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Comment by _factor | Hacker News Reader

What is money really?

If I build you a house for $10, then I pay my friend those $10 for a house, then he goes back to the original friend and paid them to build a house, we end up with $10 passed around and 3x magic value added to the economy (houses).

If I go to mars and become the first farmer, then pay 2 barrels of food for a house, then pay 1 barrel for a cobbler to make me shows, I’ve set the market price that a house is now worth 2 pairs of shoes.

I start a stock. I offer 1 million shares, I sell 50 shares to my friend for $10 each. The market cap is now 10 million.

What even is this fuzzy value thing we call currency? Seems like the only thing ascribing value is some powerful guy with a military behind them saying it has it.

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Nothing fuzzy: money is debt. Ultimately modern money originates from a ledger entry which denotes an asset and a liability (a deposit and a loan; which is the asset and which is the liability depends on your perspective).

State issued currency is exactly the same. The liability from the perspective of the state is that central bank issued money can be used to satisfy a tax liability.

Fuzzy in the sense that the value of things is not well defined, it is just arbitrary, based on supply and demand.

The relative value of things change even in the absence of money (e.g. in a barter economy, or for one person stuck alone on an island). Therefore the fuzziness cannot be attributed all to money.

You offer to sell me shares of your stock for $10 each. I am not your friend. I do not think your offering supports your valuation so I decline. I think your stock might be worth $2 a share, I convince your friend I am right. Your friend sees her investment tanking and agrees to sell her shares to me before they fall any further. Your market cap is now 2 million.

I go to mars and build a shoe factory. I produce and sell shoes for a fraction of a barrel of food. I buy your house for two pairs of shoes. Now you are homeless.

If money was perfectly efficient we wouldn't need it, its just a way to negotiate on stores of value without having to trade pigs around.

The military thing absolutely ascribes value, but so does every other human interaction with a thing, value is something we all hold in our minds, if you want it and I have it, it's valuable, if not, it's worthless. There's no magic regarding money in this equation.

Money has always been a tool of the state. Even if it was perfectly efficient, the state would still use money for its own ends.

Edit: moreover, most money is created to support activity in which the two sides cannot be matched at all, because one side doesn't exist yet, specifically loans. It's hard to see how some hypothetical perfect exchange mechanism would deal with disparities in time.

Money is anything which: is a store of value; is a medium of exchange; is a unit of account; is a standard for future payment.

It needs to be durable, transportable, divisible and difficult to counterfeit.

Famous example - cigarettes in a POW camp:

https://courses.cit.cornell.edu/econ4260/out/radford_pow.pdf

I was thinking about this the other day. They always confiscate prisoners’ cigarettes because they’re used as money. This actually makes the cigarettes more valuable if a prisoner can hold on to them. Imagine the look on the prisoners’ faces if the prison issued free and unlimited cigarettes to everyone. The entire economy would implode.

Not always transportable: https://en.wikipedia.org/wiki/Rai_stones

This seems to be a ledger, except that it's not written down! Oral history as money. (Is a community's collective memory transportable?)

> 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 a transfer to the oral history of the stone thus effected a change of ownership

Compare with locations in a memory palace:

https://en.wikipedia.org/wiki/Method_of_loci

And to show that memory and consensus are what's important, it doesn't even matter if you lose the stone:

> In one instance, a large rai being transported by canoe and outrigger was accidentally dropped and sank to the sea floor. Although it was never seen again, everyone agreed that the rai must still be there, so it continued to be transacted as any other stone.

It serves to competing uses. One it is a medium of exchange. The other is as a store of value. I feel it has more use as a medium of exchange. The fact that the interest isn't created creates economic pressure towards exploitive activities.

It's a complicated subject, but David Graebner's 'Debt' would give you a lot to think about.

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