An Honest Introduction to Money

[BobK71]

I welcome any comments about this essay, including challenging ones.  To make it readable, I've had to make assertions, which may or may not seem justified or adequately explained.

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What Is Money?

Money is an agreed standard of value.  Any economy that has advanced beyond bartering must use money.

The acceptance of any money requires faith.  In the religious war among monies, partisans are eager to point out the faith-based nature of opponents' monies, while forgetting this basic fact.  The intrinsic values of monies rarely, if ever, justify their monetary values.

(National currencies naturally start with the most faith, but for this very reason, they are also the most abused over time.  Exactly how they will perform, thus, becomes fundamentally uncertain.  Ordinary citizens are basically gambling with their savings, no matter what they do.)

Money's Evolution

It seems, money really grows on trees.  I.E. wherever there are thinking humans, there is money.  Shells, tobacco, laundry detergent have all been used.  Gold and silver have emerged through the millennia as dominant forms of money in important parts of the world, due to their physical properties.

Modern Western money started as physical precious metals, evolved into paper which was supported by the various, progressively weaker versions of metallic standards, to fiat paper.  Central bank fiat policy also evolved from "inflation-targeting" to "dual-targeting."  (The other target is employment.)

Each step along the way, savers were expropriated by a combination of inflation, broken promises (e.g. central banks' undying commitment to gold at a fixed price,) and financial instability.  For some reason, at each step, the promises of the last step were always found to be impossible to keep, in the end.

Throughout this period, the state has grown more powerful, while financial crises always seem to recur.  Commonly accepted logic justifies the expanding role of governments and central banks as needed to contain crises, while forgetting that state-supported financial asset expansion has been the root cause of every crisis.  (The conventional logic never seems to be challenged by the economics profession.)

Money's Role in the Rule by Elites

The core modern social structure is a grand alliance between the political and financial elites.  Each group receives most of its power and wealth by issuing money and debt out of thin air, while confidence lasts.  While the political class contributes state power to prop up the values of the money and debt issued by both groups, the financial elite contribute innovative ideas by dreaming up new assets the public might believe in, if temporarily.

Bank assets provides extra demand for the money and debt issued by the state, and actually protect them from market forces, if bank assets crash.  It's for this service that banks receive a share of the benefits of state power, in the form of taxpayer-funded bailouts and loose regulation (given the guarantees of their debt by the state.)

The central bank is the institutional cornerstone this partnership.  Its real function is to keep the partnership alive by keeping both sides honest.  (I.E. "honest" only to each other under the terms of the partnership, for example, by refraining from issuing too much money or debt and endangering the system as a whole.)  If it never seems clear whether the central bank is public or private, this is basically why.

The chief device for extracting wealth from the rest of society is issuing money and debt, free of cost, while the public still trust in their values, to benefit members of the elites quite personally.  The consequences of inflation and financial instability are borne by the economy at large.

At this point I should mention an important point: the various gold standards have actually been another device for propping up the values of state and bank issued money and debt.  Compared to fiat money, they did slow down monetary expansion, but the basic nature of the system was no different.  (The central issue is that the state is involved in money, specifically in artificially propping up the money it issues.)  What this means is that modern monetary pollution didn't start with the demise of the gold standard, but with the founding of the Dutch and English central banks much earlier.

Why Hasn't Paper Money Imploded?

A big part of the story is the modern human capacity for economic growth, made clear by the Italian Renaissance (during which money was still precious metals.)  More and better products and services give value to money and debt, which are really just claims to real wealth.  (More and more, however, this scenario should be taken with a grain of salt.  As monetary pollution progresses, exponentially growing forces come from all hidden corners of the system to impede economic growth.  This point was basically made by John Maynard Keynes himself, before he became part of the establishment.)

Another fundamental support system for inflated money is the political and military power of the state that issues it.  It's no accident that the most inflated monies came from the Roman Empire, the 17th-century Dutch Empire, the British Empire, and later the USA.  These monies were inflated most because their issuers could.  One way or another, a strong state has the means to make peoples of the world "believe" in the value of their paper.  This can take the form of acquiring colonies which happen to desire to hold reserves in paper sterling, or allying with oil-rich dictatorships which happen to demand dollars for oil, and to store their national savings in dollars.  (More on these topics under "International Money.")

The failure of the decades-old, IMF issued Special Drawing Rights to gain traction as a global reserve currency is a counter-example of the above.  The SDR has no strong backing from any state, and doesn't clearly and directly benefit any state.  Unlike gold, bitcoin, etc., there's no natural limit to the supply of SDRs either.  Thus, there is no reason investors or central banks should have confidence in the SDR in its own right.

Finally, the ability of the imperial system to distribute the benefits of monetary issuance widely (if unevenly) give many people a vested interest in the survival of the system.  Every citizen of the imperial power (and its close allies) benefits from the over-valuation of currency.  The professional class in these countries, including economists, benefits even more.  These "benefits" come with the cost of inevitable long-term decline of the imperial and allied societies, as both people and institutions naturally grow weak when there is free wealth to bail out irresponsible behavior.  Ultimately, the "benefit" of money issuance acts like an addiction, and few affllicted countries or people have been able to escape from it.

One way or another, this process sustains and breeds a lack of awareness among the populations of democratic countries, which becomes the ultimate green light for monetary and financial manipulation.

International Money

This is where things get really interesting, but also morally problematic in a serious way.

Economists generally agree on a complex and recurring process called the "exorbitant privilege" of reserve currencies, a phrase coined by Valéry Giscard d'Estaing in the 1960s.  Simply put, it shifts most of the economic pain and financial instability caused by financial pollution from the core imperial countries to the rest of the world through a mix of capital flows and policymaking. If you always wondered why democracies tolerated this system, this could ultimately be the biggest reason.  (Just in 2013 we saw a powerful demonstration of one phase of this process.  Just by saying it might "taper" its money-printing program soon, the Federal Reserve stirred up a financial storm in developing countries via sudden capital flight and strengthened the dollar by doing nothing.)  In future I will try to explain this process in more detail.

Conceptually, "exorbitant privilege" is the same process by which top US politicians and banks appropriate power and wealth from the rest of the population, but transplanted to the international stage.  When you can issue paper that people believe has value, at least for now, you have a lot of power.

But here, we are dealing with real economic and social misery, caused by the inability of poor countries to use their price advantage to progress economically.  And this misery is imposed by the imperial system.  We can't condone terrorism, but we can see here a good part of how it might have developed, from an objective point of view.

(The elites in the developing world generally work with the system by doling out even worse financial pollution to their populations and benefiting from it -- and this is actually part of why "exorbitant privilege" works.  But there have been rare exceptions.  Early 19th century China trusted only physical silver and wouldn't accept any other money from its trade with Britain.  It simultaneously imposed trade barriers, in an attempt to insulate itself from economic instability originating from British financial pollution.  The result was an outflow of precious metals from Britain that must have endangered its leveraged monetary system.  The other result was the British-launched Opium War that eventually brought China to its knees.)

Many processes work to ensure that the imperial monetary power eventually declines.  You could say corrosion and decline comes from the very nature of the system.  The Dutch endured economic hardship when their debt-money bubble finally burst.  British economic pain would have been even worse in the mid-20th century if it had not been for the help from its hand-picked successor, the USA.  It's hard to see any bright long-term future for the USA.

History seems to show that, when there is global monetary hegemony, the "top dog" will be, at least initially, a genuinely strong and enlightened country with liberal economic values (where "liberal" is not as used in American politics.)  This is easy to understand: if you want global investors to trust the money and debt you issue, you have to refrain from obvious financial repression.  Crucially, this also means that, in a post-Rome world, the modern global empire must rely on both "hard" and "soft" power.  And financial pollution is a cancerously growing erosion of soft power.

This also, perhaps, sheds light on why it was the USA, and not Germany that took over from Britain.  It also means the next global hegemon, if there will be one, will probably not be China but India.  It seems, public life and political culture are a big part of the story.


The Role of Money in Economic Activity

There is no question that the world owes its high modern standard of living, in large part, to monetary inflation.  Whether this affluence implies either happiness or fairness is a different question.  (Note: we are not using "fairness" in the sense of equal results for people; we're using it to mean freedom from state intervention at the core of the system to transfer wealth between different groups.)

Monetary inflation, driven at the core by the skillful and powerful hand of the state, both requires and is nourished by constant real economic growth.  All the issued debt and money must be able to buy goods and services at decent prices, or trust in these assets would collapse.  But economic growth dictated by the needs of finance is fundamentally unnatural.  The results include the quick-buck mentality that drives environmental pollution and personal unhappiness.

A big and progressively self-defeating part of this story is inequality.  Financial market distortion that originates from state-sponsored monetary inflation create artificial winners and losers.  More and more economic activity goes to supplying the winners with life's luxuries.  When there is any wind of contraction, the winners pull back spending and throw too many people out of work.  In constant fear of this, the authorities must maintain monetary inflation to stimulate consumption and investment.  But these actions tend to worsen inequality (especially when combined with the "need" to avoid turning monetary inflation into consumer price inflation and exposing the system for all to see,) and the cycle continues.

(A more technical perspective is that capital is mis-priced across the system, ultimately, by state intervention.  The current system is thus the financial equivalent of the socialist economy, where the state, and not the infinitely nuanced price signals around the economy, determines supply and demand.  The problems caused by this market distortion are then used to justify further distortion and even repression, under the general assumption that the authorities have nothing but the good of society in mind.)

Ultimately, the economy can be said to be addicted to state-directed money and debt inflation.  The economics profession is correct to say that abandonment of this core system would cause a lot of immediate economic pain, at this juncture.

Is Modern Money Here to Stay Then?

We should first consider the fundamental condition of the modern system: money, debt, and various other financial assets, which are only claims to real wealth (goods and services,) vastly outstrip the amount of real wealth at current prices.  More tickets have been sold than there are seats in the house.  People have confidence in the values of these assets only because of the various deceptions practiced by the authorities, ranging from driving central banks of the world to hold them as national reserves, to allowing banks to use "innovative" risky assets to soak up the wealth.  (Though one of the latter backfired spectacularly in 2007/2008.)

Any system with deception at its core can't possibly be stable on a long-term basis.  In this case, sooner or later, simple property rights, which is a much older and tested human institution than modern money, will reassert itself.

More specifically, the system suffers from a number of key problems for sustainability.  The more paper wealth the system creates, the more wealth will want to find good homes where it can keep its value, if not grow.  But since the extra wealth is artificial and not driven by real economic growth, this can only destabilize and corrode the system further by driving asset bubbles and their eventual busts.  The system's response to all problems is, predictably, to create more paper claims.  And the cycle continues.

Another key destabilizing factor is the mutual reinforcement between inequality and instability, as mentioned above.  One way or another, the authorities must have inequality.  Inequality is currently the only way most money can stay saved and not drive up inflation and discredit itself.  But so much money in the hands of the few will cause asset bubbles and instability, not to mention political "problems."

Also, artificially high economic growth rates increase the educational levels and awareness of the citizenry.  The system needs this high growth to survive, and yet this very growth will threaten it via growing awareness.
 
In short, the system works towards its own end in multiple ways (as all inherently contradictory systems do.)  And the exponential nature of this system's factors of instability will move things faster nearer the end.  But history is full of unsustainable systems lasting for many lifetimes.  The very reason for manipulation is that it usually succeeds for a while.  Though the end result is not in doubt, its timing is.


