props for debunking the myth of barter coming before credit
Do you think Graber came up with this? Or that this wasn't the mainstream view amongst economists? Allyn Young wrote matter-of-factly about it for a popular science book in 1924[0]. And I don't mean to say he was the first one to realise this, I'm saying this was a common view. And Young wasn't some avant-garde heterodox radical. He was the president of American Economic Association. It doesn't get more mainstream than that!
And this what I mean by misrepresentation of the history and ideas of mainstream economics. And Graber doesn't stop there. He pretends like somehow all of economics is hinged upon this Myth of Barter.
Adam Smith is not the supreme arbiter and law-giver of economics. FWIW, Graber's critism of Adam Smith in this instance is justified. But as is typical of Graber, he doesn't stop there. He goes on to say thet Adam Smith's famous "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest" thesis is wrong because shopkeepers of the time mostly sold goods on credit and thus the customers were in fact depending on their benevolence.
If credit was benevolence, that would make banks the most benevolent entities on the planet.
0: https://d396qusza40orc.cloudfront.net/money/readings/Allyn%2...
It's not necessarily wrong though. Giving credit can still be a self-interest motivated action, in fact it would most often only be that - generating a higher reward to the risk taken by giving it - as banks try to manage. So yes, banks aren't run by benevolence, and they aren't the most benevolent entities on the planet (far from it) - they're just economically rational actors, that are benefited by offering credit.
Or did I misunderstand your comment?
I had forgotten about the Wizard of Oz bit! I don't recall if it was meant as an aside or it was meant to support a larger point about public opinion of bimetallism.
The bulk of the middle section of the book is mostly just meh. The final chapter though is something to behold! It's comically bad.
The book remains fairly popular in certain circles. If not for anything else, read it so you can politely refute the person who brings it up at a party.
The Wizard of Oz bit is mostly color, but he relates it to the difficulty state-money theorists have had in coming up with similar narratives, and also that the myth of barter has persisted for lack of a similar anthropological myth for money.
https://economics.rutgers.edu/joomlatools-files/docman-files...
L. Frank Baum's The Wonderful Wizard of Oz, however, is not only a child's tale but also a sophisticated commentary on the political and economic debates of the Populist Era.1 Previous interpretations have focused on the political and social aspects of the allegory. The most important of these is Littlefield ([1966] 1968), although his interpretation was adumbrated by Nye (1951), Gardner and Nye (1957), Sackett (I960), and Bewley ([1964] 1970). My purpose is to unlock the references in the Wizard of Oz to the monetary debates of the 1890s. When the story is viewed in this light, the real reason the Cowardly Lion fell asleep in the field of poppies, the identity of the Wizard of Oz, the significance of the strange number of hallways and rooms in the Emerald Palace, and the reason the Wicked Witch of the West was so happy to get one of Dorothy's shoes become clear. Thus interpreted, the Wizard of Oz becomes a powerful pedagogic device. Few students of money and banking or economic history will forget the battle between the advocates of free silver and the defenders of the gold standard when it is explained through the Wizard of Oz.
The Wikipedia article is actually pretty good overview: https://en.wikipedia.org/wiki/Political_interpretations_of_T...
By misrepresenting what economists actually believe? How exactly did that improve the public discourse?
However, what does it even matter, when the zombie keeps walking to this day? The linked article repeats the myth of barter.
And lest people think it's only right-ish economists that keep repeating it, Yanis Varoufakis did so too (in his book "Talking to my daughter about the economy").
And yeah sure, nothing "hinges" on the myth of barter. But it is a symptom, a glaring illustration that economists are really bad at arguing from how real people actually act, and cheerfully embrace just-so stories that support their preferred ideas - which is the linked article's whole game, too.
I didn't say Graber claimed that. I was refuting the common defence of the book and emphasising that it was already a mainstream view.
> However, what does it even matter, when the zombie keeps walking to this day?
> But it is a symptom, a glaring illustration that economists are really bad at arguing from how real people actually act
How much does the historical origin of money matter to the understanding economics of today?
Economists aren't particularly interested in the origin of money. Any references to barter are usually in fluffy lines like this article or as dumb thought experimens. The fact that some of them get it wrong is not indicative of anything.
> cheerfully embrace just-so stories that support their preferred ideas
Which is rife across the humanities and not exclusive to economics. Hell, Graber's entire book is full of just that.
If you look at popular books or even school text books, they will cheerfully claim that seasons are caused by the change in distance between the earth and the sun. That doesn't mean people working on climate models don't know that's not the case.
And Varoufakis is <insert polite term for crackpot>, not exactly representative of mainstream economics.
That said, I do think Graeber is right to emphasize the role of culture and belief--anthropological ideas--as an antidote to overly quantitative/mechanistic models. I'm not an economist, but it does seem like behavioral economics was pretty revolutionary in advancing the idea that humans are not just rational utility maximizers, despite Keynes using the term "animal spirits" nearly 100 years ago.
Again, speaking as a layperson, it's frankly a bit weird to me how distant economics, anthropology, and psychology seem to be from each other.
This is a false and misguided dichotomy. Nothing prevents you from taking culture and beliefs into account when you create a model.
Labor search models usually have a notion of bargaining power.
"Just-so stories that support their preferred ideas" + "so nothing prevents you from taking culture and beliefs into account when you create a model."
A litte OT but,... years ago i read a HN-Topic, about um 'What to change if we could'. I read some postings, where people seem realy angry with abuse, misuse and malpractice, done by people who may or even may not wanted to be remembered as: 'This is our work, we do this cos we are in empowered to do so' (won't explain it more, back to more context:)
My conclusion by that time was, questioning: 'Is privatizing favourable?' Cos there is confusing data, complex situations and a need for easy hypotheses...(and solutions maybe) The assumption that time was, that the gov spend a (huge) budged to pacify many more conflicting 'partys' than a private entity would like to do/or will, cos generating income through excessive spending (may 'only work when'/'need expotential growth') means nothing more than the need to reinvest profits to bigup the businesses.
(sry, non native english-speaker)
And now really OT, I remember some of the friends around Putin are building contractors, and the TV-shows about the war in Ukraine or Syria before um...
[turns-around-in-a-circle] (-;
How I understood your comment: "This whole field, consisting up of many people trying to do understand things, is just a bunch of nonsense generalizations."
This is a relatively fair take. That being said, at least it's damaged and dethroned the equally misguided frictionless spheres of homo economicus.
The idea that humans are not perfectly rational self-interested actors has been part of mainstream economics at least since Keynes.
Is it the whole story? Probably not. Like I said, I'm not an economist.
But given the extreme challenges in empirically testing macroeconomic models, it should be no surprise that economists might--as somewhat irrational humans--over-rely on theoretical models.
A lot? Money is a social construct, so the history of money is something like a record of empirical observations that must be accounted for by any proposed theory of money. The fact that most modern economists don't seem too concerned with this doesn't mean that it's not important.
My favorite course I took in college was historical linguistics. But I was a linguistics major…
I do expect CS students to take a history of computing course.
Maybe it's interesting to linguistics majors but the rest of us tend to ignore typos when the meaning is clear from the context.
> My favorite course I took in college was historical linguistics.
And?
> I do expect CS students to take a history of computing course.
The overwhelming majority of them don't and seem to do just fine.
The idea that Varufakis is not mainstream is not even remotely controversial. I have issues with Graeber's misrepresentation of economics, not his anthropology.
You can tell that Graeber isn't an economist because he mistakes the oversimplified educational narrative for what monetary economists actually believe about the history of money and credit. But you have a fair point--even economists often fool themselves about this, possibly because the field has grown to the point where many aren't as familiar with this topic as they should be (I don't think that was the case 100 years ago).
A moral justification for what?
I believe Graeber acknowledge that Marcel Mauss came up with https://en.wikipedia.org/wiki/The_Gift_(essay) long before him ("1925 essay by the French sociologist Marcel Mauss that is the foundation of social theories of reciprocity and gift exchange")
The myth is certainly taught by mainstream economists, here is one example:
http://www2.york.psu.edu/~dxl31/econ14/lecture18.html
>And Graber doesn't stop there. He pretends like somehow all of economics is hinged upon this Myth of Barter.
I think he was specifically targeting neoclassical economists. The idea of Homo Economicus is essentially rooted in a number of myths that depict humans as spherical cows, Adam Smith's story of money emerging from barter being just one.
>Adam Smith is not the supreme arbiter and law-giver of economics.
Nope, he just has an unusual take because his analysis is more rooted in historical and anthropological study and, of course, he's kind of left wing. This angers people who try to gatekeep economic thought, limiting it to the likes of neoliberal (but still somehow mainstream) ideologues like Mankiw or Milton Friedman.
I guarantee that when David Koch made an large donation to Florida State U economics department he didn't do it with the idea that they would teach more Graeber.
Can you please state what you think the supposed myth actually is? I'm asking because people seem to have very different ideas about what it actually is as seen in this very thread.
> I think he was specifically targeting neoclassical economists.
Quoting Graber:
> The answer seems to be that the Myth of Barter cannot go away, because it is central to the entire discourse of economics. Recall here what Smith was trying to do when he wrote The Wealth of Nations. Above all, the book was an attempt to establish the newfound discipline of economics as a science.
> Nope, he just has an unusual take because his analysis is more rooted in historical and anthropological study and, of course, he's kind of left wing.
I'm sorry, Adam Smith is left wing?
>I'm sorry, Adam Smith is left wing?
I was referring to Graeber. He was left wing and anticapitalist.
Orthodox (neoclassical) economists like Mankiw tend to be very strongly pro-corporate due to way funding flows in the profession.
Interesting. Did you actually read Debt? Because Graeber himself says that economists don't claim a barter system as a historical fact:
> It's important to emphasize that this is not presented as something that actually happened, but as a purely imaginary exercise.
As I suspected, it seems you're arguing something else entirely
I lifted a different example from some other lecture notes in my link above where they just flat out said "this is what used to happen".
