The strange thing about money is the way it has changed, over time from being valuable commodities (such as gold and silver) to becoming pieces of paper with promises to pay the gold or silver to pieces of paper that are "legal tender for all debts public and private" to pieces of paper that promise to give you the other pieces of paper (i.e. cheques) to electronic entities that tell you how much numbers of these pieces of paper you have.
We have given up our real money for fiat money and we have given up our fiat money for promises to pay fiat money. What a wacky world we live in.
A common misconception is that paper currency is money. Currency is a form of money but it is, by far, not the predominant form of money today. In today's world, money is created by bankers at the stroke of a pen by issuing debt. Similarly, money is destroyed when a loan is repaid or, worse, when loans are defaulted on.
I personally believe that more than 90% of the adult population does not truly understand the true nature of money. It's sad, really.
ingredients: 1 oz cranberry vodka 3 oz Wink (it's now called CPlus Wink I do believe - it's similar to Fresca) serve over ice; garnish with lime
A nice, tart drink. Cheers!
Currency, or money, is a certain commodity against which goods are exchanged, in most of the interpersonal exchanges of a society. The big advantage of money, over direct barter, is that it can be measured in discrete homogeneous units, and therefore provides a way of reckoning costs and revenues in common terms. Certainly, a society can support multiple tenders. There's no theoretical reason why people couldn't negotiate prices in dollars, yen, pounds sterling, euros, shekels, moles of platinum, kilograms of wheat, hair elastics, or Spanish dubloons in different exchanges and contracts with different people, all within the same society. In fact, that's really what we do, and in most countries there are no laws governing how voluntary transactions are to be paid for (since legal tender laws only apply to debts and taxes). But for a number of reasons, mostly convenience and security, one form of currency will tend to supplant the others, ceteris paribus. Like barter, money is traded en masse for goods and services. The units of currency are therefore not units of value;* they are units of a quantity of a substance. If a lamp is priced at $20, it does not mean that the value of the lamp is $20, but that the person who owns the lamp wants one "bushel" of money, consisting of twenty dollars' worth of money, before he'll give you the lamp. If a plot of real estate is appraised at $30 000, it doesn't mean that the value of the land is $30 000, but rather that the appraiser is telling you that you can very likely find someone who will give you one big wad of money, consisting of $30 000, in exchange for ownership of that land. This is the reason that many of the early currencies of our civilization – notably the pound – were named after weights; they originally referred to a certain mass of precious metal (in the case of pounds, of silver). So, how does a prospective seller know how much money the value of his product is equal to? The thing is, he never does. First of all, the money he will ask for must be enough so that it is, as far as he's concerned, better than the product he's selling. After all, if the amount of money were just as valuable to him as the product, he'd be just as good off keeping the product for himself. On the other hand, the same is true of the prospective buyer: she wants something that is more valuable to her than the money she has in her hand. In order to find the optimal balance of interests, the two parties haggle. The nature of Euro-Saxon customs for pricing most day-to-day commodities and services are probably the main source of the misconception that money is a measure of value. In Euro-Saxon shop pricing, the seller assigns a certain price to his commodity, and if the buyer isn't prepared to part with that much money, then she simply walks away. This doesn't look like haggling, but is actually part of an extended haggle that occurs over the course of months and involves thousands of individual consumers. It is much like the haggling of a shy jungle band with a cautious sedentary village: The villagers find a clearing and leave a pile of goods there, then retreat back into the forest. Then, the forest people enter the clearing, and leave a pile of goods they're willing to trade. Then they retreat back towards their own encampment. The villagers return, compare the two piles, and if they're satisfied with the pricing, they take what has been offered to them and go home, leaving their own offering for the foresters. If they aren't satisfied, then they may add something to their own pile, or separate something from the pile offered to them to indicate they don't want it. Then the foresters return and judge the piles. This continues back and forth, with each side modifying its offer and its terms, until both sides are satisfied. Although at no time is there any vocal haggling like we might find in the streets of Guayaquil, or at a Sotheby's auction, it is clearly haggling nonetheless. Anthropologists refer to it as "dumb barter" or "silent trade." In the Euro-Saxon pricing scheme, the seller's opening price is based on the amount of money exchanged in the past for similar products, of comparable quality and cost to produce, exchanged under similar conditions as those he expects to be selling under himself. A prospective buyer will simply not purchase the product or avail herself of the service if she is not satisfied with this asking price – ie., if she expects that she could get something more valuable to her, personally, for the same amount of money somewhere else. If this occurs so consistently that the seller cannot profit or even break even on the rate of sales he is turning, if he is to have any hope of recuperating his investment he will have to lower prices. This is not because he "mismeasured" the value of his product, but because he misjudged how valuable it would be, compared ordinally to the lump sum for which he was asking, to the consumer. In this way, we haggle "blind," just like the foresters and villagers. This is how prices are negotiated; this is how we haggle. A standard of currency is a commodity which is used as one element of a barter in most of a society's exchanges. The precise amount of money used in a given exchange is negotiated, and is a measure of price. If the exchange is profitable to the consumer, then the amount of money asked for by the seller will be less valuable to her than the product being sold. If the exchange is profitable to the seller, then the amount of money he is asking for will be more valuable to him than the product he's trying to get rid of. Because these valuations are ordinal (most valuable vs. least valuable) and are relative, mutually profitable exchange is possible. But these facts also mean that it is impossible to quantify value. Reasonable pricing has nothing to do with whether the "value" of the money is "equal" to the value of the product. It is simply old-fashioned barter using a univeral bartering medium: money.