What Money Should Be

Since even democracies have no effective way to monitor the sausage-making of money and other core financial assets, the public must demand that the state keep its hands off money completely, and let each money sink or swim in the free market.

Amazingly, this would be the only real change needed.  Other things will take care of themselves.  There will be no more endless arguments about bank regulation, for example, since banks will have to do what is necessary to survive.  (The Scottish free-banking system in the 18th century, luckily allowed by a political quirk of the country's union with England, is still one of history's few great examples of stable, effective and innovative banking.  Under this system, the per-capita GDP of Scotland went from half to equal to that of England.)

The purpose of the state is to uphold the values that have been agreed to by all members of society.  Anything extra is a form of oppression, mild or severe, by definition.  For better or worse, the only universal values we have developed so far are the sanctities of life and property.  We don't want to give guns to the state to arbitrate between savers and debtors, partly because we ourselves don't agree on how to do it, and partly because the biggest debtor of all can't really be expected to judge impartially.

I earnestly hope that democratic populations will eventually develop the maturity to demand simplicity in money, to understand that "complex" is not "better" -- it's dishonest.  This is not to give in to cynicism, or to think that simplicity is a virtue in all human systems.  (It's not.)  It's just that, with this system, the incentives to be dishonest have proved too great for mortal humans to resist.


The Future of Money

As an artificially complex system, the short-term future of money is fundamentally uncertain.  Though I don't like to indulge in predicting social and economic trends at the macro level (since, at heart, modern money is a political institution,) I'll survey a number of conceptually sound pathways we might follow, for better or worse, as some of the major possibilities.

We start with the simple observation that when there are many more tickets sold than seats available, something has to give, eventually.

Strangely, the big picture seems to be that only measures at one extreme or the other of the spectrum really make sense to the authorites.  A good analogy might be that modern money is a poker player who finds themselves with a weak hand in a big pot (which implies that other players probably have very good hands and won't fold easily.)  The player should either fold to cut their losses, or make a huge bet to try to scare the other players into folding.  Anything in the middle would guarantee defeat, and the stakes are high, no matter what happens.  (Note that the historical plumbing-like neutral function of money has been transformed into a poker game by the vested interests associated with state-managed money.)

So, one possibility is that the authorities decide to re-peg major paper currencies to gold, cryptocurrency, or other limited-supply commodity.  (In the case of cryptocurrency, there's a precondition that the world has grown to trust in its value and future.)  This is the well-trodden path of countless countries who end up having to peg their currencies to a strong Western one.  With a high enough peg rate, the issuers of currency will have enough financial stability to give themselves room to pursue fiscal and monetary stimulus more aggressively in order to achieve the growth, social stability and inflation they want.  So, inflation will come, and, fundamentally, this move would represent a repudiation of a large percentage of past debt (as well as of restoring paper currency's official status as debt) and a restart of the system.  But, of course, if the authorities are considering this move, they are not going to let the public know until the last minute.

Implicit in this move would be the acknowledgement of a certain failure.  For this reason, cryptocurrency might be a "better" candidate than gold, since there were much lower peg rates against gold in the past that central banks swore to defend.  If the populace still don't understand money, the authorities can claim that the pegging's purpose is to put money on a more advanced, electronic, foundation.  (It's possibly for this potential scenario that the US government has been generous enough to bitcoin that its value has risen so much in recent years.)

The other possibility is that the authorites defend the system by making financial repression overt, thus giving themselves much more power to stimulate the economy.  The key move would be making nominal interst rates negative.  Savers' money would be lost automatically, at a central-bank-determined rate, by staying in the bank, so they'd better spend or invest it, and stimulate the economy.  A crucial precondition would be the banning of cash by the major economies (since if bank interest is negative, people could defeat the system by having their money in cash.)  Thus, it's likely that the move would take two separate steps.  First cash would be banned, say, for anti-terrorism or anti-crime reasons.  When all major currencies were electronic-only, negative rates would be announced as a means for central banks to rescue and stimulate the economy.

In this scenario, precious metals and cryptocurrencies would probably be banned alongside cash, by claiming that they could be used as cash.

Needless to say, as in the equivalent poker play, there are various risks associated with this move, for the authorities (which we won't enumerate here,) assuming they could pull it off.  In addition, the elites themselves would have to ask, if nothing else, whether they really wanted their children and grandchildren to inherit a world where private property was radically redefined with highly unpredictably ultimate consequences.

One popular scenario among economists that IMO probably wouldn't survive is some kind of international reserve currency issued by some organization, perhaps modeled on the IMF's SDR.  The issuer of the reserve currency would draw confidence from neither the naturally limited supply of the money nor the power of a united sovereign state.  We only need to look at the euro to see this future unfold.  The euro is fundamentally destabilized first by the political wars between creditor and debtor member-nations, and then by the currency's issuer (the ECB) having to print money to "solve" all potential problems when politicians won't agree how to help out.  If this kind of problems arise among the relatively homogeneous European countries who pledge solidarity to each other, we can't hope to avoid them in the wider world.

Both the euro and any future fiat internationalized reserve currency suffer from the naivete that this kind of currencies will command confidence without the power of a strong and unified state to prop them up.

I would like to end on a hopeful note by citing the nowadays-little-known fact that China went from centuries of paper back to commodity money in the early Ming dynasty after experiencing inflation and severe financial repression to prop up the paper.  (This was not long after Marco Polo reported to Europe that paper money existed.)  Granted, a huge amount of silver was being discovered in South America, and some rich and powerful forces must have benefited from the change, it must also have involved some seeing of the light by the authorities.  If a country with centralized power, which was its own world, eventually acknowledged the natural laws of money, perhaps things will get better for us sooner rather than later.

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[1715043494]

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[johnyj]

That was long 

Money must be produced with similar value of its face value, otherwise it is just a IOU promise. However, since value is all subjective, the subjective measure of an IOU's value thus is based on the creditworthiness of the issuer

[username18333]

Earth has a heterarchical monetary authority: anyone may “mint” coins through an official channel (e.g., Writcoin[™]) and have these coins certified “Great Empire Coin (GEC)” by the Empire.

How does the G.E. coin relate to your monetary theories?

[Possum577]

How does bitcoin fit into the standard definition and traditional role of money? how might it change money? Are you going to have subsequent commentary that extend beyond this introduction? Have you linked this up with any of the other money supply and currency use discussions going on in this forum?

It would be nice to get a healthy, educated debate going on the key challenges facing bitcoin and "money".

[Buttknuckle]

Hi Bob, this is a surprisingly good analysis.  Thanks for posting it!  Now go write some academic papers

[BobK71]

Earth has a heterarchical monetary authority: anyone may “mint” coins through an official channel (e.g., Writcoin[™]) and have these coins certified “Great Empire Coin (GEC)” by the Empire.

How does the G.E. coin relate to your monetary theories?

Not sure how G.E. works, but I would love to have a system where anyone can issue money and the markets decide which monies survive.  The basic problem we have is that state power is involved in artificially propping up monies.  The more the state props it up, the more fragile it gets over time, and life becomes a gamble.  (And surprise, surprise, the average person always seems to lose.)

[BobK71]

That was long 

Money must be produced with similar value of its face value, otherwise it is just a IOU promise. However, since value is all subjective, the subjective measure of an IOU's value thus is based on the creditworthiness of the issuer

There's no need for an issuer.  China did fine between 1550 and 1850 with ingots of silver.  In fact, the more money is free of issuer, the better.  If there is to be an issuer, let the markets judge their creditworthiness, free of state intervention.

Money's intrinsic value rarely, if ever, comes close to its monetary value (and this includes gold and silver.)  And this has worked fine for millennia.

[BobK71]

How does bitcoin fit into the standard definition and traditional role of money? how might it change money? Are you going to have subsequent commentary that extend beyond this introduction? Have you linked this up with any of the other money supply and currency use discussions going on in this forum?

It would be nice to get a healthy, educated debate going on the key challenges facing bitcoin and "money".

IMO bitcoin is really a new gold or silver.  And these things don't come often in human civilization.  I'm not sure which "standard and traditional definition" you mean.  Is it the millennia-old system of money, or the centuries-old system of what I call modern money?

I will definitely talk more...  In fact I would say almost half of this essay has probably been covered in one way or another by my other posts in this forum.  I tend mostly to reply to others' comments.  Only twice, I believe, I have started new threads.

[BobK71]

Hi Bob, this is a surprisingly good analysis.  Thanks for posting it!  Now go write some academic papers

Thank you!  Academic papers would be tough.  I am trying to become good at clearly explaining something that is convoluted by nature (thanks to the elites' muddying the waters!) but I might have some way to go.

[BobK71]

Money is debt. Society can't shed debt without collapsing the money supply. Debt slaves borrow their money supply from debt slave masters.
The Gates Foundation is one of the biggest debt slave operations on the planet.
Whatever monetary wealth they hold onto is UNPAYABLE DEBT SOME OTHER GROUPS OF PEOPLE HAVE SLAVE AWAY AND PAY PERPETUAL INTEREST.
There is no way to pay back that debt because the money required is being held onto by the Gates Foundation.
The Matrix is child's play - real life is many times more Machiavellian.

Thank you, I think you hit one of the core issues.

Unfortunately, money is debt in modern times.  Most modern money is created by the banking system through "fractional reserve" banking.  So almost all money starts out as debt.  But debt becomes real money pretty quickly.  Say, a company borrows from the bank to operate.  As it pays out salaries, the employees fully own the money they receive.  But, since this money started out as debt, someone is still waiting to be repaid that same money that went into salaries.

So, if there's not enough economic growth (or at least demand, however artificial,) the whole system collapses.  The day when creditors as a whole decide there won't be enough growth to repay debt (for whatever reason, temporary or permanent), will be the day of the collapse of the money supply.  And most of these "creditors" are just depositors.  In fact, at 0% interest, why should anyone put money in the bank, if it were not for security?  Deposit insurance can never have enough funds to survive a systemic meltdown -- its design is always based on isolated bank insolvencies -- how else could it be cheap enough to entice people to put money in banks?  And the system (as usual) is deliberately vague as to whether deposits will be bailed out when deposit insurance itself is broke.

For all I know, we could be getting close to that point.  The authorities would certainly never broadcast the fact if we are.  Realistically, though, I believe the system will always bail out deposits and public debt, at least nominally.  These have been so much like real money that the social and political effects of a default would be intolerable.

For the above reasons, you can see why the modern system will always prop up the value of debt artificially, punishing savers and rewarding debtors (but as you point out, debt is by nature punishing, so, surprise, surprise, ordinary people are punished no matter what they do.)  Debt and faith in debt is what keeps the world running.  This is not a system a sane architect would design.  The only reason it survives is that the elites receive a huge benefit from it, and we don't know any better.

BTW, there is no inherent problem with debt.  Credit (we use this term when we want to put debt in a good light!) is essential to real economic growth.  The key question is whether the state (and, as a result, its banking allies) gets involved in manipulating the price of credit.

The Italian Renaissance was an example of state-free credit.  Contrary to what modern commentators would have you believe, great innovation and progress is possible under this system.  In this world, people lend out what they can afford to lose, and fully understand and accept the consequences of default.  Only truly viable projects get funded, as determined by the market, and as a result there is far less instability and misery due to debt default.

[Razick]

The purpose of the state is to uphold the values that have been agreed to by all members of society.

1) This is impossible since 100% will never agree on even basic values.