Really, there is no shortage of examples. It's the same myth in all cases, (although I wouldnt be surprised if some econ textbooks got patched since the book came out).
Im not sure exactly what youre trying to prove here. The distinction you're trying to highlight is hardly material.
Yes, I obviously did read the book. I also used to believe the myth because I first read it in an undergraduate econ textbook.
> It's important to emphasize that this is not presented as something that actually happened, but as a purely imaginary exercise. "To see that society benefits from a medium of exchange" write Begg, Fischer and Dornbuch (Economics, 2oos), "imagine a barter economy. " "Imagine the difficulty you would have today," write Maunder, Myers, Wall, and Miller (Economics Explairzed, 1991) , "if you had to exchange your labor directly for the fruits of someone else's labor." "Imagine," write Parkin and King (Economics, 1995) , "you have roosters, but you want roses".
He quotes Stiglitz after this and remarks:
> Again this is just a make-believe land
Before claiming it's the same myth it's necessary to clarify what the myth actually is and why it supposedly is so important for capitalism.
> Yes, I obviously did read the book. I also used to believe the myth because I first read it in an undergraduate econ textbook.
In a deleted comment you claimed you read it in Mankiw. There it is most definitely presented as a thought experiment asking the reader to imagine the inconvenience of barter.
A) it's been presented as both. The example you pointedly ignored that I posted above is one such example.
B) It's not really that material. The story serves the same purpose either way - both in the above example and in, say, Stiglitz.
>it's necessary to clarify what the myth actually is and why it supposedly is so important for capitalism.
It is which is why Graeber did explain why it's important.
I thought you read the book?
>In a deleted comment you claimed you read it in Mankiw.
After writing that comment I double checked the 8th edition of the text to see if i remembered correctly and ctrl-f and found zero about barter in the whole book so I guess we both misremembered.
I cant honestly remember which econ textbook I read it in since it was 16 years ago, but I do know that I read it and believed it and there are plenty of other examples that can be found via google, so whatever.
Nobody thinks this is the mainstream consensus view, not even Graeber.
> The story serves the same purpose either way
> It is which is why Graeber did explain why it's important.
The whole thread is about why Graber's just-so explanations are wrong. And your arguments are materially different from what is actually in the text.
> I guess we both misremembered.
From The Principles of Macroeconomics, 3rd Edition. Chapter 15 - The Monetary System
> The social custom of using money for transactions is extraordinarily useful in a large, complex society. Imagine, for a moment, that there was no item in the economy widely accepted in exchange for goods and services.
This borders on conspiracy theory. I was in an econ PhD program for years (though I never quite finished the dissertation), and trust me, economists working in the neoclassical tradition do not need corporate funding to be right of center. Most academic economists aren't getting corporate funding.
And there are plenty of left-wing economists whose work is nevertheless mainstream in the sense of living within the neoclassical paradigm.
> The myth is that barter arose spontaneously throughout history and that currency arose as a more efficient means of mediating barter.
Economists mostly don't care how money arose, and 99.999% of theories in economics would be unchanged if money arose after barter, after credit and debt, or as a result of aliens implanting the idea in ancient peoples' brains.
I find it overwhelmingly ironic that economists consider "people respond to incentives" as a fundamental building block of economic theory but when the topic is "do economists respond to incentives?" the answer is no, they are only interested in truth.
>Most academic economists aren't getting corporate funding.
Most programmers arent employed by FAANG but that doesnt stop armies of the ones that arent from idolizing the goog. Using money to build prestige that goes with money does a better job than straight up bribery.
Economists are the best paid social scientists by far thanks to the injection of money. Having a seat at the policy table has its advantages - advantages that anthropologists dont get.
>And there are plenty of left-wing economists whose work is nevertheless mainstream in the sense of living within the neoclassical paradigm.
I wonder if you are using, say, Paul "footsoldier of the DNC" Krugman as an example of "left wing" here because I cant think of any.
>Economists mostly don't care how money arose
The book addresses this point and explains why Adam Smith (and subsequent thinkers) did care. It's worth a read.
If people aren't qualified, as opposed to having credentials, to understand and comment on a subject, they should get a good co-author. Because the look at monetary policy through the ages is a very interesting one. If the authors do have an actual grip, and the ability to explain things to the layman unless we talk about dry scientific books, of the subject. If they don't it's just pseudo-science sold with confidence.
* Interestingly, I think that was meant as exculpatory for economists, which is itself a bit revealing.
And it would have been fine if Debt stuck to the anthropology. But perpetuating inaccuracies about money can be actively harmful.
For example, I-series bonds are the safest instruments available to US residents to hedge against inflation. Now, in popular conception, if US treasury bonds are seen as a debt that will never be paid, people might instead put their savings into assets that are suboptimal. You already see gold shilling targeted at senior citizens which makes for a terrible investment.
That the national debt will never be "paid off" is hardly inaccurate. It's barely even controversial. It wouldn't be a good idea either.
Hell, I remember the news articles from the 90s during a brief period of budget surplus that fretted about what pension funds and insurers would do if they couldnt buy t bills any more. The mask briefly slipped as the reality of the national-debt-is-basically-just-a-savings-account before we returned to our regularly scheduled implied bankruptcy doom-mongering and budget ceiling theatrics.
So overall, debt isn't paid back. The particular debt is paid back very much indeed. And whatever was paid for with that debt is ideally here to stay. National debt isn't anywhere close to private debt or a mortgage. Looking at it that way is just wrong.
By no account do I understand monetary theory or how national debt works in detail. I know enough to understand that it is a very complex topic, one that isn't easily understood. So I am cautious when it comes to easy explanations.
In fact, you probably don't want the public debt to be payed.
If debt is a liability, that means that is also an asset of somebody. In the case of public debt is an asset of the private sector. A country without public debt would mean those senior citizens wouldn't have safe assets.
Also, a reduction of public debt means a lower deficit, that means less public expenses, that means, or a GDP fall or a higher private debt. Everything has to balance.
Not debunked at all. How do people even agree what things are worth in order to offer credit before there exists any prices?
The issue with Graeber and others is they are looking for a historical account of barter pre-dating a historical record of debt, but they will never find it, because the record-keeping begin for the purpose of recording debt. Any barter would pre-date any record keeping, and would likely be very shortly-lived before people converge onto a common money. They have completely misinterpreted Menger's 'On the Origins of Money' to begin with, and are debunking a straw-man.
> "We have actual case studies of communities developing money prices from scratch: namely, prisoners who end up using cigarettes as the common medium of exchange. [...] The prisoners certainly weren't giving each other things from their Red Cross kits as gifts or as loans. No, they first were trading (in a state of direct exchange) and cigarettes quickly became the money in their community [...] The prices (quoted in cigarettes) of various items were posted on a board. If Graeber and his colleagues stumbled upon the ruins of this P.O.W. camp, they would presumably conclude that there was never a preexisting state of barter, because they only found boards listing prices quoted in terms of cigarettes." - https://mises.org/library/have-anthropologists-overturned-me...
Is this is the case, it seems to me that the issue is not with Graeber and others but, with the guys that claim something about which there is not historical account.
>>"We have actual case studies of communities developing money prices from scratch: "
The point is not if barter is used sometimes or if some people, in some circumstances, would start using cigarettes as money, but if that's the main history of money, specifically in the context of early states, as has been claimed for many years without any kind of evidence.
The burden of proof is not in the guys that examine the historic and archeology evidence, but in the ones that want to sell a narrative without evidence.
Both sides of the argument are making claims without evidence, because evidence prior to record-keeping of debt doesn't exist, and never will. There are only theories about how money came into being, and some are more plausible than others.
Graeber himself contradicts his own "debunking" of Menger's theory:
> "All evidence that exists points to money emerging as a series of fixed equivalents between silver – the stuff used to measure fixed equivalents in long distance trade, and conveniently stockpiled in the temples themselves where it was used to make images of gods, etc – and grain, the stuff used to pay the most important rations from temple stockpiles to its workers. Hence a silver shekel was fixed as the amount of silver equivalent to the numbers of bushels of barley that could provide 2 meals a day for a temple worker over the course of a month. It was the Temples that actually had a need to extend a silver system from a unit used to compare the value of a limited number of rare items traded long distance, used almost exclusively by members of the political or administrative elite of the societies in question – to something that could be used to compare the values of everyday items, like planks of wood, jugs of beer, and so forth."
Why silver?
Why were they already stockpiling silver?
How was it decided that silver would be used to measure fixed equivalents in long distance trade?
How was it decided the ratio of silver to bushels of barley?
What were these political and administrative elite doing when they proposed to offer a certain amount of silver for some long-distance traded rare items? (We have a word for this: 'barter')
Why would the foreigners they are trading with even want all this silver?
It takes some circular reasoning to get to where Graeber thinks he is, because he misinterpreted Menger to begin with. The above does not discredit Menger at all.
So, you have record-keeping that contradict the barter history and you have anthropology evidence that human semi-nomad tribes, even if they could barter sometimes, don't organize their society around barter, but, somehow, the more plausible evidence is barter. Don't know what to say to that.
He argues that where barter exists, people will quickly converge onto one or more forms of money for organizing trade. Even if it is not the intention of individual tradesmen, some astute traders will realize that they can profit by matchmaking (a necessity when there is a double-coincidence of wants). These astute traders will pick commodities which have the best saleability (those which are mostly likely to be accepted in exchange for other goods, and which retain value) as their means of measuring trade value. The successful traders will in turn, define which commodities emerges as the common monies in that economy, because traders who chose other (less saleable) commodities as their unit of measure will not be as successful.
It is not surprising that there are no historical documents outlining this, for it would likely pre-date even the written word by centuries or millennia. If it were the intention of a matchmaker to profit from establishing trades through use of goods with high saleability, they would also not likely advertise their tactics willingly, as they would be in competition with others attempting to make similar trades.
There are many historical accounts of monies being displaced when new, superior forms of money enter into economies, which is an extension of Menger's thesis (Also known as Thiers' Law). If a society is using a form of money which for whatever reason becomes much less saleable, and a new commodity enters the market which is more saleable, the more saleable commodity will eventually displace the old money.