Currency, or money, is a certain commodity against which goods are exchanged, in most of the interpersonal exchanges of a society. The big advantage of money, over direct barter, is that it can be measured in discrete homogeneous units, and therefore provides a way of reckoning costs and revenues in common terms.
Certainly, a society can support multiple tenders. There's no theoretical reason why people couldn't negotiate prices in dollars, yen, pounds sterling, euros, shekels, moles of platinum, kilograms of wheat, hair elastics, or Spanish dubloons in different exchanges and contracts with different people, all within the same society. In fact, that's really what we do, and in most countries there are no laws governing how voluntary transactions are to be paid for (since legal tender laws only apply to debts and taxes). But for a number of reasons, mostly convenience and security, one form of currency will tend to supplant the others, ceteris paribus.
Like barter, money is traded en masse for goods and services. The units of currency are therefore not units of value;* they are units of a quantity of a substance. If a lamp is priced at $20, it does not mean that the value of the lamp is $20, but that the person who owns the lamp wants one "bushel" of money, consisting of twenty dollars' worth of money, before he'll give you the lamp. If a plot of real estate is appraised at $30 000, it doesn't mean that the value of the land is $30 000, but rather that the appraiser is telling you that you can very likely find someone who will give you one big wad of money, consisting of $30 000, in exchange for ownership of that land. This is the reason that many of the early currencies of our civilization – notably the pound – were named after weights; they originally referred to a certain mass of precious metal (in the case of pounds, of silver).
So, how does a prospective seller know how much money the value of his product is equal to? The thing is, he never does. First of all, the money he will ask for must be enough so that it is, as far as he's concerned, better than the product he's selling. After all, if the amount of money were just as valuable to him as the product, he'd be just as good off keeping the product for himself. On the other hand, the same is true of the prospective buyer: she wants something that is more valuable to her than the money she has in her hand. In order to find the optimal balance of interests, the two parties haggle.
The nature of Euro-Saxon customs for pricing most day-to-day commodities and services are probably the main source of the misconception that money is a measure of value. In Euro-Saxon shop pricing, the seller assigns a certain price to his commodity, and if the buyer isn't prepared to part with that much money, then she simply walks away. This doesn't look like haggling, but is actually part of an extended haggle that occurs over the course of months and involves thousands of individual consumers.
It is much like the haggling of a shy jungle band with a cautious sedentary village: The villagers find a clearing and leave a pile of goods there, then retreat back into the forest. Then, the forest people enter the clearing, and leave a pile of goods they're willing to trade. Then they retreat back towards their own encampment. The villagers return, compare the two piles, and if they're satisfied with the pricing, they take what has been offered to them and go home, leaving their own offering for the foresters. If they aren't satisfied, then they may add something to their own pile, or separate something from the pile offered to them to indicate they don't want it. Then the foresters return and judge the piles. This continues back and forth, with each side modifying its offer and its terms, until both sides are satisfied. Although at no time is there any vocal haggling like we might find in the streets of Guayaquil, or at a Sotheby's auction, it is clearly haggling nonetheless. Anthropologists refer to it as "dumb barter" or "silent trade."