2) A majority or super-majority is an alternative, but...

3) as history will demonstrate the majority is often wrong.

4) Right and wrong are not determined by the majority, morality is absolute. What is right can be right even if everyone thinks it is wrong.

Although some people will disagree with me on this, I will still say it: murder is wrong is not an opinion but a fact. We can disagree about what constitutes murder, but every reasonable human being *must* accept that murder is wrong in order to participate in a credible discussion of ethics. This fact should reveal that ethics are absolute rather than a societal consensus. After all, in some societies human sacrifice or mass murder has been acceptable, but those actions are still objectively wrong.

[username18333]

Not sure how G.E. works, but I would love to have a system where anyone can issue money and the markets decide which monies survive.

The G.E. government certifies coins as "Great Empire Coin (GEC)" through a network that allows one to spend more coins than they hold. This is the G.E. government's equivalent of empowering a central bank to purchase more bonds than the bank's preexisting cash holdings would permit.

[BobK71]

The purpose of the state is to uphold the values that have been agreed to by all members of society.

1) This is impossible since 100% will never agree on even basic values.

2) A majority or super-majority is an alternative, but...

3) as history will demonstrate the majority is often wrong.

4) Right and wrong are not determined by the majority, morality is absolute. What is right can be right even if everyone thinks it is wrong.

Although some people will disagree with me on this, I will still say it: murder is wrong is not an opinion but a fact. We can disagree about what constitutes murder, but every reasonable human being *must* accept that murder is wrong in order to participate in a credible discussion of ethics. This fact should reveal that ethics are absolute rather than a societal consensus. After all, in some societies human sacrifice or mass murder has been acceptable, but those actions are still objectively wrong.

A philosophical discussion is probably beyond the scope I originally planned, but I would just say that we do need some state to uphold some kind of universal values, in practice.  Without that, it would be the law of the jungle, or the law of organized gangs.

[BobK71]

Not sure how G.E. works, but I would love to have a system where anyone can issue money and the markets decide which monies survive.

The G.E. government certifies coins as "Great Empire Coin (GEC)" through a network that allows one to spend more coins than they hold. This is the G.E. government's equivalent of empowering a central bank to purchase more bonds than the bank's preexisting cash holdings would permit.

What system is in place to prevent individuals from issuing/spending more money than they earn (in the past or future?)

[BobK71]

In a world where the things we need and use go bad, sharing comes naturally. The hoarder ends up sitting alone atop a pile of stale bread, rusty tools, and spoiled fruit, and no one wants to help him, for he has helped no one. Money today, however, is not like bread, fruit, or indeed any natural object. It is the lone exception to nature’s law of return, the law of life, death, and rebirth, which says that all things ultimately return to their source. Money does not decay over time, but in its abstraction from physicality, it remains changeless or even grows with time, exponentially, thanks to the power of interest.

The purpose of monetary society is to allow individuals the flexibility to earn and consume at different times, and to adjudicate the relative value of each good, service and consumption.  It also makes division of labor possible.  Money is one of the great inventions of humankind.

The vast majority of savers are not hoarders who refused to help others over their lives.  They are ordinary people trying to be able to consume when they become old or sick.  In any case, sharing what you have is a noble impulse that is fundamentally difficult to codify into a system, so it should probably stay as such.

And savers taking advantage of borrowers are not the predominant outcome of debt.  Inflation and default probably happen more often than loans repaid fully with higher-than-justified interest rates.

To be totally honest, you can't be 100% sure, but usually someone making a sweeping philosophical statement about money such as this has the ulterior motive of supporting the financial repression by the elites that makes the modern monetary system possible, that benefits them so much.  And their next device for repression will be negative interest rates, if they get their way.

For this reason, I have become wary of such statements, as I've read so many of them.  When all's said and done, money really shouldn't be considered that different from the simple and mundane object we all understand it to be.  If it really is more complicated, then something is wrong, since the elites will take advantage of the lack of understanding of the rest.  This last part is unfortunately all too true today.  There's nothing that will benefit the average person more, fundamentally, than fixing this anomaly.

[username18333]

What system is in place to prevent individuals from issuing/spending more money than they earn (in the past or future?)

In those days there was no king in Israel; every man did what was right in his own eyes.

[username18333]

To be totally honest, you can't be 100% sure, but usually someone making a sweeping philosophical statement about money such as this has the ulterior motive of supporting the financial repression by the elites that makes the modern monetary system possible, that benefits them so much.  And their next device for repression will be negative interest rates, if they get their way.

And if thy brother grow poor, and he be fallen into decay beside thee, then thou shalt relieve him, [be he] stranger or sojourner, that he may live beside thee. Thou shalt take no usury nor increase of him; and thou shalt fear thy God; that thy brother may live beside thee. Thy money shalt thou not give him upon usury, nor lend him thy victuals for increase. I am Jehovah your God, who brought you forth out of the land of Egypt, to give you the land of Canaan, to be your God.

Thou shalt take no interest of thy brother, interest of money, interest of victuals, interest of anything that can be lent upon interest: of a foreigner thou mayest take interest, but of thy brother thou shalt not take interest; that Jehovah thy God may bless thee in all the business of thy hand in the land whither thou goest to possess it.

[johnyj]

Money is debt. Society can't shed debt without collapsing the money supply. Debt slaves borrow their money supply from debt slave masters.
The Gates Foundation is one of the biggest debt slave operations on the planet.
Whatever monetary wealth they hold onto is UNPAYABLE DEBT SOME OTHER GROUPS OF PEOPLE HAVE SLAVE AWAY AND PAY PERPETUAL INTEREST.
There is no way to pay back that debt because the money required is being held onto by the Gates Foundation.
The Matrix is child's play - real life is many times more Machiavellian.

Interest is not a big issue. Now when the interest rate can be negative, all the debt slave talk will be questioned. In a negative interest environment, you only need to return less money than you borrowed, and there will be more and more money left in the circulation, and debt will shrink

So, as long as banks control the money creation, they could adjust the game rules as wish: Positive interest, negative interest, more money, less money... anything can be done when you command the money creation

The real issue lies in money creation, e.g. if those money are created at a cost to its face value. If it much cheaper, then there are some kind of slavery. And another problem is people using fiat money as unit of value, it is people's trust of fiat money give the money creator right to rob them

[username18333]

it is people's trust of fiat money give the money creator right to rob them

If “people” (johnyj) should each, individually, prove a “money creator” (johnyj), need these concern themselves with the “right to rob” (johnyj)?

[dinofelis]

A philosophical discussion is probably beyond the scope I originally planned, but I would just say that we do need some state to uphold some kind of universal values, in practice.  Without that, it would be the law of the jungle, or the law of organized gangs.

The law of organized gangs is just another name for states, right.
The state is the violence monopolist.  If a gang has enough power in a territory to be unchallenged, then it is the state.

[dinofelis]

There's no need for an issuer.  China did fine between 1550 and 1850 with ingots of silver.  In fact, the more money is free of issuer, the better.  If there is to be an issuer, let the markets judge their creditworthiness, free of state intervention.

I fully agree with you.  However, you should maybe read "Debt, the first 5000 years", by Graeber.  It illustrates somewhat the fact that most money found actually its origin, not in markets, but by states, wanting to finance war and needing the seigniorage to pay their armies. 

Money's intrinsic value rarely, if ever, comes close to its monetary value (and this includes gold and silver.)  And this has worked fine for millennia.

In fact, this is even so by definition.  If a monetary asset had an intrinsic (usage) value, equal to its face value, then it wouldn't be money !
After all, what is money ?  Money is what is used mostly as an intermediate asset.  As such, the demand for it is MAINLY to be used as an intermediate asset (temporary store of value).  Hence the demand for it is *much higher* than the demand for its usage as a consumption or production capital good (which determines its intrinsic value).
So by definition, the demand for money must be much higher to be used as intermediate asset than as consumption/capital good, and hence the price of it, determined by that demand (in the face of the same offer) must be much higher than its intrinsic value.

Otherwise it wouldn't be money.

[BobK71]

A philosophical discussion is probably beyond the scope I originally planned, but I would just say that we do need some state to uphold some kind of universal values, in practice.  Without that, it would be the law of the jungle, or the law of organized gangs.

The law of organized gangs is just another name for states, right.
The state is the violence monopolist.  If a gang has enough power in a territory to be unchallenged, then it is the state.

The state is oppressive, but I wouldn't go quite as far.  In the post-Enlightenment world, the state has been constrained to some degree, and all I'm saying is that getting out of money should be the next constraint (similar to, say, staying out of for-profit business as the US government is officially required to.)

Note that (as I alluded to in the original post,) the most successful modern states in both military and monetary terms, ie the UK and US, have also been the most supportive of "liberal" values.  (I'm using "liberal" in a classical sense.)  Only these states can really "rob the world" because the world trusts in their promises to pay their debts.  So there is a kind of strangely poetic logic going on that the most purist libertarians may not realize.

The progress we're after requires a mass awakening.  And it can be argued that such an awakening will be the only true and permanent success.  Any quick victory probably won't be real.

[BobK71]

...  However, you should maybe read "Debt, the first 5000 years", by Graeber.  It illustrates somewhat the fact that most money found actually its origin, not in markets, but by states, wanting to finance war and needing the seigniorage to pay their armies.  

If we can take a slightly smaller view, say over the last five hundred years, we should recognize the success of the "Westphalian" system.  (The Peace of Westphalia set forth the principles of territorial integrity and non-intervention between European states, after the carnage of more than a century of warfare.  Notwithstanding Napolean, Hitler, Putin, etc. the system is largely successful, especially since the non-European world has largely adopted the spirit over the last hundred years.)

In the post-Westphalian world, even the biggest international contest and driver of monetary inflation, ie the rivalry between Britain and France in the 18th century, saw most conflict happen outside Europe.  Today's conflicts, say, between China and other countries, are over small bits of territory.

Absent the real need to protect people against foreign aggression, monetary control and inflation has no real justification in today's world.

[dinofelis]

If we can take a slightly smaller view, say over the last five hundred years, we should recognize the success of the "Westphalian" system.  (The Peace of Westphalia set forth the principles of territorial integrity and non-intervention between European states, after the carnage of more than a century of warfare.  Notwithstanding Napolean, Hitler, Putin, etc. the system is largely successful, especially since the non-European world has largely adopted the spirit over the last hundred years.)

I wouldn't call Europe a heaven of peace in the last 500 years   About every 50 years or so, there has been a devastating war in Europe over this time scale.

I think that the two elements which make regular warfare and conquest unprofitable today are the fact that two elements are usually required by the international community which has weight (essentially the USA, say):
- absence of slavery
- representative democracy.

As such, the usual goals of military conquest, namely enlarging territory, winning slaves and wealth from the conquered territory, and increase of power, now fall apart.  Slavery is frowned upon.  And if there is to be representative democracy in the conquered territory, that would rather lead to decrease of political power (if the conquered area is not favourable to your invasion, which is often the case).

So all the classical incentives of classical military invasion for a state have been ruined by the international pressure for absence of slavery and for representative democracy.

This is why most wars today are fought by proxies.  There is no political gain any more in direct conquest of territory.  It is only interesting if the area is remarkably rich, and much smaller than the invasion powers. 

Representative democracies will use their armies to gain geopolitical power without annexation but by destruction of regimes that thwart their own geopolitical strategies of obtaining stuff from others.