So if it were the case that silver was selected (by who?) as the first money, 'for reasons', it seems like they hit jackpot on first try, for silver would remain the most saleable commodity for millennia until it would be later displaced by gold. Call me sceptic, but I don't buy such coincidences.
Huh? During the 17th and 18th century European colonization of North America there was no existing standard of payment which all settlers had access to. Before the circulation of paper money by colonial assemblies, tax and wages for public servants shifted to tobacco due to the liquidity of the export market.
> There are many historical accounts of monies being displaced when new, superior forms of money enter into economies, which is an extension of Menger's thesis (Also known as Thiers' Law). If a society is using a form of money which for whatever reason becomes much less saleable, and a new commodity enters the market which is more saleable, the more saleable commodity will eventually displace the old money
In the American colonies, commodity money based on farm products was replaced by paper credit money loaned by governors on security of property. Gold and silver were skipped over as official forms of money because they were not in large supply, and because activists such as Benjamin Franklin argued that if people invested time in digging for Spanish gold and buried treasure they would be poorer than if they spent time plowing fields.
> for silver would remain the most saleable commodity for millennia until it would be later displaced by gold
What's important is not simply salability but liquidity. In industrial countries the value of credit money is secured by the value of the assets of borrowers, they have to collect money back in same unit of account after investing or spending it to avoid default and foreclosure. In America the colonies tobacco-money or farm-product money was displaced by paper money with no metallic backing. Metal-backed money was imposed by Great Britain.
This is prominently discussed by Graeber in the book, so this comment leads me to believe you have even read it.
"Occasionally, we can even find some kind of currency beginning to develop: for instance, in POW camps and many prisons, inmates have indeed been known to use cigarettes as a kind of currency, much to the delight and excitement of professional economists. But were too we are talking about people who grew up using money and now have to make do without it - exactly the situation "imagined" by the economics textbooks."
However, when I later began studying Austrian economics, it became quite clear that Graeber's assumptions were based on circular reasoning, and that Graeber's writings on economics are through a left-leaning lens. That isn't to cast doubt on his work on Anthropology, which is fascinating to read, but I have doubts that he truly understood Menger's argument to begin with (or perhaps willingly chose to filter it to fit into his world-view.)
Being inside a deeply rooted paradigm, it is hard to imagine that the idea of "the worth" of a thing might not have been a paradigm that pre-historic people comprehended.
The thing that anthropologists like Graeber excel at is how they can take themselves out of their own conditioned thinking.
Think off this, when you see a n expensive car drive by you will most likely reflexively say "That car is probably worth $300,000". You assign an objective worth to the car, when classical economics will tell you that the actual worth of a car is subjective.
Personal ownership was not seen in the same way in the past as we see it today so objective worth might not have been in their mental framework.
Barter is just trading without the use of money. It isn't mutually exclusive with credit. What Graeber describes in his book is still barter. It's just a primitive credit system based promises of goods and services instead of promises of money.
This does not match with any definition that I've seen. Graeber debunks a parable used by Adam Smith and economists used to explain why money is more efficient than barter. The problem is that the central thesis of the parable still stands: trade is more efficient with through a medium of exchange.
> barter, for example, features immediate reciprocal exchange
Reciprocality requires figuring out how many chickens a Ford Taurus is, i.e. the exchange rate.
1) Have you ever met a good economist?
2) Is it possible you think he is a poor economist because he deeply understood it from the outside and you are still too "in it" to see? That is not a criticism, it is a question.
This isn't the contradiction you think it is.
The US has been in debt permanently since the civil war. When exactly did you think it was going to be paid off in its entirety? Why would it even make sense to do so while there is a permanent demand for high quality securities?
Did you think Graeber was saying that treasuries weren't the safest security for you or me? He didn't. This is a gross misinterpretation of the book.
> American imperial power is based on a debt that will never-can never-be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
Graber then likens the large holdings of US treasuries by Western Europe, Japan and Korea to a tribute system which siphons wealth from these supposed client states to the American Empire. And then in the very same chapter he also says China accumulating US treasuries is the first stage of a very long process of reducing the United States to something like a traditional Chinese client state.
No mention of the actual conventionally understood reason of why US treasuries are favored as reserves i.e. safety and liquidity.
Tell me again how I am misrepresenting the book.
Why do you think Russia dumped its treasuries in 2018 if they're such a safe investment for military opponents of US hegemony? How liquid would they be right now if they'd kept them? Which buyer of treasuries do you really think China shares most in common with? Is it State Farm or Calpers? Or is it Russia?
What you're doing right now is the economic equivalent of trying to apply Newton's second law to relativistic speeds. Yes, that's absolutely misrepresenting the book.
> Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.
The larger their holdings and the more the US is reliant upon their industrial output the larger the inflationary spike they can trigger just by flipping a switch.
Whether that spike is large enough to break confidence in the US dollar entirely and break its hegemony is another matter.
The longer China manages to maintain a trade surplus with a US and siphon US industry away the better their odds are though and the scarier them unloading is.
It's kind of like adage about how you owing the bank $1000 is 100% your problem and you owing the bank $10 mil is now the banks problem.
As interesting as this thesis may be, this is not even remotely close to what Graeber was alluding to:
> From a longer-term perspective, China's behavior isn't puzzling at all. In fact it's quite true to form. The unique thing about the Chinese empire is that it has, since the Han dynasty at least, adopted a peculiar sort of tribute system whereby, in exchange for recognition of the Chinese emperor as world-sovereign, they have been willing to shower their client states with gifts far greater than they receive in return. The echnique seems to have been developed almost as a kind of trick when dealing with the "northern barbarians" of the steppes, who always threatened Chinese frontiers : a way to overwhelm them with such luxuries that they would become complacent, effeminate, and unwarlike. It was systematized in the " tribute trade" practiced with client states like Japan, Taiwan, Korea, and various states of Southeast Asia, and for a brief period from 1405 to 1433, it even extended to a world scale, under the famous eunuch admiral Zheng He. He led a series of seven expeditions across the Indian Ocean, his great " treasure fleet"-in dramatic contrast to the Spanish treasure fleets of a century later-carrying not only thousands of armed marines, but endless quantities of silks, porcelain, and other Chinese luxuries to present to those local rulers willing to recognize the authority of the emperor.
At the same time they have been exporting cheap goods to the US which the US has become slowly accustomed to. Treasury purchase operations were an integral part of discounting these goods by artificially pushing down the value of the yuan. I suspect theyll try to keep this up more or less indefinitely until something snaps - they get slowly stronger and the US gets slowly weaker.
It has led to the US slowly deindustrializing and relying more and more upon artificially competitive Chinese imports.
The key feature of this strategy is the destruction of US industrial ecosystems through systematic, persistent undercutting. This is something the US tolerates because A) the frog is being boiled slowly B) US corporates have the same relationship with short term profits that an addict has with crack. In a way it's similar to the alliance the US made with the first batch of the post USSR oligarchs.
It takes 15-20 years give or take to build or destroy an industrial ecosystem while a currency can collapse in hours.
So yes, the strategy is very much like zheng he - service the US oligarchy's addiction to profit for a few decades before finally pulling out the rug and leaving the US to realize that it making an iPhone in the US will cost $3000 and you're actually all rather poor now.
I don't know what you think the tribute system was but it most definitely did not involve a rug pull.
Doesn't it kind of keep interest rates low and create needed liquidity in the US markets? I'm a layman but to me this reminds me of how i heard it explained that the status of the dollar as reserve currency and for oil transactions, etc subsidises subsidises the perpetual american trade deficit on the back of other nations. That person also referenced north african nations trying to protect their currency pegs even tho US fiscal policy was in part leading to issues for them leading up to the arab spring. I wonder how much truth there is to that.
We see a lot of Marx's basic ideals parroted by people without people realizing it. My favorite is Tucker Carlson listeners who spit on Marx. The idea of an elite with money/resource control controlling politics is literally straight out of Marx's writings and is a talking point Tucker Carlson likes to use.
Yes, Marx took the bad parts out of Smith and Ricardo and made a weird theory based on his reification of labor and value.
> We see a lot of Marx's basic ideals parroted by people without people realizing it. My favorite is Tucker Carlson listeners who spit on Marx. The idea of an elite with money/resource control controlling politics is literally straight out of Marx's writings and is a talking point Tucker Carlson likes to use.
Does Marx have a monopoly on this idea? It is a very trivial thing to believe, you don’t need Marx for that.
He was working with flawed economic concepts, like the labor theory of value. He tried and failed to relate "value" derived from labor to actual market prices. (We now know that the problem he set up was even logically not solvable.) The "economics" you find in Das Kapital is essentially a zeroth-order approximation to what would be considered economic reasoning today, a bit like Aristotle's physics compared to Einstein's GR. It is of some very niche interest for things like input/output analysis, which is important to computable simulations of the economy. But for anything else, it's just not useful.
If you ignore the social aspects of capitalism and economics completely, sure, Marx doesn't look like an Einstein. If you include those, that changes, doesn't it?
EDIT (a long one): Recently I read "Faster, Cheaper, Better - A history of Manufacturing (pretty sure that's the right title, it's in a shelf at home right now) about the history of manufacturing from the stone age to LEAN and beyond, written by a former Toyota LEAN guy and current Professor at Karlsruhe University. Great book, can only recommend it. It is showing well researched examples for each period, including my personal favorite the Venetian Arsenal. And I totally agree with the author that we, as man kind, came out better every time we improved manufacturing. In the long run, in the short run we paid incredible high prices in health, lives and social issues. These short term consequences are just glanced over in this book, hand waved like "yadayadayada, child labor and harsh working conditions bad,... things improved, society better now".
Marx lived during the industrial revolution, he saw those problems first hand. He saw that people with capital got rich, exploiting poor people and driving whole societies and professions into the ground. The Luddites are sold as backwards thinking folks today. Back then, when you just lost your own, small workshop that provided food for your family too a manufacture, when your own, and your kids prospects, changed from stable income to ruined health, 12 hour work days and being treated as cattle, they seem to be quite reasonable so.