In the Euro-Saxon pricing scheme, the seller's opening price is based on the amount of money exchanged in the past for similar products, of comparable quality and cost to produce, exchanged under similar conditions as those he expects to be selling under himself. A prospective buyer will simply not purchase the product or avail herself of the service if she is not satisfied with this asking price – ie., if she expects that she could get something more valuable to her, personally, for the same amount of money somewhere else. If this occurs so consistently that the seller cannot profit or even break even on the rate of sales he is turning, if he is to have any hope of recuperating his investment he will have to lower prices. This is not because he "mismeasured" the value of his product, but because he misjudged how valuable it would be, compared ordinally to the lump sum for which he was asking, to the consumer. In this way, we haggle "blind," just like the foresters and villagers.
This is how prices are negotiated; this is how we haggle. A standard of currency is a commodity which is used as one element of a barter in most of a society's exchanges. The precise amount of money used in a given exchange is negotiated, and is a measure of price. If the exchange is profitable to the consumer, then the amount of money asked for by the seller will be less valuable to her than the product being sold. If the exchange is profitable to the seller, then the amount of money he is asking for will be more valuable to him than the product he's trying to get rid of. Because these valuations are ordinal (most valuable vs. least valuable) and are relative, mutually profitable exchange is possible. But these facts also mean that it is impossible to quantify value. Reasonable pricing has nothing to do with whether the "value" of the money is "equal" to the value of the product. It is simply old-fashioned barter using a univeral bartering medium: money.
Currency is older than even written history, and is present in almost every society in some form. The Iroquois Confederacy used wampum, or belts of bead designs, to cement contracts between citizens. In some African cultures, cattle were used for the exchange of any other good, from land to dowry. The Kula Ring of the South Pacific consists of a number of cultures who trade kula, or shell jewlery, amongst one another for ceremonial purposes. Even in "advanced" societies, in dire times, the social structure supporting some one medium may collapse, leaving a void in which some more unusual media have the opportunity to arise: – in colonial Quebec, playing cards signed by the Gouverneur were used; after World War II in Europe, cigarettes were considered standard (if not legal) tender. As social organization becomes more complex, however, the value of a general medium of barter becomes ever more apparent, and some object will gain more currency. Since the Bronze Age, the most common medium of exchange was precious metal. Gold, because of its scarcity, its malleability, and because it never tarnishes, was for thousands of years considered the most precious of metals, and took on a great deal of symbolic significance. In northern climes, silver was more accessible and so took on the role of currency for the Vikings and for the Anglo-Saxons, but by the Twentieth Century a gold standard prevailed all over the world. Even "pounds sterling" or French argent have not been traded primarily against silver for four hundred years. In the Sixteenth Century, the debasement of silver coins by the government led the people to support a de facto gold standard. Later, tender laws were revised to officially change the official state currency to pounds bullion, though the name "sterling" remains even today, many years after gold was abandoned for the last time. Throughout the Renaissance period, the security and liberal policies of some small Italian duchies led to increasing wealth for those states, and as a result, business transactions tended to involve more and more gold. At a certain point, trafficking all that gold for an exchange became impractical, and so the actual physical coin was held at warehouse outlets called banks. Letters of credit were issued by these banks, like cheques: they certified that, upon presentation of the letter, the owner would be reimbursed in full for a certain amount of gold. Over time, because governments have traditionally had the best security services, the actual currency tended to be held in reserves owned by the state. In this way, the state became a bank and mint, and issued its own letters of credit. As time went on, it became less and less important whether one could actually present the bill to the government, as long as the paper money was widely recognized to have a fixed rate of exchange in the actual standard. In this way the shift to paper money was made without losing the gold standard, and countries remained on that standard even though no one actually traded gold anymore. This led people to believe that gold no longer had an economic function. During and between the World Wars, the gold standard began to lose favour among governments. Before World War I, Germany switched to a paper standard and actually forbade trading this money against gold, thus leading to mind-boggling inflation and wide-spread poverty and paving the way for Nazi rule, despite the establishment of a land standard – too little, too late. The use of a floating currency in the US, as well as the seemingly free money of War Bonds (which were effectively shares in the extorted tribute of the subjects of countries that lost the War), were part and parcel with the fantastic mass speculation of the 1920's which paved the way for the Great Depression. Today, the economies of most of the "developed nations" are based on the trust of the people in their governments, making our economies, essentially, a signature standard. One of the results of this has been the rapid inflation that has occurred since the mid-Twentieth Century.