Absent the real need to protect people against foreign aggression, monetary control and inflation has no real justification in today's world.

It does.  After all, it is still the main tool to get goods, services and power to a small elite which shares financial and political power.

The goal of the state is to pump wealth from the productive to the elite.  This has always been so, and it the principal reason of existence of a state.  From the first kings to the most sophisticated form of modern government.  However, as the modalities change, and the ways to get power change.

[mrhelpful]

The banks are just a higher version of the mob lol.

They say we need the money or else! we blow up the economy anyways with poor practices of giving suckers like us to invest supposedly a worth AAA bond or some crap.

The only thing we can do is try to be better off, in reducing as much risk as possible if we ever get a chance to reach a high principal balance.

[techgeek]

I would worry more on whos about to be the next world currency reserve, cause theres a slight chance the u.s will fall off and possible china can take it.

Just the fact that their whole growth is 10x larger, and they been playing chess with how they should approach the situation. Cant predict which one will win, but stay on top of whos winning or has the chance to take over the world foreign reserve.

[username18333]

The goal of the state is to pump wealth from the productive to the elite.  This has always been so, and it the principal reason of existence of a state.  From the first kings to the most sophisticated form of modern government.  However, as the modalities change, and the ways to get power change.

What system is in place to prevent individuals from issuing/spending more money than they earn (in the past or future?)

In those days there was no king in Israel; every man did what was right in his own eyes.

In the case of Great Empire and the G.E. coin, your statement is inaccurate.

[dinofelis]

Note that (as I alluded to in the original post,) the most successful modern states in both military and monetary terms, ie the UK and US, have also been the most supportive of "liberal" values.  (I'm using "liberal" in a classical sense.)  Only these states can really "rob the world" because the world trusts in their promises to pay their debts.  So there is a kind of strangely poetic logic going on that the most purist libertarians may not realize.

I think there's a subtlety there.

I define money as follows:
"money is money because most people think that most people think that it is money".

And that's also what is going on with what you're saying.  In fact, nobody thinks that the USA, or the UK, are going to pay their debt.  After all, since Nixon, a dollar changed from a virtual IOU into a real IOUN (I owe you nothing).  This was already de facto the case: nobody was really claiming their gold, and there wasn't enough of it for the IOU to even be slightly credible.  It was when Charles de Gaulle from France wanted his physical gold, that Nixon was forced to give him a middlefinger.  In reality, actually, de Gaulle had been getting gold from the USA against french dollars since 1965.  It was when this really became difficult to maintain, that Nixon stopped it - it would become clear that the IOU was not covered.

A dollar on which is printed "this note is legal tender for all debts, public and private" has on its other side "in God we trust".  Meaning probably "hey, I owe you nothing, but go and see God, maybe he'll jump in".

What can you get, from the USA, with a dollar bill ?  Another dollar bill.  That's about what the IOUN means.  So what trust in what ability to pay what debt ?

The dollar is a world currency, because everybody thinks that everybody thinks that it is money.  But in the original issuer, the USA, no trust has to be placed for that, as they owe you nothing against it.  That makes that the USA, with its ability to print those bills, can buy the world, against nothing.

[username18333]

A dollar on which is printed "this note is legal tender for all debts, public and private" has on its other side "in God we trust".  Meaning probably "hey, I owe you nothing, but go and see God, maybe he'll jump in".

That was added in 1954, if I remember correctly, to (help) rally the American public behind its government's aggressive posturing towards the officially atheist U.S.S.R.

But in the original issuer, the USA, no trust has to be placed for that, as they owe you nothing against it.  That makes that the USA, with its ability to print those bills, can buy the world, against nothing.

The U.S. government only makes the U.S. dollar legal tender by ensuring that it can be used to pay debts. It is the modern American consumer  economy that creates those debts and the private banks of the U.S. Federal Reserve system that "print those bills" (dinofelis) through debt (e.g., buying U.S. government bonds therewith).

[dinofelis]

The U.S. government only makes the U.S. dollar legal tender by ensuring that it can be used to pay debts. It is the modern American consumer  economy that creates those debts and the private banks of the U.S. Federal Reserve system that "print those bills" (dinofelis) through debt (e.g., buying U.S. government bonds therewith).

So those obtaining those bills are essentially the US government, which can, as long as the US dollar is world reserve currency, buy up the world against it.

Which they did:


http://en.wikipedia.org/wiki/Balance_of_trade#/media/File:Cumulative_Current_Account_Balance.png

[Razick]

The purpose of the state is to uphold the values that have been agreed to by all members of society.

1) This is impossible since 100% will never agree on even basic values.

2) A majority or super-majority is an alternative, but...

3) as history will demonstrate the majority is often wrong.

4) Right and wrong are not determined by the majority, morality is absolute. What is right can be right even if everyone thinks it is wrong.

Although some people will disagree with me on this, I will still say it: murder is wrong is not an opinion but a fact. We can disagree about what constitutes murder, but every reasonable human being *must* accept that murder is wrong in order to participate in a credible discussion of ethics. This fact should reveal that ethics are absolute rather than a societal consensus. After all, in some societies human sacrifice or mass murder has been acceptable, but those actions are still objectively wrong.

A philosophical discussion is probably beyond the scope I originally planned, but I would just say that we do need some state to uphold some kind of universal values, in practice.  Without that, it would be the law of the jungle, or the law of organized gangs.

Very true, I just wanted to point out that the state is not the source of morality.

[username18333]

So those obtaining those bills are essentially the US government, which can, as long as the US dollar is world reserve currency, buy up the world against it.

However, the U.S. government owes more on each "bill[]" (dinofellis) than its face value (regardless of whether or not it has been spent), for its bonds (at least, at present) pay positive interest.

[Pab]

 That maybe you dont know,i dont know who said that,propably Lenin
Money in hand of our enemy can be dangerous weapon
money in hands of our own people is the most dangerous enemy


My thoughts
Looks like that we all,living in diffrent countries,we are all living in totalitary system,and we are the the most dangerous enemys

[BobK71]

I would worry more on whos about to be the next world currency reserve, cause theres a slight chance the u.s will fall off and possible china can take it.

Just the fact that their whole growth is 10x larger, and they been playing chess with how they should approach the situation. Cant predict which one will win, but stay on top of whos winning or has the chance to take over the world foreign reserve.

I think the US is actively trying to keep China from taking the succession (if there is to be a next global power.)  Instead, it is trying to give it to India, if and when it's ready.  IMO the US is playing the role of Britain in late 19th century, China is playing Germany, and India is playing the US.  This also makes sense if you look at the political cultures of the countries.

Things might work out differently this time.  World War One was able to knock out Germany for good, but such a thing is unthinkable now.  China might not be able to step into the throne, but it can be a constant thorn on the side of the established order.

This in itself would be good for keeping each country (relatively) honest (ie in a monetary and financial sense) through rivalry and competition.  What we want to watch out for is collusion, of the kind during the 90s, when China was the world's biggest supporter of the dollar and cheap Chinese imports allowed US interest to stay low in the middle of the great buildup of the financial house of cards and the great movement of wealth to the elites.  (The cause for optimism is that even this lasted only 15 years before the elites shot themselves in the foot with the 2008 crisis.  The system really is doomed.)

[username18333]

(The cause for optimism is that even this lasted only 15 years before the elites shot themselves in the foot with the 2008 crisis.  The system really is doomed.)

Couldn't the plutocracy merely have the U.S. Federal Reserve system accept and issue the Federal Reserve Note II (i.e., a new one) instead of the Federal Reserve Note?

[BobK71]

If we can take a slightly smaller view, say over the last five hundred years, we should recognize the success of the "Westphalian" system.  (The Peace of Westphalia set forth the principles of territorial integrity and non-intervention between European states, after the carnage of more than a century of warfare.  Notwithstanding Napolean, Hitler, Putin, etc. the system is largely successful, especially since the non-European world has largely adopted the spirit over the last hundred years.)

I wouldn't call Europe a heaven of peace in the last 500 years   About every 50 years or so, there has been a devastating war in Europe over this time scale.

I think that the two elements which make regular warfare and conquest unprofitable today are the fact that two elements are usually required by the international community which has weight (essentially the USA, say):
- absence of slavery
- representative democracy.

As such, the usual goals of military conquest, namely enlarging territory, winning slaves and wealth from the conquered territory, and increase of power, now fall apart.  Slavery is frowned upon.  And if there is to be representative democracy in the conquered territory, that would rather lead to decrease of political power (if the conquered area is not favourable to your invasion, which is often the case).

So all the classical incentives of classical military invasion for a state have been ruined by the international pressure for absence of slavery and for representative democracy.

This is why most wars today are fought by proxies.  There is no political gain any more in direct conquest of territory.  It is only interesting if the area is remarkably rich, and much smaller than the invasion powers. 

Representative democracies will use their armies to gain geopolitical power without annexation but by destruction of regimes that thwart their own geopolitical strategies of obtaining stuff from others.

Absent the real need to protect people against foreign aggression, monetary control and inflation has no real justification in today's world.

It does.  After all, it is still the main tool to get goods, services and power to a small elite which shares financial and political power.

The goal of the state is to pump wealth from the productive to the elite.  This has always been so, and it the principal reason of existence of a state.  From the first kings to the most sophisticated form of modern government.  However, as the modalities change, and the ways to get power change.

Besides the end of slavery and democracy, another modern sign of progress is the idea of territorial integrity.  This is what makes it impossible for the US to do what Britain did, i.e. acquire colonies around the world and force them to keep paper sterling as reserves.  The world simply won't allow it.  The US only dominates the world indirectly by stirring up trouble (consciously or not) among countries and peoples and taking the role of the "balance of power" (i.e. by becoming the deciding force by siding with one side or the other.)  This is not ideal, but it's progress.  Domination at least requires the nod from the local elites.

[username18333]

Besides the end of slavery and democracy, another modern sign of progress is the idea of territorial integrity.  This is what makes it impossible for the US to do what Britain did, i.e. acquire colonies around the world and force them to keep paper sterling as reserves.  The world simply won't allow it.

Ensuring that barrels of oil are sold for USD (thus creating a merket therefor) effectively makes oil consumers (i.e., the world) a "slave" (i.e., they don't receive compensation specifically for their contribution) of the U.S. economy.

[johnyj]

it is people's trust of fiat money give the money creator right to rob them

If “people” (johnyj) should each, individually, prove a “money creator” (johnyj), need these concern themselves with the “right to rob” (johnyj)?

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

In a communist country like North korean, if you don't use fiat money you will be executed. But in a western modern democracy country, the mass adoption of fiat money is purely voluntarily. Is it because everyone's income is received in the form of fiat money? Or people only trust the most powerful organizations like government?

[BobK71]

What can you get, from the USA, with a dollar bill ?  Another dollar bill.  That's about what the IOUN means.  So what trust in what ability to pay what debt ?

The dollar is a world currency, because everybody thinks that everybody thinks that it is money.  But in the original issuer, the USA, no trust has to be placed for that, as they owe you nothing against it.  That makes that the USA, with its ability to print those bills, can buy the world, against nothing.

This goes to show (as my original post stated) that money is just a standard.  As long as people trust a money, it will have value.  Granted, modern state issued money is probably doomed long-term, it can last a while, as the totally fiat dollar has lasted 40+ years since Nixon shut the gold window.  And the standard's longevity will depend on how well it's managed by its issuer.

What the elites seem to want is to enjoy today while it lasts.