That Marx was the only prominent (there were certainly more, Marx being the most famous) economist looking at those issues says more about economists and politicians of the day than it says about Marx.
That those social aspects of our technological improvements are glanced over also tells a lot about us. We are in the middle of a second industrial revolution, one that is aggravated by climate change. We will have a ton of those social issues down the road. And we are not thinking about those enough. That we basically have to fall back to Marx to get some potential answers speaks volumes about modern economics, social sciences and engineering.
Could you expand on that?
That may well be true. But I'm not convinced that modern economists are doing any better. For example, consider how much economic work is still based on the utterly flawed concept that humans are rational in a classical sense.
It is not. In its descriptive mode, economics captures animal spirits well. In its prescriptive mode, yes, this is assumed. But rationality is a simplifying assumption, with work then done to explain why the reality observed in the descriptive mode diverges from the predicted behaviour of rational actors. Put another way, the rationality assumption is part spherical cow, part “what would we do were we rational?”
Rejecting modern economics for the rationality assumption is rejecting modern physics for its use of frictionless environments.
But either way is fine, I am not self-censoring and don't really care for internet-points ^^
You're totally right, few people have read Marx but a lot of people have an opinion about him.
He wasn’t.
> And when he came up with "Das Kapital" it was one way of interpreting the nascent, unlimited capitalism of the industrial revolution.
Das Kapital was just a bad book in terms of economic theory regardless of its anthropological value.
> Because of that, Western society tends to discard Marx.
Economists tended to discard Marx long before Lenin.
> I think Marx is as relevant as he ever was
Hm. I am not sure I understand the connection.
He was.
>Das Kapital was just a bad book in terms of economic theory regardless of its anthropological value.
Das Kapital is a great book in both economic and anthropologic terms.
>Economists tended to discard Marx long before Lenin.
No they didn't.
>Hm. I am not sure I understand the connection.
You should try reading Das Kapital.
> You should try reading Das Kapital.
Well, maybe you should try re-reading it, because as far as I understand it, it doesn’t say anything close to that; though I am sure there is an interpretation that claims so as there are dozens of various contradictory Marx’s interpretations.
"No, you're wrong. That's not how it was."
Ironically, the first volume is the most popular and yet the worst of them all.
* https://www.goodreads.com/book/show/2714607-the-ascent-of-mo...
I found the historical context made it much easier to understand, and while I'm not a fan of Ferguson's politics - he is an excellent historian of finance.
If so, I'm gonna stay very far away from that book - there's enough authors out there that second chances in a case like this really are not required.
https://en.wikipedia.org/wiki/Niall_Ferguson
https://en.wikipedia.org/wiki/Neil_Ferguson_(epidemiologist)
Distrust any comment on the content that appears before the post is at least 3 hours old. Similarly how can we upvote it fast enough for the algorithm to not bury it before anyone has a chance to read it.
I admit I didn't read the appendix.
I have followed this writer for some time, always pretty good and VERY detailed.
If you don't know about bitcoin / historic currency, it's a great read. Covers the basis.
That's if you read out loud (23,000 @ 140wpm = 2:45 hours). If you silent read, you can get around 240wpm (1:36 hours).
That said there is plenty here that people can engage with in good faith without reading it all word for word.
I can't also tell if it's all somewhat promo for members area. As an economist, trying to understand the incentives.
FWIW I like the research.
What is money?
Well, the answer to that question ties into the difference between currency and money. Currency is some other entity’s liability, and they can choose whether or not to honor that particular liability. Money is something that is intrinsically valuable in its own right to other entities, and that has no counterparty risk if you custody it yourself (although it may have pricing risk related to supply and demand). In other words, Russia’s gold is money; their FX reserves are currency. The same is true for other countries.
The author is a woman.
Knew a lot of this already, picked up some new examples I hadn't heard of before. Feel like it's a good article for sharing with older-generation family etc.
people who've studied economics formally already have a good grasp of what money is; as they read through the first few paragraphs of this they can see by its meandering where it may be headed. I don't plan to finish it.
So, the terms “U.S. dollar”, “fixed rate mortgage”, “401k”, “capital gains”, etc. don’t really have any inherent meaning beyond the set of rules that govern their interactions. This rule system itself can change over time depending on politics and human emotions, so you have to try to model the dynamics of this meta-system as well, even though that’s pretty difficult.
Once you’ve gathered all the different rules into some programmatic representation, then you decide what it is you want out of life and at what points in your life, then you start optimizing. For example, would you rather have a 10% chance of having $1,000 on some future date, or a 1% chance of having $10,000? The expected return is the same in both cases, so your optimization should really consist of targeting a specific shape for the entire distribution of outcomes rather than a single number (or specific assets).
Not surprisingly, the average person (including me) does not have the right combination of 1) detailed knowledge of the global financial system and its rules, 2) how all these rules are likely to change, or 3) the technical background to implement the advanced mathematics required to optimize all of this in an accurate way that actually makes valid predictions.
So most people instead just guess and base their financial plans on their hunches about how “money” works, and large organizations that have the time to do all of this modeling in a more rigorous way come out much further ahead.
I still think simplifying the “rules” of finance would be one of the best things we could do to reduce wealth inequality, as inequality seems to largely be hidden in the highly volatile landscape of the cost function for the optimization problem I described.
That's a pretty good and succinct way of explaining the function of public markets. Their whole purpose is optimizing capital allocation by translating disparate assets across time into a single common metric.
Further, Venture Capitalists borrow money from Investment Banks who borrow money from the FED, how do we all envision this process working if our government can no longer issue money? A nebulous "DAO" with smart contracts? I'm not sure I'm comfortable with that.
This is one problem gold bugs seem to gloss over: sure your currency might technically be backed by gold (or whatever) but that's only the case because there's an enforcement mechanism on the humans involved (ie the government). And that government only exists because the people collectively will it. So there's really no difference between this and a fiat currency.
It gets even funnier when Crypto Bros start proselytizing about blockchains. Here one tiny part of the system has been replaced a simple consensus by computers. But that's where it ends. As soon as crypto (including NFTs) meets the real world, meaning if you use your Bitcoin (for example) to purchase something (weird concept I know) that isn't on the blockchain as well then you've just added a trust requirement where collective delusion has to act as an enforcement mechanism.
No. Because the ring stands in for what-will-happen. It's a sign of consequences and expectations which are real, but grounded in the reality of human action.
When taking money for payment, we don't want bread -- bread satisfies my hunger, but not my need for *PAYMENT* -- which is to have *something to pass on* to another person, for what I want later on.
"Bread" is no more a collective delusion of hunger, than money is a collective delusion of trade. All trade is trade with money. Receiving "bread" as payment, isnt a payment -- it's consumption. To trade at all is to receive money, ie., that think which can be passed-on.
Trade is a game of receiving something pass-on-able for something consumable. That we use bank notes for this is a contingency, but it merely a symbol for the underlying necessity -- inasmuch as a ring symbolises marriage, which is that series of actions which will occur if you have an affair.
Money is not a delusion. Trade is not a delusion. People's need for a medium of exchange is as real as their need for hunger.
Simply: if a person acquired bread to pass on (for something else they wanted), then bread would be money.
I think probably some animal species use money, on a rare occasion: if a monkey exchanges a grape for sex, and the money with the grape exchanges the grape, the grape is money.
It might be that amongst other animals, that ability to see the future-value-to-others of grapes is very very limited. So other animals dont keep grapes around. If they did, grapes would be money.
That the value of a grape depends, like that of a dollar, on what we expect another to take for it -- this makes it seem mysterious -- because we ourselves are distrustful of the future, and of having-what-you-dont-need.
I think this is an animalistic impulse: its a kind of paranoia about the behaviour of others. This is at the heart of why people use "collective delusion" and the like. There's something, in that sort of person, which views depending on the future behaviour of others with paranoid suspicion.
Edit: Rai Stones often don't move (like coins/paper money do), but rather stay in one location. Per Wikipedia: "The ownership of a large stone, which would be too difficult to move, was established by its history as recorded in oral tradition, rather than by its location. Appending the transfer to the oral history of the stone thus affected the change of ownership"
[1] https://www.npr.org/sections/money/2011/02/15/131934618/the-... [2] https://en.wikipedia.org/wiki/Rai_stones
It has value because the government decided that to operate inside its country, you must use this currency. This is enforced through taxation. It doesn't matter if you believe in the dollar or not, at the end of the day the government will tax you for a dollar amount and you're gonna have to pay in order to keep having access to the US market.
This is why cryptocurrencies have no inherent value, only value as it pertains to actual currencies.
As you said, if people don't believe the government will enforce it, it has less value. As you clearly say, it doesn't matter what the government says, it matters what people believe.
And it hyper inflation or matters what people believe future value is.
You should rethink your definition of money because you've essentially demonstrated its value derives from belief.
How do they gloss over it? This is like one of the primary grievances most of them seem to talk about -- that currencies which used to be backed by gold are no longer, so clearly there was no supernatural force that was inextricably linking a dollar and an amount of gold. They're openly and explicitly unhappy with the government's change of currency. I don't think I've encountered any who thought that gold backing could transcend the government. Although that being said I'm talking about the traditional Ron Paul style "gold bugs" here -- I haven't really followed the lunatic fringe of crypto culture so maybe that's what you're referring to?
You're saying gold bugs complain that the currency is no longer backed by gold. As an aside, the US dollar has never been 100% gold-backed in its history. Ever. Not once. Anyway, my point is that even if it was gold-backed (even to 100%) there is still trust required that that's actually the case and you're reliant on the government to actually enforce that.
My point is that a gold-backed currency is no better than a fiat currency because you're still reliant on a government and collective delusion either way.