Currency is older than even written history, and is present in almost every society in some form. The Iroquois Confederacy used wampum, or belts of bead designs, to cement contracts between citizens. In some African cultures, cattle were used for the exchange of any other good, from land to dowry. The Kula Ring of the South Pacific consists of a number of cultures who trade kula, or shell jewlery, amongst one another for ceremonial purposes. Even in "advanced" societies, in dire times, the social structure supporting some one medium may collapse, leaving a void in which some more unusual media have the opportunity to arise: – in colonial Quebec, playing cards signed by the Gouverneur were used; after World War II in Europe, cigarettes were considered standard (if not legal) tender. As social organization becomes more complex, however, the value of a general medium of barter becomes ever more apparent, and some object will gain more currency.
Since the Bronze Age, the most common medium of exchange was precious metal. Gold, because of its scarcity, its malleability, and because it never tarnishes, was for thousands of years considered the most precious of metals, and took on a great deal of symbolic significance. In northern climes, silver was more accessible and so took on the role of currency for the Vikings and for the Anglo-Saxons, but by the Twentieth Century a gold standard prevailed all over the world. Even "pounds sterling" or French argent have not been traded primarily against silver for four hundred years. In the Sixteenth Century, the debasement of silver coins by the government led the people to support a de facto gold standard. Later, tender laws were revised to officially change the official state currency to pounds bullion, though the name "sterling" remains even today, many years after gold was abandoned for the last time.
Throughout the Renaissance period, the security and liberal policies of some small Italian duchies led to increasing wealth for those states, and as a result, business transactions tended to involve more and more gold. At a certain point, trafficking all that gold for an exchange became impractical, and so the actual physical coin was held at warehouse outlets called banks. Letters of credit were issued by these banks, like cheques: they certified that, upon presentation of the letter, the owner would be reimbursed in full for a certain amount of gold. Over time, because governments have traditionally had the best security services, the actual currency tended to be held in reserves owned by the state. In this way, the state became a bank and mint, and issued its own letters of credit. As time went on, it became less and less important whether one could actually present the bill to the government, as long as the paper money was widely recognized to have a fixed rate of exchange in the actual standard. In this way the shift to paper money was made without losing the gold standard, and countries remained on that standard even though no one actually traded gold anymore.
This led people to believe that gold no longer had an economic function.
During and between the World Wars, the gold standard began to lose favour among governments. Before World War I, Germany switched to a paper standard and actually forbade trading this money against gold, thus leading to mind-boggling inflation and wide-spread poverty and paving the way for Nazi rule, despite the establishment of a land standard – too little, too late. The use of a floating currency in the US, as well as the seemingly free money of War Bonds (which were effectively shares in the extorted tribute of the subjects of countries that lost the War), were part and parcel with the fantastic mass speculation of the 1920's which paved the way for the Great Depression. Today, the economies of most of the "developed nations" are based on the trust of the people in their governments, making our economies, essentially, a signature standard. One of the results of this has been the rapid inflation that has occurred since the mid-Twentieth Century.
Although many commodities have served as currency throughout history, there are certain qualities that are particularly ideal for a money standard. First, it should be durable. If you make an exchange against a certain commodity, and that commodity is later destroyed before you have the chance to use it or exchange it for something else, then you have wasted the exchange and lost for good whatever it was you exchanged for the money in the first place. In some ancient societies, wheat grains were used as a currency, but wheat can spoil, or it can be eaten by rats. Silver is much more durable, and is therefore a much better currency standard than wheat, but even silver can tarnish. Gold, or platinum, since they never spoil, are even better. Second, a good currency would be homogeneous, divisible and combinable. Any given unit of currency would be exactly like every other. Any given mass of currency could be fused with any other, or split to form two smaller units, without any change in the composition of the currency. Gems and crystals are very bad in this regard, because it is extremely difficult to smelt them together, and even if one does it there's still the chance one might ruin their structure or losing some ingredient. Most precious metals, on the other hand, are quite easy to melt down or cut slivers from, and because they are elemental, there's no worry that this will render some given mass of currency different from any other. According to Alan Greenspan in his essay "Gold and Economic Freedom" (Capitalism: The Unknown Ideal, ed. Ayn Rand. New York: Signet, 1967), the third important quality in a currency is that it be a luxury. His reasoning is that, since luxury goods are always in demand, everyone will be willing to trade against them. But this is a myth. Even in the wealthiest societies, food and medicine are always in demand, and can hardly be called luxuries. In times of need, food, medicine or cigarettes might be bartered for, extensively across a whole society; – but as most of these goods are consumed by their purchasers, they don't serve as media of exchange at all, but are being bartered for consumption. What Greenspan was trying to indicate here is that gold is a superior standard because of its symbolic and psychological value, and the luxury one achieves from possessing it. In actual fact, these detract from the utility of gold as a standard. There are two further qualities, aside from those already mentioned (durability, homogeneity, malleability): scarcity and uselessness. Scarcity is important because if a medium is too plentiful, ridiculous amounts of it must be offered in order to make any exchange worthwhile. Imagine if the government switched to a sand standard: how many tons of sand would be required to buy a few pounds of wheat?