As for the "true nature" of money, there's the whole spectrum from people who believe only commodity money is "real", to chartalism that believes the state owns all the rights to money.  I believe you can't really take a scientific approach by stating the nature of money, and then proceeding to prescribe the system around it.  For better or worse, with 99% of the people willing to believe essentially what the authorities tell them, money is still basically a political subject.  The very statement of the nature of money is politically tainted, or perceived to be.  The discussion is much more fruitful and less prone to religious-war problems when we take an operational perspective.

[username18333]

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

(You missed the gist of my post.) What does that matter when any- and everyone may do so?

[BobK71]

(The cause for optimism is that even this lasted only 15 years before the elites shot themselves in the foot with the 2008 crisis.  The system really is doomed.)

Couldn't the plutocracy merely have the U.S. Federal Reserve system accept and issue the Federal Reserve Note II (i.e., a new one) instead of the Federal Reserve Note?

If they devalue or abandon their FRN I, which amounts to: 1. acknowledging their previous note issue was a flawed system; 2. in effect reneging on their debt or at least most of it; 3. stiffing the very people who trusted them;  4. causing a crisis and mass spectacle that generates lots of commentary that exposes the system's fundamental weakness; 5. trying to get a new system going to maintain their power, that people will now trust, I think they will want to make absolutely sure the new system has enough strength to withstand all skepticism, at least initially.  We have to remember these people are pretty smart.

That is why if they peg dollars to gold, crypto, etc., it will be at a very low price for the dollar.  They'll need all the stability they can get, and then some, to allow them to push fiscal and monetary stimulus to get the economy going and pacify the population.  (Also, pegging existing dollars looks much better than starting a new dollar.)

[BobK71]

The banks are just a higher version of the mob lol.

They say we need the money or else! we blow up the economy anyways with poor practices of giving suckers like us to invest supposedly a worth AAA bond or some crap.

The only thing we can do is try to be better off, in reducing as much risk as possible if we ever get a chance to reach a high principal balance.

In the modern world, at least in the developed world, people don't tolerate police and soldiers using their power to bully the public.  (Except racially charged instances, maybe.)

Unfortunately, bullying on the financial plane *is* tolerated.

And the state uses and nurtures the banks essentially in the same way as it did warriors, and for the same reasons.

[username18333]

I think they will want to make absolutely sure the new system has enough strength to withstand all skepticism, at least initially.  We have to remember these people are pretty smart.

Free market economics is renowned for its competition and the necessity of business to become evermore agile and adept in doing business because of that. However, the Federal Reserve has established a sort of horizontally and vertically integrated monopoly on money; it can "sell" (i.e., loan) any quality of money without any (domestic) threat of competition so long as (1) legal tender laws are enforced consistently and (2) it supplies the notes (be they FRN 1, FRN 2, FRN 3, etc.) itself.

[BobK71]

That maybe you dont know,i dont know who said that,propably Lenin
Money in hand of our enemy can be dangerous weapon
money in hands of our own people is the most dangerous enemy


My thoughts
Looks like that we all,living in diffrent countries,we are all living in totalitary system,and we are the the most dangerous enemys

Money takes on a whole new meaning in a socialist economy.  Since the government creates it at will and doesn't really allow it to drive supply and demand of goods and services (but instead quotas, regulations, and other uses of power are used to allocate scarce resources,) the economy is basically de-monetized.  If you *don't* have money, you definitely can't get what you want.  If you have money (and have the same amount everyone else seems to have,) then you're subject to the regular rationing.

[BobK71]

Free market economics is renowned for its competition and the necessity of business to become evermore agile and adept in doing business because of that. However, the Federal Reserve has established a sort of horizontally and vertically integrated monopoly on money; it can "sell" (i.e., loan) any quality of money without any (domestic) threat of competition so long as (1) legal tender laws are enforced consistently and (2) it supplies the notes (be they FRN 1, FRN 2, FRN 3, etc.) itself.

The short answer is that the authorities probably won't try this strategy because of the low chances that the populace will end up putting much wealth in the FRNs.

The long answer is that financial repression alone, especially financial repression by law (e.g. legal monopoly) has rarely, if ever, been enough to support the modern monetary system in the West.  Even under the last paper-money regime in China, when all power was concentrated in the emporer, there was virtually no contact with foreign countries, and using anything other than the state paper money was punishable by death, eventually the state saw fit to go to silver.

To my thinking, modern money has always survived by distributing its weight among all of the following major devices of support, and not any one alone.  I think this distribution will be even more necessary in the future as trust in the elites continues to diminish and power will continue to shift from the US-Europe axis to the developing world.

Remember that the fundamental problem for mondern money is that the problematic incentives for the elites always end up creating more paper claims to wealth than real goods and services, and so the following support systems become necessary to keep the system alive:

1. Political repression
- Acquiring colonies and making them hold paper sterling as reserves, by Britain.
- Working with China and oil-rich dictatorships to support the dollar in exchange, effectively, for safeguarding the regimes' power.
- Encouraging poor countries to issue too much money and debt so the dollar becomes trusted and hoarded by individuals.
- Problems for the elites: international inequality, social instability in poor countries, terrorism and war.

2. Financial repression by law or market manipulation
- Banning of private gold ownership (US.)
- Legal caps on bank interest (US.)
- Capital controls (US and Europe under the Bretton Woods system.)
- Driving savings into bank assets by, effectively, taxpayer support for banks and loose bank regulation.
- Loose monetary policy.
- Suppression of gold and silver prices via derivative trading.
- Exporting economic instability and pain to developing countries via the "exorbitant privilgeg" process.
- Problems for the elites: market-developed evasion (e.g. money market funds and euro-dollars;) financial fragility (due to distortions of asset prices by policy) and instability; developing countries fighting back (Asian currency manipulation was a big part of the causes of the 2008 crisis.)

3. Acknowledgement of reality
- Price inflation over the long term.
- Devaluation of the dollar against gold during the Great Depression.
- Allowing gold price to go to $300 and then $1200 per ounce under the fiat system.
- Dollar devaluation against Deutsch Mark, euro, yen and yuan in recent decades.
- Monetary/fiscal tightening (e.g. early 1980s US, present day European periphery.)
- Problems for the elites: exposure of the system's weakness to the public.

(Note that, often, a device is a combination of the above categories.  E.g. Western equities and real estate are indirectly propped up by central bank policy (low interest) and enjoy long-term appreciation which reflects the weakness of paper money against "real" assets.  These are excellent devices from the elites' point of view as they naturally divide the weight of the system among multiple pillars.)

In short, the survival of the system depends as much, if not more, on "soft power" as on "hard power."  For example, the very reason that the world still trusts the dollar is that the US is perceived by many to have an open and free financial system.  The reason Americans and foreigners get into dollars and Treasuries is that they know they can get out.

This is not to say that creditors hold much power over debtors, or rich over poor.  The various repressions make clear the authorities' ability to punish savers of all types.  But any redistribution of wealth to the poor, especially under a complex and disguised system such as this, tends to reflect power grabs by the elites.  Genuine help to the under-privileged of the world, and especially allowing them room to help themselves, can really only come about when the economy acquires real wealth in a stable, sustainable and equal manner, and that can only happen when the world system is no longer destabilized by state-issued money.

[BIT-Sharon]

Currency, money can be said, is used as a tool of medium of exchange, the stored value and accounting unit, is specialized in supplies special goods and services in the exchange act as equivalents.

[BobK71]

Currency, money can be said, is used as a tool of medium of exchange, the stored value and accounting unit, is specialized in supplies special goods and services in the exchange act as equivalents.

Yes, that's pretty much the economic profession's standard narrative.  IMO it reduces "store of value" to 1 among 3 major functions, while in reality people won't use it much as medium of exchange or unit of account if it loses store of value status.

[dinofelis]

Yes, that's pretty much the economic profession's standard narrative.  IMO it reduces "store of value" to 1 among 3 major functions, while in reality people won't use it much as medium of exchange or unit of account if it loses store of value status.

In fact, "unit of account" is independent of the money function.  It is funny that what people mostly define as "money", namely "unit of account" doesn't need to be money at all.  In fact, any commodity, any service, can be a "unit of account" without it being money at all.

If you want to express price in "oxen" or in "one hour's labor" or in "apples" doesn't really matter.  Any sufficiently well-known commodity or service can be socially decided upon to be the "unit of account" without even coming close to be an intermediate asset.

However, no medium of exchange can exist without at the same time not being a "store of value".  These two things go together of course.  The only difference between both is liquidity and a few practical issues.  Real estate is a store of value, but is not a very practical medium of exchange.

In fact, a medium of exchange is not really needed.  It is but ONE solution to the problem of indirect exchange.  There are other ways to solve that issue, and historically, not "medium of exchange", but "credit" was often first introduced as a means to solve the issue of indirect exchange.

Money is just a tool.

http://www.princeton.edu/~kiyotaki/papers/Evilistherootofallmoney.pdf

[LiteCoinGuy]

The Biggest Scam In The History Of Mankind

https://www.youtube.com/watch?v=iFDe5kUUyT0



Money vs Currency - Hidden Secrets Of Money Ep 1 - Mike Maloney

https://www.youtube.com/watch?v=DyV0OfU3-FU

[Benjig]

Currency, money can be said, is used as a tool of medium of exchange, the stored value and accounting unit, is specialized in supplies special goods and services in the exchange act as equivalents.

When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the "coincidence of wants" problem. Money's most important usage is as a method for comparing the values of dissimilar objects.

[dinofelis]

When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the "coincidence of wants" problem.

The point is that historically, the system that develops usually to avoid that coincidence of the wants, is a credit system, not a monetary system.  It most probably even lies at the invention of writing.  You can simply avoid the "coincidence of wants" by giving an IOU in exchange of what you need now.  You'll pay your debt later, whenever that other person needs something from you.  Or he can transmit that IOU from you to a third person if he wants something from that third person.  Very often, central trusted entities, such as temples or the like, wrote down those IOU.

[username18333]

This is not to say that creditors hold much power over debtors, or rich over poor.  The various repressions make clear the authorities' ability to punish savers of all types.  But any redistribution of wealth to the poor, especially under a complex and disguised system such as this, tends to reflect power grabs by the elites.  Genuine help to the under-privileged of the world, and especially allowing them room to help themselves, can really only come about when the economy acquires real wealth in a stable, sustainable and equal manner, and that can only happen when the world system is no longer destabilized by state-issued money.

Code:

sendfreetransactions=1

Code:

sendtoaddress [address] [balance + amount]

Your “poor” could appropriate a greater portion of the (monetary) value of the GEC economy to themselves.

[mrhelpful]

A philosophical discussion is probably beyond the scope I originally planned, but I would just say that we do need some state to uphold some kind of universal values, in practice.  Without that, it would be the law of the jungle, or the law of organized gangs.

The law of organized gangs is just another name for states, right.
The state is the violence monopolist.  If a gang has enough power in a territory to be unchallenged, then it is the state.

This sounds more of a bank if anything else.

I mean wheres our bail out money, when we they started selling bad AAA graded investments. Even the credit agency giving those grades should be fined.

[johnyj]

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

(You missed the gist of my post.) What does that matter when any- and everyone may do so?