Exactly. Gold is a currency just like the dollar or euro. If you are a gold bug, you believe that no other currency in the world is trustworthy. If this is true, good luck figuring out what to do with your gold after the collapse of civilization, because I find it isn’t a particularly good dinner option.
False dichotomy. Gold is valuable when some but not all currencies (especially your own country) goes to shit. This is as plausible of a scenario as EVERY currency in the world becoming untrustworthy.
Shoving gold up your ass and crossing a border is a hell of a lot easier than shoving a wheelbarrow of inflated cash, or even a small stack of 100s (USD), up there. There are very few materials with as much value density as gold that are readily tradeable in most large cities as a commodity. To some extent crypto can serve a similar, but not identical, purpose.
This could apply to religion, politics, nation hood, loyalty, or money. A few other things as well. Arguably, sexual monogamy. And marriage. Also, all mass panics and hysterias. I could go on.
How about sub-cultures in programming and technology?
One can be printed into infinity, one cant. Gold is manifested mistrust in governments ability to manage a currency.
You just argue that "gold backed" is a scam that falls apart the moment people actually try that.
It not a delusion it's an agreement. Dollars are a form of ledger. They just keep track of who owns how much of a big liquidity pool. We had to pick something or we'd have to manage liquidity for a cartesian product of commodities(e.g. "Whats the price ratio of Chickens to Ford Taurus's today? Is anyone even in a position to exchange?"). Crypto is just an extension of this idea. Its has value because it facilitates exchange. I can turn dollars into bitcoin, bitcoin into ETH, ETH into yen, and yen into sushi. As long as those currencies are liquid they have utility.
Or, did you simply find that this was the system in place, and you went along with it?
Re your point about crypto - did you see how you turned your crypto into yen (fiat) to get your sushi?
You make this agreement every time you accept dollars for good and services. And most people do or would.
> did you see how you turned your crypto into yen (fiat) to get your sushi?
Sure did why is that a problem? I could have turned the fiat into Marriott points and exchanged those for a hotel stay. Does that mean the fiat is worthless because I turned it into Marriott Points first? I just needed to get my liquidity into the correct medium.
FWIW I don't like to think of it as "buying sushi" instead I sold yen for sushis. Maybe I'll use my sushis to buy bitcoin from someone.
Yes, but you are also forced to participate in order to pay your taxes. Even if you, for example, only conducted trade via barter, the gov would still require you to pay taxes in local currency.
All money in the economy is created through debt. Yes, someone signed a contract. Home owners did, students did, corporations did and even the government does it.
The only thing I would slightly disagree with is that gold is a real thing, that people do consider as valuable regardless of the governance system. You can physically hold gold, it is portable, it is rare (doesn't grow on trees) you can make something with it (jewellery).
Meanwhile Bitcoin can only be influenced through transparent, though anonymized ownership (it isn't totally anonymous per se), and so no one party has monopoly over what should happen next. This is great, because it makes ownership and stewardship of it a matter of national security, since you cannot deny other parties, organizations or even nations from also owning a share of it, and so it also forces diligent cooperation across borders.
The same thing is true for gold, to an extent, but the handling and ownership of gold requires a ton more resources and security to be done safely, and it's also far less transparent.
And I haven't even started to discuss the other great properties of crypto, such as corruption, crime and extortion resistance. If you want to do either of the aforementioned crimes, then cash is simply a much better choice. At the same time it's also regulation resistant.
The fact that it's also inflation-proof is really just a bonus after all that. So all in all I think you should do more research and rethink your position on the many great alternatives to fiat.
What is a "Crypto Bro"?
Eh, that's not really Gresham's law, which applies when there is a fixed (by law) exchange rate between two currencies.
Quoting Hayek’s Denationalization of Money, “What Jevons, as so many others, seems to have overlooked, or regarded as irrelevant, is that Gresham's law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law.” (Emphasis his)
[0] https://en.wikipedia.org/wiki/Gresham%27s_law#Reverse_of_Gre...)
Gresham’s law applies when the seller is bound to a certain rate of exchange between the two currencies. The buyer will therefore pay in the currency she has the least desire to hold for the long term. As a result of everyone doing this, over time all trading will be done in the less-desirable currency.
In practice, you have to settle debts in the government dictated currency. Here Gresham takes hold, the valuable currency will disappear from circulation. Think silver dollars in the US with a higher material value then the nominal value. You still have to accept payment in any dollar so you wont spend silver dollars doing so. As long as you have the choice to sell it for material value. Think copper content in pennies for where this doesnt apply because its illegal to melt down.
Its all just a description of how the market (meaning people ) behaves once the government applies pressure in certain directions.
I don’t think this is going to significantly change the way most people on hacker news think about bitcoin, but I will say that it changed my perspective on the problem of network scalability.
If you think of Bitcoin not as competing against Visa, but as competing against the bank settlement network, then it makes a lot more sense.
Yes, this is Bitcoin precisely. If you then lock your bitcoins in different schemes with different security models or transaction amortization tradeoffs, you carry the risk of the scheme, not the settlement layer and unit of account. You can experiment with different forms of commodity money, fiat money, and all the monetary policy therein and the proof will be in the pudding of who ends up with more of the underlying, finitely scarce coin, but you can never risk anyone's coin that doesn't join the scheme.
How can someone go through life and never ask themself what money is, where it comes from, why their paper bills keep getting worth less year over year... Most of us consume things on a daily basis, but never stop to think what actually happens there, where the value of the money comes from, what determines the price of the product, etc.
Paper money is clearly not the same thing as an electronic record in a bank account. Paper can't be stored in a database. They are kept equivalent because banks (and people) trade them at par, for example using ATM's.
Each bank (including central banks) has its own computer system for its accounts. Bank account money never leaves a bank's computers. There's no way to get it out of the computer, any more than you can remove your virtual treasure from an online role playing game.
So this seems like a good way of thinking about what happens when a bank creates money. They can create virtual currency in their own computer system, not in anyone else's. It doesn't make them richer, any more than a game company creating virtual gold pieces makes them richer. The money is either meaningless (if held by the bank itself) or a liability (if it belongs to a bank customer). To a bank, only outside money counts as wealth.
Transfers happen via trades. To pay anyone not using the same computer system, a bank needs outside money of some form.
So inside money and outside money are clearly different. To a customer, money in Bank A might seem equivalent to money in Bank B, but to Bank A, only dollars in Bank B are assets, and to Bank B, only dollars in Bank A are assets.
So, one way to approach the "what is money" question might be to look at payment systems. How is it that all these different sub-currencies are made to trade at par?
For example (bank money = real money) only because the bank is willing to keep the peg at (1.00 bank credit = 1.00 real currency) as you state whenever you use an ATM, take money out at the counter, etc. When the bank runs out of real money to maintain this peg it can and has deviated in the past (e.g. people selling their bank accounts at say 30c to the dollar in the great depression). In normal times however their much smaller money stock is enough to keep the peg going against the usual net deposit/withdrawal flow.
Of course if a central bank comes in and can lend that bank unlimited real money the peg could be maintained. Indeed that can and has happened.
https://blogs.imf.org/2019/02/05/cashing-in-how-to-make-nega...
That is in interesting perspective. I always wondered how can BTC scale if the average folks cant use it to make instant payments.
Perhaps edits might not have changed the message, as I feel it's just one abstraction level too far from reality in order to merely argue for the inevitability of cryptocurrencies.
For instance in some situations, cigarettes or packs of ramen are performing the role of money when it facilitates some economic transaction denominated by it. For dollar, you can see how the US GDP is many multiples of total value of dollars available and the same goes for the Euro too.
On the other hand, stocks, real-estates, and gold are all assets by this definition. For instance, gold has market cap of ~$10T but the global gold market is perhaps something like $500B/yr - say from extraction to retails.
By this definition, Bitcoin is closer to asset than money. If it were close to being money, the value of economic activities facilitated by Bitcoin would be in multi-trillion dollar range and I just don't see that happening anytime soon. Of course, this doesn't say anything about its value as digital asset of some sort but I think the rhetoric of cryptocurrency as money doesn't really hold.
> stocks, real-estates, and gold are all assets
So what infers the quality of "asset" on these things? IMO it's their intrinsic use value. E.g., I could build a house to shelter me on a land, gold could be used to build electronics, stocks generate cash flow. Most of these assets are natural resources which humans need to lead a good life. So there is a natural demand for these resources regardless of whether they are used as currency or not.
Said this way, I just don't get what's the intrinsic use of a bitcoin? I totally get the intrinsic use of ETH; I could use it to execute a smart contract i.e., it's a currency to get some computation done. What is the natural demand driver for bitcoin? I just don't know.
1. Money already has a definition, a generally recognized medium of exchange. Gold and bitcoin are mediums of exchange, but they are not (yet, in bitcoin's case) generally recognized.
2. How do you define the market cap of dollars?
3. Market cap is a really poor measure of just about anything.
4. The concept you're referring to is related to the velocity of money[1].
Money as Debt: https://www.youtube.com/watch?v=2nBPN-MKefA
Principles for Dealing with the Changing World Order by Ray Dalio: https://www.youtube.com/watch?v=xguam0TKMw8
It's kinda the same thing with land. Homeowners vote in regressive zoning and lower property taxes and then point the blame at high profile companies like Blackrock taking advantage of the same laws to boost their property values. A house price 20% increase is the same for everyone but real estate companies benefit more because they have more houses.
The fundamental problem is that everyone wants to benefit at the expense of other people and they let the big guys get away with it because restricting their benefit would restrict your own benefit.
-- Ferguson, Niall - The Ascent of Money
-- Ferguson, Niall - The Cash Nexus
The standards of Niall Ferguson are very, very, very high. I would also keep an eye n his site, niallferguson.com , particularly on his ongoing journalistic production: https://www.niallferguson.com/journalism
Great for the day to day, but need hard assets for long term. $100 won't have good purchasing power in 20 years time.
Yes, but it basically boils down to this question: Why would you keep those $100 for 20 years anyway? If you think about that you inevitably end up at having assets instead.