** Gold, because it is relatively scarce as far as precious metals go, is a much better medium than, say, lead, or tin. Useless is not generally an adjective we'd think would be good to have apply to our currency, but it has a lot to do with the durability of the object. The best medium of exchange is the one that is not being used as anything other than a medium of exchange. If, for example, we used oil as currency, we would find that it was difficult to keep track of how much was still in circulation, as opposed to having been destroyed for fuel, and therefore it would be difficult to keep consistent track of inflation or deflation. Also, it makes it more difficult for the individual to plan his budget correctly, figuring out the optimal amount of money to destroy and the optimal amount to trade. In effect, econometrics in a society on a consumable standard is not significantly easier than life in a society with no standard medium of exchange whatsoever. An otherwise useless medium of exchange is, of course, not a necessity, but a convenience. Until the Twentieth Century, there were no known practical uses for gold. Many so-called "primitive" peoples thought of Western civilization as foolish because they traded against something so useless as gold, which they used only for ornamentation. In actual fact, the uselessness of gold was part of its strength as a medium of exchange. Today, we use it in some electronics, as well as for some aeronautic and cosmonautic purposes, but it is still, relatively speaking, less practically useful than any other standard we could use. Think about it: What can you really do with gold, other than give it away? The only real answer is, to hoard it in the form either of actual stock, or ornament and objets d'art. But why would anyone want to hoard gold? First, because it is pretty; secondly, because it is a symbol of wealth, the power of the owner to exchange it. But it only gives this power insofar as it is useless for anything other than exchanging it. While any currency will gain this symbolic value insofar as it is widely recognized as a stable standard, this "hoardability" inhibits the function of money, rather than supporting it. Money exists to be spent, if not now then in the future. You don't want a currency that is going to be consumed; you want a currency that is going to be spent – ie., given away again and again – or saved. Insofar as gold is being hoarded for its "psychological value," then it is being consumed. In microeconomic terms, hoarding has no long-term effect on business, since when some amount of money ceases to circulate, the purchasing power of the rest appreciates; but the market is better able to stabilize, faster, when money freely circulates. The advantage of gold is that it is not destroyed when it is consumed, but for the time it is being used for the satisfaction of avarice its function as a currency is impaired. This will undoubtedly happen with any standard; the advantage of gold is that it is not destroyed in the process, as (for example) cigarettes would be. If gold succeeds as a standard, it is in spite of the "psychological" value avarice would attribute to it. Of course, the final words have to be left with a cheesy, inspirational e-mail chain forward I recieved once: It can buy a house, but not a home. It can buy a bed, but not sleep. It can buy a clock, but not time. It can buy you a book, but not knowledge. It can buy sex, but not love. It can buy a position, but not respect. It can buy luxury, but not happiness. It can buy medicine, but not health. It can buy blood, but not life. * This was the main error in Karl Marx's theory of surplus value. Because the price of a manufactured commodity will, under most circumstances, be partially determined by the cost to the manufacturer of hiring the labour and maintaining the machines to produce it, the value of the product must be determined by the labour that went into it, and the difference between the price of the product and the cost to hire the labour and provide raw materials represents a swindle on the part of the seller. Anyone familiar with how prices are haggled has no excuse for believing Marx's view on this matter. If you don't see why this is so right away, check out what I have to say on the theory of surplus value. ** This is one of the reasons that governments on a "signature standard" or trust standard should know better than to think that, by printing more bills, they are increasing the amount of money in circulation. They're increasing the number of units, sure – making the dollar as plentiful as the grains of sand on a beach. This has disastrous effects on the purchasing power, or "value," of the currency. It is the cause of inflation, not the best response to it. For more information regarding the increased flexibility of private monetary systems, see yufu, negative interest money, and Liberty Dollar. Further Reading– Mises, Ludwig. Human Action. Auburn: Mises Institute, 1998. Thanks to anthropod for the bits about the jungle trade. I get lost sometimes. This is part of my World Peace Project.
