What is money? A brief history of what we can’t live without | Hacker News Reader

What is money? A brief history of what we can’t live without

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2 pointssshamoon8 comments

Would love feedback - positive or negative

>The government and the Federal Reserve (yes, they are two distinct entities — not part of the same) have perverted the definition of something

This system is not internal to US. Most countries have more or less independent federal bank and similar system.

>Whatever money may be, ultimately, it is supposed to act as a store of value for your labor, ingenuity and good fortune.

This is outdated idea and source of much confusion. Yes, money should act as reasonable store of value in short term. Money should not have store of value property that is better than alternatives. It should never be good investment. Money should be the most liquid asset, unit of account and medium of exchange before being long time store of value. Because contracts (including wages) are defied using money as unit of account, small inflation forces constant renegotiation of contracts. It's fluid in the gears of the economy. Store your value elsewhere. It's easy.

Money is just an asset. Theoretically, you can define money as the most liquid asset. Transition from money to other assets is fluid (different M's) based on them being money-like and there is nothing confusing in it unless you falsely assume that money should have some kind of magic substance that other assets don't have. Your car can be more money-like if you turn it into financial instrument by taking a loan against it.

Why are you saying this is an outdated idea? For the many millennia that money has existed, it has been a store of value AND a transactional commodity. Only in the past 100 years (more like 40, really) has this changed so drastically.

Are we, as a society, so special that we can change what money has been for all of humanity throughout all of time?

We are not special. Money has been very unpredictable entity in history. In the past, economic thinking was not that developed. There were no alternatives.

Historical fluctuations in inflation: https://en.wikipedia.org/wiki/File:US_Historical_Inflation_A...

Historical interest rates: http://i.imgur.com/i0xit0K.png

More important than store, is predictability. If you know it's going to be 1-5% inflation next 20 years with high probability, life is much easier to plan than if there is high change of huge deflations or inflations.

I completely agree that predictability is an important aspect of money. We don't know that inflation will be 1-5% over the next 20 years with any certainty.

This makes planning very difficult with money. I suppose my point was to hold a mirror to society and show how we value ourselves using money as the barometer.

The main benefit of the fiat money is that it follows the economy and not the other way around. USD is what it is because US economy. 30-year bonds have yield 3.58% and it tells us much about how markets see the future of U.S economy and inflation.

I don't see money as a "store of value." It represents value. It does not store it. It's primary value is in lubricating trade so you don't have to trade a whole bunch of stuff to get the one thing you want. You can just get money and then go get Thing You Want.

I don't agree with your conclusions but the history part was interesting. Thank you for sharing that.

Edit: Also, 12 trillion dollars divided by 311 million people in the US is only $38585.20900321543 per person. Not such a crazy high number for the money supply given that this is a wealthy nation.

I will revise the article accordingly. Thanks for the heads up.

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