“Money is what you can give to someone else for a sandwich”
This seems fundamental to both currency and anything looking to define itself as currency. I don’t see an inescapable reason for everyone to have a WTP to convert traditional money for cryptocurrency.
Take email. Everyone nowadays needs an email account for many critical needs. It might be possible to function as an adult without an email account, but that probably requires more than a few sophisticated machinations. And of course people pay for the infrastructure to have an email account - cell phone for a client, perhaps some privacy for a free email account or actual money for other email accounts. Email is actually so useful and critical that people are willing to pay many times over a course of decades in service of that email account. Email has many inescapable uses and most people are thus willing to pay to have the use of an email account.
Tether is a completely unregulated de facto 'bank' that makes up a very significant portion of the demand for bitcoin. If that blows, bitcoin will inevitably go with it.
Buying bitcoin is betting not on bitcoin, but on tether.
This is a pretty good overview of all that's happened and why the parent's comment is actually relevant.
https://www.theverge.com/22620464/tether-backing-cryptocurre...
If Tether fails it would definitely hurt but it's not an existential threat to crypto.
The difference with Tether seems to be that they appear to be creating the deposits (tether) without any evidence of actually having or creating enough assets to cover it all (either having money in the bank, or writing decent quality loans to back it).
Banks no longer need reserves with the Fed but they are still subject to capital adequacy regulations.
Banks that don’t have assets to cover all their liabilities (deposits) are insolvent. Non-delinquent loans are assets to the bank (liabilities to the customers) that are created when banks lend and create money (which become deposits - which are liabilities to the bank and assets to customers).
Only the central bank can originate money without creating debt.
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
For Tether fear uncertainty and doubt, you kind of need to make a standard of where it stops being top of mind. Even Tether’s problems are only that its maybe 70% backed by fiat in a bank account, not like 10% or anything similar to the broader financial system.
Private money so money == debt is a popular not-that-modern and widespread scam to keep a strong grip on the society by a small number of people. In the past we have had a bit of power subdivisions:
- army power, represented by the State
- religion power, represented by the clergy
- economy power, represented by merchants
Army need religion to keep people obeisant and economy to have natural resources and means to transform them for war and life. Religion need army to be protected, to crush enemy religions and economy to remain in power. Economy need army to protect it's own interests and religion to justify it's own crimes. After the French revolution economy became the State and a religion. And that's why economy now is ruled by dictatorial thieves and being those just "economist" they can't rule well. As clergy they have learnt very well how to pasture the masses, but as State they both do not really know how to fight a war nor how to rule a country and that's the reason of our deep crisis. The rest is noise.
Any dictatorship to remain in power need a vast majority of loyal and obedient subjects, to elicit them they need to give something, not just rhetoric, the classic panem et circense. Since there are oppositions they need to give much while they earn much, much more, and so resources get depleted quickly, that a war arrive to justify the disaster, sometimes suffice if there are a ready resourceful and fable enemy, sometimes not and dictators end up badly. Some try to ride the revolt sacrificing some puppets to be substituted by other, again sometimes work, sometimes no. Since we need a society to live well money remain anyway a unit of measure and people keep accepting it at different weight depending on the current situation and the game keep going.
The best video-tutorial I see is in a small part of a Colombian movie "El Concursante", perhaps some can find subs in various languages https://youtu.be/WpGhcDg7IJ4
Because that commodity then first has to exist, and sometimes it doesn't - as the 'specie shortage' period in England in the 17th Century that brought the 'free minting' period to a close, and created the Bank of England shows. [0]
Why bother, when splitting twigs in half, or indenting a receipt on paper achieves the same ends at much lower cost?
What makes fiat currency work is that nobody else can issue the unit of account that the central authority requires in settlement of taxes. Anybody who does is jailed. Anybody who fails to pay is jailed and has their assets confiscated.
Since the central authority arises from the organisation of the population as a group, it has the political and physical power to enforce the tax on everybody who wants the protection of that group. Anybody who doesn't is 'outlawed' in one way or another - which is effectively a death sentence.
[0] "Money, Politics and Power", Richard A Kleer: https://amzn.to/3tHSRto
The question I expected you to ask is why people wanted the bonds, since all they're backed by is future dollars. The circularity is resolved by the fact that people know that there will be some demand from the government for dollars, since the government has outstanding dollar-denominated debt.
I think an important cause of demand you're missing is that people still need to pay taxes in dollars.
> the government would still need to exchange those bitcoins for dollars in order to pay its debts
That is not true. The government does not collect taxes to pay its debt, as it can simply spend its own currency which it creates. Taxes are relevant to spending in that it keeps dollars valuable.
Not if it wants to hit an inflation target.
So, do these bonds cover something or do they just paper over a huge systemic problem?
If a bank bought and sold gold to make a currency hit an inflation target, would that be commodity money or fiat?
That's my favorite take in the entire thread.
The promise which governors and colonial assemblies made to the borrowers was primarily that the government would continuously spend the revenues brought in by interest payments back into circulation on local infrastructure, and that new loans would be regularly issues at low interest rates of 3-4%, so that the money needed by borrowers to repay their debts was easy to come by, and that the debt would not be held or sold to private lenders engaged in usury.
So accepting the scheme was a good deal to borrowers, and provided immigrant farmers with cash & credit which would not otherwise be available to them without borrowing form European lenders at high rates. The government acted as a public bank and the money was a public utility.
This model is completely different than market analysis of prices / value . Not to mention that majority of value traded is done outside of open markets .
This model makes the assumption that all players in the value chain (producers and consumers) are agents with repeatable instructions ie put,Get,push,add,mov,etc.
Since there is No SI unit for instructions I propose the Unit for measuring instructions be MOV operator , This is because of my belief taking inspiration from the X86 MOV operator which was proven to be turing complete with the movfuscator(https://github.com/xoreaxeaxeax/movfuscator). What this means IMO all computable operations can be broken down to move operations.
Lastly this system views markets as interaction between agents . And makes the assumption that agents that do not sustainably price their goods / services will fail to operate in the longrun. And views variance / volatility in prices as a outcome of chaotic interaction between agents rather True indicator of value.
That makes no sense. Value and money should have the same unit. Let's say it's "$". There is already a term for what you are describing in $/second: "income" (if you include all assets of a company) or "cash flow" (if you only include cash).
The internet now makes all of us witnesses to this phenomenon of badly educated people thinking this and other pillars of modern society are "secret knowledge" when they're basically just not educated enough to know about them.
I think it's fair to say that the crypto boom has greatly increased the general public's sense of the slippery nature of money.
The main other way you might get that broad understanding is by close exposure to currency collapse, hyperinflation or extreme volatility.
It's kind of a tribute to the USD that it's so mindblowing when people figure it out.
I was wondering about that just yesterday. "What are the value of those coins?" I thought. There seems to be a mint (episode 3), and the guy who runs the whole thing (the central bank) seems to live out in the desert.
Who sets the value? Can anything be money? (let's forget about the intrinsic value of the gold itself for a moment.).
It seems that these coins are used within the community of the criminals themselves and the bank sets their value. It also seems that the community can pay for things with fiat currency or these coins. And it seems that one can exchange these coins for fiat currency too.
The John Wick universe is an interesting example to see the practical use of another currency in everyday use embedded in a world of fiat currency.
But what really got me thinking (I know, late to the party)... money can be anything. Anything that a community decides what it is. As the community becomes larger it becomes more valuable, but also it comes with more problems too (the USD as example).
ie, if I turned up with cash to organise a hit... you might wonder who I was and if I was a cop. But if I instead rocked up with mafia gold, well then I've passed the sniff test for being part of the underworld.
If demand is always greater than supply it means that the market isn't working as it should. In a well-functioning market price will adjust so that the supply is equal to the quantity demanded.
New supply --> cheaper prices --> new applications --> more demand
I don't think there will ever be such a thing as "enough", even when civilization gets to the stage where we measure in units of stars.
Bitcoin fulfills this role well, but people are too busy conflating its energy consumption with carbon emissions.
Fiat currency doesn’t exist because convenience or mechanisms of fungibility or anything else mechanical about the medium. It exists because a _country_ backs it. A _country_ guarantees it. And I don’t mean a “country” in sociopolitical terms. I mean a literal country. A land that is full of people and all the value therein. Their potential value, their military value, their moralistic value, their natural value, and so on and so forth.
This is why crypto doesn’t work. The second any major fiat player (ie, A COUNTRY) goes against it, it’s dead in the water.
Money is now a high technology. Whereas money actually in use generally is not. Similarly with other aspects such as transportation or government. High tech exists, but generally is not deployed.
Effectively this means that the structure of society becomes more and more out-of-date as it lags behind advancements and developments.
Also, if you aren't familiar, do some investigation into the historical relationship between clans, gangs, kingdoms, and nation-states.
Having access to the legal system is actually good.
Having to implement your own safeguards to store large amounts of value is bad.
And Nassim Taleb's analysis that Bitcoin is not a currency but rather an inherently volatile security casts a shadow on this analysis.
Are there any other business examples where an asset ( without any other craftsmanship/ work / energy input ) changes in value based on who holds it?
They (the banks and governments) will decide how and whether you can spend your credits. But almost no one realizes the horrors this will bring. With CBDC's your government or even your employer can decide how you are able to spend your money(credits). They can disallow you from paying your rent when you did not take your mandatory experimental Covid19 booster shot. Or they can disallow you to pay for gasoline if they think you've used too much.. The possibilities are endless. This is not a conspiracy, do your own research!
This is why crypto currencies are so important for us; banks and governments cannot control them. If we lose crypto currencies we will lose our freedoms eventually. The fight of governments and banks with decentralized crypto currencies are not about electricity usage or money laundering at all. It's all about absolute power and control over the people. Again, do your own research!
> During World War II, when the Japanese Empire invaded regions throughout Asia, > they would confiscate hard currency from the locals and issue their own paper > currency in its place, which is referred to as “invasion money“. These > conquered peoples would be forced to save and use a currency that had no > backing and ultimately lost all of its value over time, and this was a way for > Japan to extract their savings while maintaining a temporary unit of account > in those regions.