Although many commodities have served as currency throughout history, there are certain qualities that are particularly ideal for a money standard. First, it should be durable. If you make an exchange against a certain commodity, and that commodity is later destroyed before you have the chance to use it or exchange it for something else, then you have wasted the exchange and lost for good whatever it was you exchanged for the money in the first place. In some ancient societies, wheat grains were used as a currency, but wheat can spoil, or it can be eaten by rats. Silver is much more durable, and is therefore a much better currency standard than wheat, but even silver can tarnish. Gold, or platinum, since they never spoil, are even better.
Second, a good currency would be homogeneous, divisible and combinable. Any given unit of currency would be exactly like every other. Any given mass of currency could be fused with any other, or split to form two smaller units, without any change in the composition of the currency. Gems and crystals are very bad in this regard, because it is extremely difficult to smelt them together, and even if one does it there's still the chance one might ruin their structure or losing some ingredient. Most precious metals, on the other hand, are quite easy to melt down or cut slivers from, and because they are elemental, there's no worry that this will render some given mass of currency different from any other.
According to Alan Greenspan in his essay "Gold and Economic Freedom" (Capitalism: The Unknown Ideal, ed. Ayn Rand. New York: Signet, 1967), the third important quality in a currency is that it be a luxury. His reasoning is that, since luxury goods are always in demand, everyone will be willing to trade against them. But this is a myth. Even in the wealthiest societies, food and medicine are always in demand, and can hardly be called luxuries. In times of need, food, medicine or cigarettes might be bartered for, extensively across a whole society; – but as most of these goods are consumed by their purchasers, they don't serve as media of exchange at all, but are being bartered for consumption.
What Greenspan was trying to indicate here is that gold is a superior standard because of its symbolic and psychological value, and the luxury one achieves from possessing it. In actual fact, these detract from the utility of gold as a standard. There are two further qualities, aside from those already mentioned (durability, homogeneity, malleability): scarcity and uselessness. Scarcity is important because if a medium is too plentiful, ridiculous amounts of it must be offered in order to make any exchange worthwhile. Imagine if the government switched to a sand standard: how many tons of sand would be required to buy a few pounds of wheat?** Gold, because it is relatively scarce as far as precious metals go, is a much better medium than, say, lead, or tin.
Useless is not generally an adjective we'd think would be good to have apply to our currency, but it has a lot to do with the durability of the object. The best medium of exchange is the one that is not being used as anything other than a medium of exchange. If, for example, we used oil as currency, we would find that it was difficult to keep track of how much was still in circulation, as opposed to having been destroyed for fuel, and therefore it would be difficult to keep consistent track of inflation or deflation. Also, it makes it more difficult for the individual to plan his budget correctly, figuring out the optimal amount of money to destroy and the optimal amount to trade. In effect, econometrics in a society on a consumable standard is not significantly easier than life in a society with no standard medium of exchange whatsoever.
An otherwise useless medium of exchange is, of course, not a necessity, but a convenience. Until the Twentieth Century, there were no known practical uses for gold. Many so-called "primitive" peoples thought of Western civilization as foolish because they traded against something so useless as gold, which they used only for ornamentation. In actual fact, the uselessness of gold was part of its strength as a medium of exchange. Today, we use it in some electronics, as well as for some aeronautic and cosmonautic purposes, but it is still, relatively speaking, less practically useful than any other standard we could use. Think about it: What can you really do with gold, other than give it away? The only real answer is, to hoard it in the form either of actual stock, or ornament and objets d'art. But why would anyone want to hoard gold? First, because it is pretty; secondly, because it is a symbol of wealth, the power of the owner to exchange it. But it only gives this power insofar as it is useless for anything other than exchanging it. While any currency will gain this symbolic value insofar as it is widely recognized as a stable standard, this "hoardability" inhibits the function of money, rather than supporting it. Money exists to be spent, if not now then in the future.