In that case, the most trusted IOU would still be the IOU issued by US government. Of course you can use airline miles and supermarket coupons to purchase certain goods, but those have limited reach and a higher risk of ruin (Companies can go insolvent anytime)

In fact, for many people the biggest doubt of bitcoin is:  Who is going to back its purchasing power?  Although it is indirectly backed by merchants who accept bitcoin, but merchants are not responsible for its exchange rate, its value could still easily drop 30% overnight if no one is backing it with fixed amount of tangible assets. Currently the value is backed by the cost, very similar to gold, some kind of psychological support

In contrary to modern monetary theory (and what those academic people believe), USD's value is not decided by supply and demand, but by the value of assets that backed USD when they were issued. FED could easily create 5X more money without affect USD's value, simply because each USD issued are backed by assets of corresponding value (Although this action is questionable "Real Bills Doctrine", it works well to sooth the confidence of merchants)

[BobK71]

Currency, money can be said, is used as a tool of medium of exchange, the stored value and accounting unit, is specialized in supplies special goods and services in the exchange act as equivalents.

When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the "coincidence of wants" problem. Money's most important usage is as a method for comparing the values of dissimilar objects.

Before money can do that though, it must be trusted to maintain its value.  When the incentives for the issuer are always to issue more, and the issuer has the physical power to do so, the system is broken and a new one is called for.

[Erdogan]

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

(You missed the gist of my post.) What does that matter when any- and everyone may do so?

In that case, the most trusted IOU would still be the IOU issued by US government. Of course you can use airline miles and supermarket coupons to purchase certain goods, but those have limited reach and a higher risk of ruin (Companies can go insolvent anytime)

In fact, for many people the biggest doubt of bitcoin is:  Who is going to back its purchasing power?  Although it is indirectly backed by merchants who accept bitcoin, but merchants are not responsible for its exchange rate, its value could still easily drop 30% overnight if no one is backing it with fixed amount of tangible assets. Currently the value is backed by the cost, very similar to gold, some kind of psychological support

In contrary to modern monetary theory (and what those academic people believe), USD's value is not decided by supply and demand, but by the value of assets that backed USD when they were issued. FED could easily create 5X more money without affect USD's value, simply because each USD issued are backed by assets of corresponding value (Although this action is questionable "Real Bills Doctrine", it works well to sooth the confidence of merchants)

That backing is psychological. That is important, because all the value is speculative, it means that someone speculate that he can get something of real value (useful) in exchange for the money, in the near or distant future. In reality, the dollar is unbacked. This is no problem for money, it is not needed, in fact it is good, else the money manager will eventually amass all the backing stuff. Still, there is no backing. The variations of value due to the erroneous belief in the backing, can go on for a long time.

[BobK71]

Your “poor” could appropriate a greater portion of the (monetary) value of the GEC economy to themselves.

I could spend an evening just ranting about that whole "crucifixion on a cross of gold" thing...

So what is this GEC idea?  I haven't had time to check it out (as work is pretty hectic.)

[pereira4]

I've found this video very relevant to this thread. It's an introduction on money and why Bitcoin is the better alternative for the future:

https://www.youtube.com/watch?v=Xkw9t9ShwGc

Very easy and short video, good for newbies to show and spark interest in the Bitcoin world. Usually all videos are about how Bitcoin works, but now why Bitcoin is the next big thing.

[username18333]

So what is this GEC idea?  I haven't had time to check it out (as work is pretty hectic.)

You mint the money, and the (imperial) government certifies it as such.

[username18333]

In that case, the most trusted IOU would still be the IOU issued by US government.

If a preponderance of a business’ customers should insist that the business accept the G.E. certified money each mints, the business, if it should also wish to maintain their patronage, must comply therewith.

[johnyj]

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

(You missed the gist of my post.) What does that matter when any- and everyone may do so?

In that case, the most trusted IOU would still be the IOU issued by US government. Of course you can use airline miles and supermarket coupons to purchase certain goods, but those have limited reach and a higher risk of ruin (Companies can go insolvent anytime)

In fact, for many people the biggest doubt of bitcoin is:  Who is going to back its purchasing power?  Although it is indirectly backed by merchants who accept bitcoin, but merchants are not responsible for its exchange rate, its value could still easily drop 30% overnight if no one is backing it with fixed amount of tangible assets. Currently the value is backed by the cost, very similar to gold, some kind of psychological support

In contrary to modern monetary theory (and what those academic people believe), USD's value is not decided by supply and demand, but by the value of assets that backed USD when they were issued. FED could easily create 5X more money without affect USD's value, simply because each USD issued are backed by assets of corresponding value (Although this action is questionable "Real Bills Doctrine", it works well to sooth the confidence of merchants)

That backing is psychological. That is important, because all the value is speculative, it means that someone speculate that he can get something of real value (useful) in exchange for the money, in the near or distant future. In reality, the dollar is unbacked. This is no problem for money, it is not needed, in fact it is good, else the money manager will eventually amass all the backing stuff. Still, there is no backing. The variations of value due to the erroneous belief in the backing, can go on for a long time.

It is this kind of psychological backing bitcoin does not have. For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further. But for bitcoin, most of people get panic when they heard that no one is backing it, even they know that mathematics and computer science will last much longer than any government

There are people backing bitcoin with fiat money (they buy when the price drops). But unlike central banks, they are distributed all over the world and do not command large amount of fiat money reserve to stabilize the exchange rate in a reasonable range

[username18333]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

[BobK71]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

The problem, of course, is that this strength is also the fundamental source of weakness.  Since the state has this automatic confidence, its officials have the incentives to maximize issuance and thus destabilize the currency.

So fiat currencies tend to collapse eventually if not quickly.  Just look at the values of the currencies of poor countries over time.  At the other extreme we have Britain.  The value of the pound went from more than $4 to $1.50 today over the last hundred years, even as the dollar buys probably 80-90% less today than, say, a hundred years ago.

[AtheistAKASaneBrain]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

The problem, of course, is that this strength is also the fundamental source of weakness.  Since the state has this automatic confidence, its officials have the incentives to maximize issuance and thus destabilize the currency.

So fiat currencies tend to collapse eventually if not quickly.  Just look at the values of the currencies of poor countries over time.  At the other extreme we have Britain.  The value of the pound went from more than $4 to $1.50 today over the last hundred years, even as the dollar buys probably 80-90% less today than, say, a hundred years ago.

The thing is, it seems the US has managed to get away with this for so long that they may as well continue to do in the future. As long as people accept printed dollars all over the world, who cares if they are based on debt or not? it seems that people doesn't care about this. They go on with their lives even if millions on debt are stacked up on the daily. Have they invented a system where infinite debt is actually sustainable?

[BobK71]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

The problem, of course, is that this strength is also the fundamental source of weakness.  Since the state has this automatic confidence, its officials have the incentives to maximize issuance and thus destabilize the currency.

So fiat currencies tend to collapse eventually if not quickly.  Just look at the values of the currencies of poor countries over time.  At the other extreme we have Britain.  The value of the pound went from more than $4 to $1.50 today over the last hundred years, even as the dollar buys probably 80-90% less today than, say, a hundred years ago.

The thing is, it seems the US has managed to get away with this for so long that they may as well continue to do in the future. As long as people accept printed dollars all over the world, who cares if they are based on debt or not? it seems that people doesn't care about this. They go on with their lives even if millions on debt are stacked up on the daily. Have they invented a system where infinite debt is actually sustainable?

It would take a cosmic philosopher to really figure this out, but my strong feeling is that you can cheat nature for a while if you have a lot of power, but eventually you have to succumb.  Britain's monetary power must have seemed to last forever, but became clearly unsustainable after World War I started.  What you point out is true, but is the very definition of a bubble.

[dollarneed]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

a long time ago humans did barter for took something what they need, but the problem was not at all the things same with other and than the fiat money was born for solution from it and completly used by humans all of the world til now but know our problem is the rate from one curency to other curency is not same and its caused there are rich country and poor country,even corupted system, and than bitcoin was born and being solution for our problem now humans are united, transaction with one curency without limited country without intervention from the bank or goverment,everybody from all of the world can used bitcoin for transaction  cmiiw

[BobK71]

Another common misconception is that there is such a thing as the "nature of money."

The truth is that the power elites have been changing the "nature of money" throughout the modern age.

In addition, there have been at least two "natures of money" at any given time, one being a model the elites would like the public to believe in, and one being the real mechanism of how money works.  That's why I had so little to say about this nature in my original post.

I would be very suspicious of a discussion that begins with a declaration of the nature of money.  It is usually just a means to justify a pre-conceived agenda or ideology.

[Nizam ibrahim.P.N]

Money is undefined currency that holds and gives power!!

[username18333]

Money is undefined currency that holds and gives power!!

Soc. We shall know better, my good friend, in a little while. The point which I should first wish to understand is whether the [capital] or [money] is beloved by the [1‱] because it is [money], or [money] because it is beloved of the [1‱].

(Germaneness mine.)

[BobK71]

Certainly, abusing the issuance of money can occur with totally market-based money too.  (Big banks would have enough market power from their size to dictate terms and incur a risky level of debt, to some extent.)

This would be analogous to how a rich person with a lot of real estate can borrow more easily and at lower interest, and thus be more able to create bubbles than the rest of us.

But we would love to have that problem, since the problem we have today is qualitatively worse, where bubbles are created by state power and supported by political and military machinations around the world.

[SONG GEET]

Money is undefined currency that holds and gives power!!

I think money can also give freedom and really make you able to do things you can't even imagine if you don't have enough money.

[Yakamoto]

Money is undefined currency that holds and gives power!!

I think money can also give freedom and really make you able to do things you can't even imagine if you don't have enough money.

Money gives you freedom to go and buy things, as well as giving you a sense of security, but there isn't a ton of things beyond that and there is a specific point at which having money isn't really all that "free". Anyone can do whatever they want as long as they actually aim to try and accomplish it, and they don't piss their lives away doing whatever the hell.

[Fraxinus]

Money is undefined currency that holds and gives power!!

I think money can also give freedom and really make you able to do things you can't even imagine if you don't have enough money.

That's so true mate,the freedom it keep is so much that you feel like a new person that you never knew you could actually become

[BobK71]

Money is undefined currency that holds and gives power!!

I think money can also give freedom and really make you able to do things you can't even imagine if you don't have enough money.

Money was a revolutionary technology that allowed people to trust in each other's promises and thus be able to divide the consumption of wealth across different times of your lifespan, and among different goods and services according to your wish.

The problem is that 'trust.'  Since everyone trusts in the government's power to deliver on its promises, at least at the beginning, politicians have incentives to abuse that trust (and to ally with banks to multiply the abuse) to receive 'free' power and wealth, while the system is stable.

The problem is not money, per se.  The problem is the government's involvement with money, in any way.

[ttargett]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

[posternat]

Money is undefined currency that holds and gives power!!

If you look at currency as an easier way to conduct business, versus bringing a sheep to the store and trading it for potatoes, then BTC is a further step in that direction.

[xIIImaL]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

Yep thinking to be rich will not lead you do that. If we need to become rich you need to perfect in money management with your business. So do that first. I think as i see your post you will do that.

[el kaka22]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

Yep thinking to be rich will not lead you do that. If we need to become rich you need to perfect in money management with your business. So do that first. I think as i see your post you will do that.

Yes, proper management must be the key for becoming rich. Without proper management no one will be able to become rich even he is earning millions. Yes, one person could become rich only by saving it and not because of earning. Properly managing and saving are more important than earning.

[sildyas]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

Yep thinking to be rich will not lead you do that. If we need to become rich you need to perfect in money management with your business. So do that first. I think as i see your post you will do that.