The author also fails to cover fraud and wash trading. Besides Invasion Money, Crypto is the only other thing on the list where debts can disappear without any transfer of value.
Quite surprising to me to not include Nick Szabo in that list. This article alone should have qualified Szabo for inclusion:
If anyone wants to give Shielded ZEC a try, get a Zcash Wallet from https://z.cash/wallets
This is how fungibility looks like: https://zcashblockexplorer.com/transactions/d51f29739b753683...
I have a good grasp on the abstraction necessary to accumulate value abstractly
A lot of financial engineering that comes naturally to me requires alot of inspiration to people I need to collaborate with
Understanding how money or currency is a proxy, a glue to get exchanges of value to occur, really require some bending of thought, for a lot of people
The velocity or multistage component is hardest for people
Also see, 𝙏𝙝𝙚 𝙂𝙧𝙖𝙢𝙢𝙖𝙧 𝙤𝙛 𝙈𝙤𝙣𝙚𝙮, by Felouz.
https://www.amazon.com/Wheels-Commerce-Civilization-Capitali...
Also see, 𝙏𝙝𝙚 𝙂𝙧𝙖𝙢𝙢𝙖𝙧 𝙤𝙛 𝙈𝙤𝙣𝙚𝙮, by Felouz.
I don't dislike capitalism, I just dislike how corruption quickly makes capitalism immoral, especially when money goes across borders.
It's sad but capitalism will never manage to gain support if it's corrupt.
In the late 1600s and early 1700s, the American colonial assemblies directly issued paper money to provide liquidity for farmers, so they did not have to barter with commodity crops such as tobacco. There was no prior government currency backed by gold, farmers paid tax in farm products.
> In that sense, currency devaluation becomes a form of tax and/or wealth confiscation. The public holds their savings in the paper currency, and then the rug is pulled out from under them.
There was no substantial devaluation or inflation of paper money in the colonies which emitted money using the public land-loan office system with no gold or commodity backing. In Pennsylvania the currency held most of its value for the 45 years the colony was permitted to issue it. It only declined 20% over its entire life time relative to the metal backed British Pound despite new currency continually being placed into circulation for immigrant farmers at low interest rates of 3-4%.
> Fiat currency is interesting, because unlike the history of commodity money, it’s a step down in terms of scarcity. Gold beat out all of the other commodity monies over centuries of globalization and technological development, and then gold itself was defeated by… pieces of paper?
In Poor Richard's Almanic, Benjamin Franklin explains the labor theory of value, and how if farmers spend their time digging holes to search for Spanish gold they will be poorer than if they had spent their time plowing their fields.
> Fiat money, if you like, is backed by men with guns.
When money is issued as credit, the value of the money is backed by the personal property and assets which the borrower stands to lose if they do not collect back money in the same unit of account after spending and investing it so that they can avoid a default or foreclosure.
> The answer is that it doesn’t have to, but it wants to. By issuing its own currency, it profits from seigniorage, which is the difference between the face value of the money and the cost to produce and distribute it.
In the land-loan office system, the government profits from interest. When it places new money in circulation by issuing credit to create liquidity it is acting as a public bank. The interest on loans which place new currency into circulation acted as a tax spent on infrastructure and public services, which was paid to the state rather than a private financial sector, which even Adam Smith admitted in the Wealth of Nations was sufficient to for most of the expenses of the state.
It's always surprising when American authors omit a discussion of American colonial money from a discussion of the history of money, given that American colonies were the first western governments to issue paper money and conduct extensive experiments on the subjects.
Its not though is it. It's tremendously simple but nobody is taught and the subject is censored for good reason.
>and yet what humanity has defined as money has changed significantly over the centuries.
Centuries doesnt matter unless you're looking to understand why the USA is about to majorly collapse. Follow slavery along timeline for dutch and qinq, to british, to usa, to now uighurs in china. To become #1 you need slaves, when you ban slavery you lose your empire.
Lets ignore the centuries. When the USA got into extreme debt during WW1 they went off the gold standard because otherwise they would effectively have gone bankrupt. Suddenly the government could 'print money' and they did. Bretton woods came along after great depression and tremendous debt of ww2. IMF basically switched to fiat but really what it was backed by north american natural resources. Not just gold, but oil, lumber, etc.
When Nixon nuked this in 71-73. He was a crook but something happened that surprised everyone. The markets went up... it literally didnt make sense. USD should have collapsed.
Technically if say during the 1980s, the US government switched to keep debt to gdp below 50% and never went beyond. They could have done that. The problem is that us politicians kept printing money. The financial crisis pushed the USA above 100%. The USA is officially bankrupt. Covid basic income schemes printing trillions only exacerbated the problem.
>However, depending on where they live in the world, people are not very accustomed to keeping track of the quality of money itself, or deciding which type of money to hold.
The USD has ~40% inflation locked in. At 7% it's going to take a few years. Everyone who is subject to USD reserve currency or for that matter uses the USD will be getting educated. This education will have consequences in many ways.
For the first time the US people living right now will get to experience and feel their government debt.
Obviously im not nostradamus but I have a feeling as a way to punish china and prevent the yuan from gaining this super power of being the reserve currency. The 'west' will all agree some crypto will be the new reserve currency they all trade in. Some proper non-deflationary nor inflationary currency. We are already seeing this happen as a grass roots movement.
You know what happens when that happens? Countries which are heavily in debt will be required to fix their debt situation. Places like Germany or Switzerland who have decided by constitutional requirement to balance the budget and reduce debt are about to become immensely wealthy.
>Save: When we save, we store our resources in something that is safe, liquid, and portable, a.k.a. money. This serves as a low-risk battery of future resource consumption across time and space.
No, that is not how any of this works. It literally doesn't work like that. Think about it this way. If there is no money, then owning a car in 2000 and not doing anything with it will incur costs. You need to store the car, you need to clean it, you need to send it to inspections. It will lose its value as new models are introduced. The vast majority of physical capital depreciates.
When you are saving, you produce more than you consume, meaning you have idle physical capital. That physical capital can be given to someone that needs it, who will then give you money in exchange. The car isn't gone. It's not stored. It's being used by someone else. If you spend the money to buy a new car, a new car has to be manufactured. When you think about it, what money is doing in this case is you are making an agreement in 2000. The deal is, you produce and I consume in 2000, in 2020 I produce and you consume.
If you were to reset the money system at the end of every year completely, then you would notice that anything produced within a year, must start being consumed within that year. Saving is the act of swapping the consumption and production relationship across production periods. When you consider the fact, that the human you are making an agreement with has to exist in the future, you should notice that starvation, aging and demographic declines are not some acts of theft or expropriation that humans born with the original sin of entropy commit behind your back.
The idea that there is a battery is wholly illogical. The fact that we even pretend that money lets us travel through time and space is the mistake rooted in most currency systems. You can't store labor, nobody has invented a Futurama style freezer that preserves human bodies and even if we did, we would most likely run out of capacity sooner than later.
>Invest: When we invest, we commit resources to a project that has a decent likelihood of multiplying our resources but also comes with a risk of losing them, by trying to provide some new value to ourselves or others.
This is incorrect again. As mentioned above, savings must be put to use or the human time that those savings represent a claim on will disappear without the futurama tech. This means that even if the likelihood of a return is zero and you are guaranteed a loss, you must still invest your savings or let someone else do it on your behalf.
>The majority of people in the world don’t invest in financial assets; they are still on the consumption stage (basic necessities and daily entertainment) or the saving stage (money and home equity), either due to income constraints, consumption excesses, or because they live in part of the world that doesn’t have well-developed capital markets.
Or maybe it's because young people aren't born with land ownership and must buy it off some old fart?
>Commodity Money
>In this way of thinking, money should be divisible, portable, durable, fungible, verifiable, and scarce
Ancient egyptians didn't get the memo. They didn't have scarce money. They had money that was immediately available to anyone who worked, especially if said work was on a farm. Since money is immediately available, it doesn't have to be reproduced or as people love calling it "printed", there was no need to generate more of it if people are willing to give it up voluntarily. The idea, that money should be structured like land, so that you must get it from rich people, is a mistake. For a lot of poor people, borrowing with interest leads to a debt trap. So the alternative, is then to replicate the exclusive currency as those who have too little cannot get it from those who have too much. The solution is to stop making a currency exclusive to small fractions of the population. A lot of people complain about money printing and inflation, yet the money supply has risen so much faster than inflation, the excessive monetary savings of the rich have grown so fast and yet people complain that the saver is getting screwed despite having record levels of savings even adjusted by inflation. All that money isn't ending up where it should be, so you can't ever stop making more of it.
>Durable means the money is easy to save across time; it does not rot or rust or break easily.
Said ancient egyptians had money that rots, which forced them to save in the way I outlined above. They actually had to do the production consumption time swap, they actually had to talk to people and seek agreement whether they want to be in debt. They can't just hold onto money and extort the rest of the population by reminding them that they are mortal and that futurama freezers don't exist and thereby force them to go into debt for the medium of exchange that is needed to trade with parties completely unrelated to the rich that can only be obtained through them. Unutilized capital simply disappears through rotting, giving the "capitalist" zero power over the rest of the population.
In other words, if money can be owned, then it cannot be merely an abstract unit of account. That money has to represent physical capital directly and in its entirety.
>Unlike a dollar, which is an asset to you but a liability of some other entity, you can hold gold which is an asset to you and a liability to nobody else.
Yes, now notice the mistake. You can have an asset which requires the consent of the entire society that accepts gold as payment and you never ask them. You think you have an agreement even when nobody is on the other side. That is the true source of inflation. You plan to consume X amount of resources in the future but nobody agrees to produce X amount of resources at the time you want to consume, the prices of goods goes up. Deflation happens when someone plans to produce but nobody plans to consume in that time period. Thus, due to human psychology, there will be an endless cycle between booms and busts, due to the fact that production and consumption schedules are inherently mismatched as nobody is forced to make such an agreement, nobody is forced to make a plan for the future. Everyone has liquid money that can be spent at any moment, which makes it impossible for producers to anticipate what they have to produce. If the battery theory were correct, then inflation or deflation shouldn't be possible as you can magically store everything including humans in your battery.