You don't want a currency that is going to be consumed; you want a currency that is going to be spent – ie., given away again and again – or saved. Insofar as gold is being hoarded for its "psychological value," then it is being consumed. In microeconomic terms, hoarding has no long-term effect on business, since when some amount of money ceases to circulate, the purchasing power of the rest appreciates; but the market is better able to stabilize, faster, when money freely circulates. The advantage of gold is that it is not destroyed when it is consumed, but for the time it is being used for the satisfaction of avarice its function as a currency is impaired. This will undoubtedly happen with any standard; the advantage of gold is that it is not destroyed in the process, as (for example) cigarettes would be. If gold succeeds as a standard, it is in spite of the "psychological" value avarice would attribute to it.
Of course, the final words have to be left with a cheesy, inspirational e-mail chain forward I recieved once:
It can buy a house, but not a home. It can buy a bed, but not sleep. It can buy a clock, but not time. It can buy you a book, but not knowledge. It can buy sex, but not love. It can buy a position, but not respect. It can buy luxury, but not happiness. It can buy medicine, but not health. It can buy blood, but not life.
* This was the main error in Karl Marx's theory of surplus value. Because the price of a manufactured commodity will, under most circumstances, be partially determined by the cost to the manufacturer of hiring the labour and maintaining the machines to produce it, the value of the product must be determined by the labour that went into it, and the difference between the price of the product and the cost to hire the labour and provide raw materials represents a swindle on the part of the seller. Anyone familiar with how prices are haggled has no excuse for believing Marx's view on this matter. If you don't see why this is so right away, check out what I have to say on the theory of surplus value. ** This is one of the reasons that governments on a "signature standard" or trust standard should know better than to think that, by printing more bills, they are increasing the amount of money in circulation. They're increasing the number of units, sure – making the dollar as plentiful as the grains of sand on a beach. This has disastrous effects on the purchasing power, or "value," of the currency. It is the cause of inflation, not the best response to it.
* This was the main error in Karl Marx's theory of surplus value. Because the price of a manufactured commodity will, under most circumstances, be partially determined by the cost to the manufacturer of hiring the labour and maintaining the machines to produce it, the value of the product must be determined by the labour that went into it, and the difference between the price of the product and the cost to hire the labour and provide raw materials represents a swindle on the part of the seller. Anyone familiar with how prices are haggled has no excuse for believing Marx's view on this matter. If you don't see why this is so right away, check out what I have to say on the theory of surplus value.
** This is one of the reasons that governments on a "signature standard" or trust standard should know better than to think that, by printing more bills, they are increasing the amount of money in circulation. They're increasing the number of units, sure – making the dollar as plentiful as the grains of sand on a beach. This has disastrous effects on the purchasing power, or "value," of the currency. It is the cause of inflation, not the best response to it.
For more information regarding the increased flexibility of private monetary systems, see yufu, negative interest money, and Liberty Dollar.
Further Reading–
Mises, Ludwig. Human Action. Auburn: Mises Institute, 1998.
Thanks to anthropod for the bits about the jungle trade. I get lost sometimes.
This is part of my World Peace Project.
This song also contains part of a lecture by Michael Parenti, who is a well-known political analyst and author of several books on American and global socio-political structure. (At the time of this writing he lacks a node; can someone more well-read than myself help us out?)
Lyrics:
Spoken by Michael Parenti: "The function of that police action, those interventions in Central America and the Middle East, the function is system sustaining. It is to maintain that overall system! And you don't look at the particular cost. I could demonstrate to you that every single bank robbery, that in every single case practically, the cost of the police was more than the actual money that the robbers took from the bank. Does that mean, 'Oh, you see, there's really no economic interest involved, then. They're not protecting the banks. The police are just doing this because they're on a power trip, or they're macho, or they're control freaks, that's why they do it.' No, of course it's an economic... of course they're defending the banks. Of course, because if they didn't stop that bank robbery, regardless of the cost, this could jeopardize the entire banking system. You see, there are people who believe that the function of the police is to fight crime. And that's not true; the function of the police is social control and protection of property."
I am sick and tired and my money's always spent And though their jobs are killing me their money pays my rent The fuel of world hate, although it's just a seed But when it grows and flowers, it becomes the world's greed
Chorus: Money for the rich Money for the fed God supplies the money and God supplies the dead And when yer dead and ready Exploited be thy name 'Cuz after you have money things are never quite the same
I don't care for money and money's not for me The money fuelled this empire and our racist history Although I'm forced to use it, the rules have all been set But life is not worth living if your soul is in debt
Chorus
Money lies ??? Money hates ??? Money kills ??? Money rapes
MALTP says re Money: America used to have bills up to $100,000, but they've stopped printing them up to $100 lately.