Yes, proper management must be the key for becoming rich. Without proper management no one will be able to become rich even he is earning millions. Yes, one person could become rich only by saving it and not because of earning. Properly managing and saving are more important than earning.

You need to do a lot of research and find the good asset to invest. For the time being, the bitcoin is the best.

[Hellacopter]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

[virasog]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

Of course, methods like Paypal and other electronic and digital methods do the same thing. Since the gold standard was lost several years ago, there seems to be little method to control the overall money scheme.

[Sweetbtc]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

Ofcourse the government controls how much is printed and rarely adds to the overall lump sum. Many people ask why we do not print more money and the answer is always that it will devalue the current supply. But, there have been several times when the government has issued fresh supplies.

[Qunenin]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

Ofcourse the government controls how much is printed and rarely adds to the overall lump sum. Many people ask why we do not print more money and the answer is always that it will devalue the current supply. But, there have been several times when the government has issued fresh supplies.

If this were not true, then we would still be using the same couple of millions dollars that the countries got started on. While digital currencies seem to be the future, the finite supply is the last hurdle that BTC will have to face.

[Sweetbtc]

Without forking, side chains, or other methods, there is always going to be that same total of BTC and as time passes, if the price balances after the last of it is mined, then the value  will become unable to withstand inflation. It will be interesting to see.

[BobK71]

Without forking, side chains, or other methods, there is always going to be that same total of BTC and as time passes, if the price balances after the last of it is mined, then the value  will become unable to withstand inflation. It will be interesting to see.

The famous 'need' to expand the supply of money is only because of modern elites' desire that a state-issued money become a tool of imperial power and/or exploitation. For better or worse, Bitcoin may or may not become part of such a scheme even if it is itself limited-supply.

[OROBTC]

...

Ahh, money...  For me, money really plays three roles (I did not come with this, but this makes the most sense to me):

1) Money should be a Unit of Account, a measure of how much something is worth, currency is good here.

2) Money should be a Medium of Exchange, you give money to someone for something in exchange (currency is great in this role)

3) Money should be a Store of Value, worth about the same a month, a year or a decade from now, currency is NOT good at this.

Therefore, I would like to see a different "system" (for lack of a better word at the moment), where something like gold is freed from its role as "backing" a currency.  Why should gold back anything?  It is its own worth, an independent value vector if you will (as an asset or investment).  Gold is the best Store of Value, and has been so for 6000 years.  NO currency has long survived...

Currency for marking value and conducting transactions, gold for store of value.  Currency cannot perform all three roles of money.  

Currency != Money, as it fails as a Store of Value.

Reference: extensive & long articles by anonymous blogger "FOFOA".

[BobK71]

...

Ahh, money...  For me, money really plays three roles (I did not come with this, but this makes the most sense to me):

1) Money should be a Unit of Account, a measure of how much something is worth, currency is good here.

2) Money should be a Medium of Exchange, you give money to someone for something in exchange (currency is great in this role)

3) Money should be a Store of Value, worth about the same a month, a year or a decade from now, currency is NOT good at this.

Therefore, I would like to see a different "system" (for lack of a better word at the moment), where something like gold is freed from its role as "backing" a currency.  Why should gold back anything?  It is its own worth, an independent value vector if you will (as an asset or investment).  Gold is the best Store of Value, and has been so for 6000 years.  NO currency has long survived...

Currency for marking value and conducting transactions, gold for store of value.  Currency cannot perform all three roles of money.  

Currency != Money, as it fails as a Store of Value.

Reference: extensive & long articles by anonymous blogger "FOFOA".

The division between money and currency is IMO an artificial one but feels so natural because it has gone on since the 1600s, and only stopped (though some say not really) in 1971.  Physical gold and silver served fine for all 3 needs before that, and explicitly risky assets like credit served to drive growth.

In an ideal world, money should be money, and debt should be debt.  Since the elites created what was really a form of debt, but which they successfully passed off as money for a while, some of us were forced to develop a new concept, currency, to describe this world.

Gold backing of currency has always been a tool for the elites to prop up the value of their paper 'money', whatever their public-relations organs (read: professional economists) said the purpose was.

There is a (probably growing) voice among the elites which wants to go back to precious metal backing of currency (and thus back to the dual existence of money and currency,) though the backing may take a more sophisticated and modern form than the classical metallic standards.  (See India's new gold-bond system for a peek at that possible future.)  Not to spur any conspiracy theories, but your reference may be in line with this voice.

If it happens, it would probably be a little better than today's world, since metallic standards in any form do slow down financial inflation, but it wouldn't be essentially different from the elite-designed system of exploitation of today or the metallic-standard periods.  Only the elites would ultimately benefit from this system, besides those few of us who get into precious metals early enough.

[BobK71]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

Yep thinking to be rich will not lead you do that. If we need to become rich you need to perfect in money management with your business. So do that first. I think as i see your post you will do that.

Agreed that managing your money is very important, but it's a delicate art.

The system is designed to take wealth from you in two ways: if you keep your savings safe, you lose wealth through inflation.  If you invest in risky assets, you lose big when the bubbles (created ultimately by the state-bank alliance) burst.

And if you spend too much, the classic problem of not having enough money will bite.

When my head is being punched from both sides, I don't live by extremist investment ideas that tell me to be very safe or very risky.  The art is charting a middle course where you get hit from both sides, but neither side gets bad enough to kill you.

There are of course temporary situations you can profitably bet on, and by temporary I include multi-decade favorable environments for betting on assets of a rising imperial power, say postwar US.  Good luck with those.  Over the long run these will only partially compensate for the systemic design for the average person to be exploited by the top elites.

[sildyas]

Money is undefined currency that holds and gives power!!

thats true, it is the main reason why people want to be rich all the time, but it is also a really bad thing in my opinion

Yep thinking to be rich will not lead you do that. If we need to become rich you need to perfect in money management with your business. So do that first. I think as i see your post you will do that.

Agreed that managing your money is very important, but it's a delicate art.

The system is designed to take wealth from you in two ways: if you keep your savings safe, you lose wealth through inflation.  If you invest in risky assets, you lose big when the bubbles (created ultimately by the state-bank alliance) burst.

And if you spend too much, the classic problem of not having enough money will bite.

When my head is being punched from both sides, I don't live by extremist investment ideas that tell me to be very safe or very risky.  The art is charting a middle course where you get hit from both sides, but neither side gets bad enough to kill you.

There are of course temporary situations you can profitably bet on, and by temporary I include multi-decade favorable environments for betting on assets of a rising imperial power, say postwar US.  Good luck with those.  Over the long run these will only partially compensate for the systemic design for the average person to be exploited by the top elites.

Maybe for the bitcoin, it is not so complicated. You can just buy the bitcon at low price and hold for long term.

[BobK71]

Maybe for the bitcoin, it is not so complicated. You can just buy the bitcon at low price and hold for long term.

I tend to agree with this conclusion.

Bitcoin is a non-state-issued asset.  These assets generally compete with state-issued money and associated assets, so the elites generally suppress their values.  (The classic example being the gold and silver standards which gave holding the metals a return of zero while the central bank could keep the system stable.  Today gold and silver are being pushed down by strange derivative trades that seem not worried about losing money but determined to see gold/silver prices go down.)

That said, the elites know that they may need to peg their money against a non-state-issued money to stabilize their own issue, when things go really badly for them.  This is why they don't want to destroy non-state assets totally, even when they can.  Compared to gold and silver, faith in Bitcoin is relatively weak among holders of non-state assets, so I believe the elites tend to want to help it gain acceptance and confidence, at this stage of its life.

I'd like to start a thread for this topic, but there's a difference between the 1860s and today -- back then, the elites wanted to promote gold as the single non-state asset, and to minimize faith in silver.  This was only because of the condition of the British Empire, the leader of the world system back then.  Today, I believe it is actually in the elites' interest to be inclusive.  The more non-state assets out there that are trusted by the public, the stronger the total backing when they need it, and at a lower price point in state currency.  That may explain why silver has (partially) come back to life from a couple dollars per ounce, and why Bitcoin has a stable and slowly rising value.

Over the longer horizon, I still believe gold is a better bet than Bitcoin.  Since Indians hoard gold, and India is slated to be the next global empire (not China which is less friendly to the existing system,) gold should profit from more scenarios than silver or Bitcoin.

My advice would be: hold all three, and diversify among them, in proportions that feel comfortable to your view of how the world will evolve.

[OROBTC]

Maybe for the bitcoin, it is not so complicated. You can just buy the bitcon at low price and hold for long term.

I tend to agree with this conclusion.

Bitcoin is a non-state-issued asset.  These assets generally compete with state-issued money and associated assets, so the elites generally suppress their values.  (The classic example being the gold and silver standards which gave holding the metals a return of zero while the central bank could keep the system stable.  Today gold and silver are being pushed down by strange derivative trades that seem not worried about losing money but determined to see gold/silver prices go down.)

That said, the elites know that they may need to peg their money against a non-state-issued money to stabilize their own issue, when things go really badly for them.  This is why they don't want to destroy non-state assets totally, even when they can.  Compared to gold and silver, faith in Bitcoin is relatively weak among holders of non-state assets, so I believe the elites tend to want to help it gain acceptance and confidence, at this stage of its life.

I'd like to start a thread for this topic, but there's a difference between the 1860s and today -- back then, the elites wanted to promote gold as the single non-state asset, and to minimize faith in silver.  This was only because of the condition of the British Empire, the leader of the world system back then.  Today, I believe it is actually in the elites' interest to be inclusive.  The more non-state assets out there that are trusted by the public, the stronger the total backing when they need it, and at a lower price point in state currency.  That may explain why silver has (partially) come back to life from a couple dollars per ounce, and why Bitcoin has a stable and slowly rising value.

Over the longer horizon, I still believe gold is a better bet than Bitcoin.  Since Indians hoard gold, and India is slated to be the next global empire (not China which is less friendly to the existing system,) gold should profit from more scenarios than silver or Bitcoin.

My advice would be: hold all three, and diversify among them, in proportions that feel comfortable to your view of how the world will evolve.

That is a very interesting commentary, BobK71.  Especially the part I highlighted.

I have read other analyses that also argue that smart states would encourage people to own gold (but that would include other assets that would count as "capital") for when the time comes to rebuild the country.

Rumor has it that within the Deep State there are some smart people with the USA's longer-term interest at heart.  It's not ALL "House of Cards" (although a lot is).  I worked for a while within a very deep part of The State, and although it was long ago, some of these are very traditional and durable attitudes.

The fact that there are SOME in .gov who are somewhat benevolent and smart is a little reassuring.

My judgement is that most of The Elites are pretty bad, but there are pockets of old-style patriotic hard-asses to be found here and there.  And it looks like some of the smartest are perfectly OK with citizens owning assets as savings...

*   *   *

Agree 100% re holding percentages of one's assets in gold, silver (or platinum) and BTC as personal circumstances permit.

[BobK71]

Thanks for sharing, OROBTC.

I don't doubt there are good people in every walk of life (and especially when you're so successful already, how much more do you really want for yourself, if you think normally?)

But I believe there's a strong element of 'involuntary behavior' at the highest levels, under the modern system.  Let's say Obama was truly committed to rebuilding a great country.  If he is smart, he would realize that if he acted like Carter, ie prescribe the necessary bitter medicine, he would only get himself blamed for the pain.  Carter's bravery stabilized the dollar and set the country up for a couple decades of harmony and prosperity, but the workings of the system invariably drags it back down anyway.