It is very easy to assume that all governments over the last 2000 years were incompetent. The problem with that is that ancient egypt's grain money system lasted two thousand years without any problem. The truth is that the gold standard is inherently unstable and collapses within 80-100 years and usually lives a second life as paper money but due to the exponential nature of compound interest, people only notice the big numbers with paper currency so they think it is governments and paper currency that are flawed and the gold standard which led to the problem is conveniently ignored and then restarted to fail in a 100 years again, due to mysterious government incompetence.
>In that sense, currency devaluation becomes a form of tax and/or wealth confiscation. The public holds their savings in the paper currency, and then the rug is pulled out from under them.
As mentioned, today the money supply is growing much faster than inflation is devaluing it. The fact is that people like to save and they have no plans to stop saving even if there is nobody there who agreed to be the producer for those savings.
>It’s rather ironic- gold was a “barbarous relic” and yet apparently had to be confiscated and pushed out of use by the threat of imprisonment, and hoarded only by the government during a period of intentional currency devaluation.
I have to be seriously disappointed by the author here. The person that called the gold standard a barbarous relic aka Keynes, also proposed the Bancor system which would have avoided the predictable failure of the Bretton Woods system. After all, Keynes was there at the Bretton Woods conference and he knew that the day it was introduced it was doomed to fail as it is just an extension of the gold standard. The Bancor system was specifically designed to eradicate the existence of "Dutch Disease" between countries and excessive debt relationships between countries. The special drawing rights of the IMF were inspired by the Bancor system but I am not sure how close they are in the spirit to the international valuta association that Silvio Gesell proposed. Yes, Keynes was a copycat but unlike Silvio Gesell he was also an economist.
>The takeaway from this section is that the growth in the broad money supply per capita is the “true” inflation rate.
Strange, an increase in savings is apparently inflation nowadays? So if the population gets bigger, saves more for retirement or money concentrates at the top, that is apparently inflation?
>The answer is that it doesn’t have to, but it wants to. By issuing its own currency, it profits from seigniorage, which is the difference between the face value of the money and the cost to produce and distribute it. It is, basically, a subtle inflation tax that compounds over time.
Okay, if that is the case, why do commercial banks get to do it then? Why do commercial banks get to profit from seignorage?
>Their currencies all lost 95% to 99% of their purchasing power over time, but it was usually gradual rather than abrupt. The system is not without its cracks as previously-discussed, but it’s certainly the most comprehensive fiat currency system ever constructed.
Imagine having possessions from a hundred years ago and them not losing their value. Gold is one of the few things and there is an obvious problem there. What do you trade your gold with? Trade gold for gold? You can't use the gold to buy things that have been stored from 100 years ago. Someone must work for that gold and if they have to value savings from a 100 years ago at 100%, they are slaves to the past. We already have that problem with land ownership. The young are slaves to the old because the old own all the land.
I stopped at the cryptocurrencies section because it is most likely just another gold standard system and I honestly don't care about cryptocurrencies.
inefficiency at its best, humanity would transcend faster into the next Age without these primate level concepts
Money is a tax credit.
Even commodity money is fiat, because without the stamp from the mint it cannot be used to pay taxes.
If you want proof of this, all you have to point to is the fact that coins minted in antiquity still exist, despite the fact that they were alloys.
Money is a tax credit, everything else is a commodity.
It's very simple.
Which is true.
But I like to think in boolean and float terms.
0 is not real.
1 is real.
Cash in a reserve currency is ~0.9
Visa/MasterCard are also ~0.9
BTC is probably around 0.7
A shit coin is <0.5
Which is to say, it isn't real. You're right - that's not a useful stance, and all of the unreal things aren't therefore equally "real"
Things in the "socially constructed reality" category depend on network effects--who believes and upholds the truths within your network. That might map to your "float" values, as not all currencies are upheld by unanimous agreement within various networks.
In all three kinds of things, belief that something is true -- even mass, near unanimous, collective belief that it is -- does not make it so. That was true for Newtonian physics and gravity as it is for, say, the idea that "interest rates and inflation are connected."
Traditionally, something is considered money when it can fulfil three functions:
1) Act as a medium of trade
2) Act as a store of (economic) value
3) Act as a unit of account
The last is critically important in the modern context because one of the fundamental uses of money today is to measure economic wealth/income/activity/potential. Many commodities can act as #2. Many abstractions can act as #1. Few things act as all three.
> We can define currency as a liability of an institution, typically either a commercial bank or a central bank, that is used as a medium of exchange and unit of account.
> Central Asians at the time of Battuta, as a nomadic culture, used livestock as money. The unit of account was a sheep, and larger types of livestock would be worth a certain multiple of sheep.
> Prices of most things stay relatively stable or preferably keep going down as priced in the most salable good (such as gold, historically) over the long run, but go up in most years when measured in a depreciating and weaker unit of account such as the British pound.
The common understanding appears to be that money is just an imaginary human-thing and that often "we would be better off without it".
Consider the case of a crypto mine being established in a remote and isolated location in the desert (or on the moon) with plenty of sunshine and solar power. As long as the mine has an internet connection, it can use the available solar energy to mine crypto and send them to anyone on earth. This physically results in the mine being able to transmit energy wirelessly across vast distances.
Almost like magic.
Sure, it's not in an electrical form and there is energy loss, but at the end of the day, the result is a very real physical capacity to do work.
> This physically results in the mine being able to transmit energy wirelessly across vast distances.
...is complete bunk. No energy is transmitted when you mine and then transact in Bitcoin: you've used the energy to produce a proof of work, one that others arbitrarily value and exchange for different energy.
Restructured: it should be clear that no trust scheme can magically transfer energy; it can only transfer tokens than can be exchanged for energy. In other words, any trust scheme that has extraordinary power requirements is strictly worse than one that only consumes energy once (i.e., when ultimately purchased).
When the person wants to spend the crypto to get energy later, then new energy still has to be produced in addition to the energy used for mining (either by burning fossil fuels or using some of the capacity of renewables). If they're producing 100 units of energy to run their miner to get enough crypto to buy 100 units of energy later, then there's twice as much energy having to be produced than if they didn't run their miner.
Money is a tool for humans to allocate resources between themselves. It's not energy storage.
If there was only one person on Earth that could freely use any resources available to them, then they wouldn't ever have any use in "saving up energy" by crypto-mining to spend later because it's not saving up energy. It's making energy and spending it on IOU notes to trade to other people for energy they make. It's only when you add other people to the system that it makes any sense to do. Though ideally, the people would be able to coordinate together to come up with a solution that doesn't involve twice the energy being made with half of it going into making IOU notes.
You can't say that something that uses a huge amount of energy, and then lets you pay for even more energy to be used has "transferred" that energy, it's just unnecessarily consumed much more energy than was required...
I think it makes more sense to regard money as a kind of messaging technology that enables decentralised coordination and prioritisation of economic activities in the real economy. But you have to remember that the messaging technology of money is not itself the real economy. It is certainly not energy. Messaging and coordination systems cost energy to run. Adding a better messaging and coordination system might allow a society to run its real physical economy more efficiently, but the messaging and coordination system in itself does not produce energy.
Here's a dumb thought experiment:
Suppose there is a pre-industrial society on island A. The economy is based on agriculture and livestock. The citizens of island A society develop a system of currency using conch shells, which they can use to track debts accrued and favours owed. Adjacent to island A is the nearby uninhabited island wilderness of island B, filled with natural resources. Inconveniently, a very deep 20 metres wide chasm separates island A from island B. After years of effort with several fatalities and misadventures, the citizens of island A manage to traverse the gap and build a sturdy bridge allowing people, livestock and goods to cross. Some economic activity spreads to island B, but the terrain is not productive for livestock and livestock remain on island A.
You are one of the pioneers on the frontier of island B, attempting to establish a farm. You would like to rent some of the livestock belonging to your business partner on island A, to provide energy to clear land and establish your new field more easily.
Calamity strikes: there is an earthquake which causes bridge between island A and island B collapses! People, livestock and large trade goods can no longer cross the chasm until the bridge can be repaired. However, the gap is small enough to communicate across by shouting. If you really want, you could also bundle up a sack of conch shell money and sling it across the gap.
Rather inconveniently for the pioneers on island B, there were no livestock on island B at the moment the bridge collapsed.
Even without a bridge, to hire your business partner's livestock, you are still able to make a payment of money across the chasm to your business partner. You can choose to sling over a bundle of money across. Alternatively, the central bankers of island B and island A can shout across the 20 metre gap to negotiate the transaction and ensure the transaction is recorded consistently in each island's clay tablets in the traditional manner (Paxos).
However, there is no way for your business partner's livestock to get across the gap until the bridge is reconstructed. It may take years of very dangerous work to rebuild it.
The system of money and financial transactions still functions across the chasm, but it is completely unable to transfer livestock-powered energy.
The messaging & debt-tracking system (conch shells, clay tablets, shouted agreements) is not the same thing as the real economy (oxen energy to plough your fields).
Isn't this exactly how energy works? Aren't photons, electrons and other force carriers merely message passing?
This model makes the assumption that all players in the value chain (producers and consumers) are agents with repeatable instructions ie put,Get,push,add,mov,etc.
Since there is No SI unit for instructions I propose the Unit for measuring instructions be MOV operator , This is because of my belief taking inspiration from the X86 MOV operator which was proven to be turing complete with the movfuscator(https://github.com/xoreaxeaxeax/movfuscator). What this means IMO all computable operations can be broken down to move operations.
Lastly this system views markets as interaction between agents . And makes the assumption that agents that do not sustainably price their goods / services will fail to operate in the longrun. And views variance / volatility in prices as a outcome of chaotic interaction between agents rather True indicator of value.