1 dollar bill is equivalent to 100 pennies, a 5 dollar bill is equivalent to 5 1 dollar bills, a ten dollar bill is equivalent to ten one dollar bills, etc.
Americans don't say the word bill and we tack on an s so that a 100 dollar bill thus becomes 100 dollars. We refer to the dollar unit because it is simpler to think of it being one hundred dollars rather than ten thousand pennies.
Using the decimal system, anything before the . in a dollar amount is in terms of dollars. Anything after the . is in terms of cents. If it goes over 99 cents (.99 dollars), it become one dollar (1.00 dollar). 99 cents plus a penny, equals one dollar. .99 dollars +.01 dollars = 1.00 dollars.
Money can be counted by basic units as well as sum amounts. Thus, 60.28 dollars becomes, in largest possible denominations: A 50 dollar bill, plus a 10 dollar bill, plus a quarter, plus 3 pennies. The collection of that money is also: sixty dollars and twenty-eight cents. The sum value is that of 6028 pennies. I provided this information about coinage values and coin lingo because I have seen foreigners try and use US cash. Not knowing what some of these things are gets in the way of the transaction.
It is also important to note that in America, the money is dirty. It has travelled through many hands and many cash registers. If someone handles cash, they should wash their hands before handling food. In fact, I think its a law.
If you have ever seen the hands of someone who has been playing a slot machine in a casino for hours on end, you will know what I'm talking about. Their hands look dirty. The coin gunk washes off fairly easily, but it looks pretty bad.
I used to work as a cashier in a bagel shop. Whenever I was done with my shift my hands would smell like the coins I've been handling all day long. Money smells metalic. When I was a kid, I thought this was cool. Now it just makes me feel dirty.
Mon"ey (?), n.; pl. Moneys (#). [OE. moneie, OF. moneie, F. monnaie, fr. L. moneta. See Mint place where coin is made, Mind, and cf. Moidore, Monetary.]
1.
A piece of metal, as gold, silver, copper, etc., coined, or stamped, and issued by the sovereign authority as a medium of exchange in financial transactions between citizens and with government; also, any number of such pieces; coin.
To prevent such abuses, ... it has been found necessary ... to affix a public stamp upon certain quantities of such particular metals, as were in those countries commonly made use of to purchase goods. Hence the origin of coined money, and of those public offices called mints. A. Smith.
2.
Any written or stamped promise, certificate, or order, as a government note, a bank note, a certificate of deposit, etc., which is payable in standard coined money and is lawfully current in lieu of it; in a comprehensive sense, any currency usually and lawfully employed in buying and selling.
⇒ Whatever, among barbarous nations, is used as a medium of effecting exchanges of property, and in the terms of which values are reckoned, as sheep, wampum, copper rings, quills of salt or of gold dust, shovel blades, etc., is, in common language, called their money.
3.
In general, wealth; property; as, he has much money in land, or in stocks; to make, or lose, money.
The love of money is a root of all kinds of evil. 1 Tim vi. 10 (Rev. Ver. ).
Money bill Legislation, a bill for raising revenue. -- Money broker, a broker who deals in different kinds of money; one who buys and sells bills of exchange; -- called also money changer. -- Money cowrie Zool., any one of several species of Cypraea (esp. C. moneta) formerly much used as money by savage tribes. See Cowrie. -- Money of account, a denomination of value used in keeping accounts, for which there may, or may not, be an equivalent coin; e.g., the mill is a money of account in the United States, but not a coin. -- Money order, an order for the payment of money; specifically, a government order for the payment of money, issued at one post office as payable at another; -- called also postal money order. -- Money scrivener, a person who produces the loan of money to others. [Eng.] -- Money spider, Money spinner Zool., a small spider; -- so called as being popularly supposed to indicate that the person upon whom it crawls will be fortunate in money matters. -- Money's worth, a fair or full equivalent for the money which is paid. -- A piece of money, a single coin. -- Ready money, money held ready for payment, or actually paid, at the time of a transaction; cash. -- To make money, to gain or acquire money or property; to make a profit in dealings.
© Webster 1913.
Mon"ey (?), v. t.
To supply with money.
printable version chaos