The rest of the elites took a free ride on Carter.  Most citizens believe his policies were terrible.

You see how gravity works in this system?  It's basically a social addiction, where the addict might fight back for a while, but faces a losing battle.

You might be partially protected if you save in non-state assets, but real progress will only come when the public wake up.

[BobK71]

For fiat money, "it is backed by government bond" is very simple and easy to understand for everyone, so they never question further.

The grandeur of the bodies that invest in a fiat currency's success (e.g., those of government and government contractors) inspires confidence in third-parties about that success.

Ofcourse the government controls how much is printed and rarely adds to the overall lump sum. Many people ask why we do not print more money and the answer is always that it will devalue the current supply. But, there have been several times when the government has issued fresh supplies.

If this were not true, then we would still be using the same couple of millions dollars that the countries got started on. While digital currencies seem to be the future, the finite supply is the last hurdle that BTC will have to face.

If you compare today's prices and salaries with 100 years ago at the founding of the Fed, you can see how much money has been created.

Most modern money starts out as credit issued by commercial banks (but are really borrowed from depositors.)  The Fed props up this system, but doesn't directly create much money.

We may own our money outright, but if you trace down who paid you that money, and who paid that entity, etc., you always end up with debt.  The vast majority of credit comes from private parties who believe they will be paid back.  But the only way that can happen is that both the economy and the mountain of debt keep growing.  If, for whatever reason, the creditors collectively decide that they won't be repaid, there will be hell to pay, unless the elites keep lubricating the system with centrally planned goodies of one kind or another.  But central planning, over the long run, sucks the life out of the economy's vigor, the very thing the system ultimately depends on for survival.

So, you see how this thing makes no sense, except to enrich the elites for the time being.

[Zedpastin]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

That is right. The money is just a medium. So the bitcoin can be the best money as it has limited supply.

[BobK71]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

That is right. The money is just a medium. So the bitcoin can be the best money as it has limited supply.

Money *should* be simple but is made complicated by the elites, because the complexity enables them to take wealth from everyone else.

In a poker game, if you play straightforward and don't second- and third-guess your opponents, you're at a disadvantage.  Poker games are designed to be a sport of the mind.  Money should not be like a poker game in an ideal world, but it is.

[MingLee]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

That is right. The money is just a medium. So the bitcoin can be the best money as it has limited supply.

Money *should* be simple but is made complicated by the elites, because the complexity enables them to take wealth from everyone else.

In a poker game, if you play straightforward and don't second- and third-guess your opponents, you're at a disadvantage.  Poker games are designed to be a sport of the mind.  Money should not be like a poker game in an ideal world, but it is.

Playing economics like a poker game is like showing your opponent your entire hand every second of the game, and having to out-think them when they stop paying attention to you is like relying on what amounts to random chance to win. It's possible, but you're competing against someone who has their hand tucked away and you can't see their face.

[Shady]

Money is thought of differently between people who have lots as well as those that don't.

In due respect, intro is just the start so once the idea of how money can operate, work for you or be obtained there's much to add about the value to it all.

[Oralmat]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

Money is a thing of a great value and it is only because we humans have made it valuable and trade everything for money.

[BlueStackz]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

In addition to what you mention, money is a tool that is meant for exchange to take pace and legally accepted by the government of a particuar territory. This is because if a government did not regard an item as a means of exchange, then it cannot be regarded as money.

[BobK71]

Money *should* be simple but is made complicated by the elites, because the complexity enables them to take wealth from everyone else.

In a poker game, if you play straightforward and don't second- and third-guess your opponents, you're at a disadvantage.  Poker games are designed to be a sport of the mind.  Money should not be like a poker game in an ideal world, but it is.

Playing economics like a poker game is like showing your opponent your entire hand every second of the game, and having to out-think them when they stop paying attention to you is like relying on what amounts to random chance to win. It's possible, but you're competing against someone who has their hand tucked away and you can't see their face.

I didn't intend the poker analogy to be carried this far.  My idea is that an institution (money) that is normally beneficial to society has been transformed by the elites into something like poker, where the terrain is complex and only the powerful and complex thinkers can possibly win.

[chixka000]

That was a long one tho and a good article for something that is to be considered as one of the main issue or topics in this sovereign world.

The purpose of the state is to uphold the values that have been agreed to by all members of society.

1) This is impossible since 100% will never agree on even basic values.

2) A majority or super-majority is an alternative, but...

3) as history will demonstrate the majority is often wrong.

4) Right and wrong are not determined by the majority, morality is absolute. What is right can be right even if everyone thinks it is wrong.

Although some people will disagree with me on this, I will still say it: murder is wrong is not an opinion but a fact. We can disagree about what constitutes murder, but every reasonable human being *must* accept that murder is wrong in order to participate in a credible discussion of ethics. This fact should reveal that ethics are absolute rather than a societal consensus. After all, in some societies human sacrifice or mass murder has been acceptable, but those actions are still objectively wrong.

Absolutely what is wrong or right is on the person,place etc involved on the certain issue. The thing here is that fact is being researched and how to believed in would be up to you.

[Financial_Genius]

How does bitcoin fit into the standard definition and traditional role of money? how might it change money? Are you going to have subsequent commentary that extend beyond this introduction? Have you linked this up with any of the other money supply and currency use discussions going on in this forum?

It would be nice to get a healthy, educated debate going on the key challenges facing bitcoin and "money".

Cryptocurrencies differ from other currencies and electronic means of payment like WebMoney.Decentralization. Cryptocurrencies have no actual Central issue (as is typical of any world currency) and belong to no one except their actual ultimate owners. Any interested person can independently produce a production (mining) of cryptocurrencies. Transparency of calculations. All cryptocurrency transactions are stored in a database forever, so if you want you can track any transaction any payment to the moment of generation of these payment marks. The degree of participation in the system. Each person is free to choose to what extent he will participate in the system: a cryptocurrency mining, or just buy them from other participants, or not to Transact with cryptocurrencies. All of this is voluntary. The lack of centralized control. There is no such regulatory body which could block wallet in bitcoin or cancel some operation.

[Qunenin]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

In addition to what you mention, money is a tool that is meant for exchange to take pace and legally accepted by the government of a particuar territory. This is because if a government did not regard an item as a means of exchange, then it cannot be regarded as money.

Even we live and die for money as we can buy anything for money.

Consider Government cancelling a piece of paper money and all the paper money just becoming useless worth of paper only. So its WE who have given the value to money.

[Zedpastin]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

In addition to what you mention, money is a tool that is meant for exchange to take pace and legally accepted by the government of a particuar territory. This is because if a government did not regard an item as a means of exchange, then it cannot be regarded as money.

Even we live and die for money as we can buy anything for money.

Consider Government cancelling a piece of paper money and all the paper money just becoming useless worth of paper only. So its WE who have given the value to money.

That just happened in India. The government just make the old 1000 Ruby notes illegal and people have to exchange to new ones.

[Betwrong]

In my opinion, money is just a tool to make our deals and trades easiest and successful. And also its a powerful tool to get good level of living .

In addition to what you mention, money is a tool that is meant for exchange to take pace and legally accepted by the government of a particuar territory. This is because if a government did not regard an item as a means of exchange, then it cannot be regarded as money.

Even we live and die for money as we can buy anything for money.

Consider Government cancelling a piece of paper money and all the paper money just becoming useless worth of paper only. So its WE who have given the value to money.

That just happened in India. The government just make the old 1000 Ruby notes illegal and people have to exchange to new ones.

Yeah, but they can do it, right? They can exchange the old Rupees without any restrictions so it means the money still have their value. The much worse scenario would be if they can't do that which happenned many times in many countries throughout the history.

I think it will take some time untill people realize the advantages of Bitcoin over paper money and will start keeping thier savings in BTC but it will happen one day or the other, and then Bitcoin will skyrocket.

[Xester]

Well the author has a very detailed idea about money. But for me the definition of money is simple. Money is the by product of my sweat and hard labor that will serve as a legal tender to purchase the need of my family. It is an object yearned by almost everyone in the society and a paper that becomes powerful enough to improve lives as well as to destroy lives. Money can be viewed on two sides, its either he is your master or second money is your slave.

[hisuka]

Money is sometime the root of evil, it is the cause by wrong doing.
Our money need for a daily life just to earn for a living. It is worth
to spend some money when you know it comes from you by reachinG
your goal.

[Vaskiy]

Money is the one that rules the entire human activities. These days people have been giving respect to each other based upon the money they hold or the status they acquire with the money earned.

[Fatanut]

Money is the one that rules the entire human activities. These days people have been giving respect to each other based upon the money they hold or the status they acquire with the money earned.

Even in the past, people who have literally nothing don't matter to the society. It's really unfair that some people were born broke while some were born rich. But that's just how it is. The only difference is that nowadays, even broke people can become successful if they invent something good or if they work really hard. Back then, if you're a slave, then you're going to serve your master your whole lifetime and you can also be sold to other rich people.

I'm aware that respect should be earned and all but money actually indicates how much your family have worked hard. If you have money, then it's most probably one of your family member is already a respected member of the society and it makes you respected as well no matter how bad your attitude or character is or no matter how useless you are. You can be the dumbest person in the world but still get respect from others.

[BobK71]

...
That just happened in India. The government just make the old 1000 Ruby notes illegal and people have to exchange to new ones.

Yeah, but they can do it, right? They can exchange the old Rupees without any restrictions so it means the money still have their value. The much worse scenario would be if they can't do that which happenned many times in many countries throughout the history.

Only in theory.  There was a short deadline for exchanging old notes for smaller denominations.  There were long lines and a lot of paperwork to fill out to do the cash-to-cash exchange.  Banks often ran out of notes.  The only painless thing to do was to deposit the old notes into your bank account, and hope ATMs still have smaller notes when you need cash.

My theory of why India did this, at the last minute, on US election day (which, if you think about it, was a very strange way to do this kind of thing) are:

- To suppress the price of gold (only for the short term).  Since the result was a shortage of cash (big or small denominations,) there would be less cash to buy gold.

- To put money into banks since depositing your large denomination notes was really the only easy way to handle the event.  This was also successfully achieved.  Only elite insiders know how fragile the banking system really is.

[BobK71]

Well the author has a very detailed idea about money. But for me the definition of money is simple. Money is the by product of my sweat and hard labor that will serve as a legal tender to purchase the need of my family. It is an object yearned by almost everyone in the society and a paper that becomes powerful enough to improve lives as well as to destroy lives. Money can be viewed on two sides, its either he is your master or second money is your slave.

Don't get me wrong.  I want money to be simple.  Money should be simple.  It should work exactly as you say.  But modern elites have been able to make money so complicated that most people can't understand their theft from, and destabilization of the world, by manipulating it.

What I tried to do in the original post was to embrace this complexity that is forced upon us, understand it, and explain why, under the elites' own 'moral code' of using their control of money to benefit the world, their system is not what they claim it is.

[elash]

That was long 

Money must be produced with similar value of its face value, otherwise it is just a IOU promise. However, since value is all subjective, the subjective measure of an IOU's value thus is based on the creditworthiness of the issuer

Money in this world is the most important thing living without money your nothing and money motivate a lot of people to work and money is the reason why we want to have a high professional because they want a higher return of money in the equivalent of there work. Money runs everything thing in this world.