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Author Topic: Inflation and Deflation of Price and Money Supply  (Read 519809 times)
Erdogan
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November 19, 2014, 12:42:48 AM
 #381

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

He (dinofelis) is correct and can demonstrate it intelligently.

Look, the meme that floats around the net saying "money as debt" is bogous (they can't even stand up and say money is debt).

Let me try another angle: Debt can be tradeable, it can have a high or low interest rate and a long or short maturity. The more tradeable, the lower interest rate, and the longer maturity, the more money-like it is. Debt that is tradeable, has zero interest, and will never be paid back, is equivalent to money. That is, you lend something to someone, get a paper that says you will never get the principal back an never any interest. Why would you hold it? It turns out it still has value, as long as it has good money qualities. This is the same as gold, when you use gold as money. You give something to someone, get the token (the gold coin), and you are promised nothing, but you can trade the gold.


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kjj
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November 19, 2014, 03:27:06 AM
 #382

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

He (dinofelis) is correct and can demonstrate it intelligently.

Look, the meme that floats around the net saying "money as debt" is bogous (they can't even stand up and say money is debt).

I'm not claiming that he is wrong.

I'm saying that you can develop a better understanding of the world by drawing the line in a slightly different place.

Let me try another angle: Debt can be tradeable, it can have a high or low interest rate and a long or short maturity. The more tradeable, the lower interest rate, and the longer maturity, the more money-like it is. Debt that is tradeable, has zero interest, and will never be paid back, is equivalent to money. That is, you lend something to someone, get a paper that says you will never get the principal back an never any interest. Why would you hold it? It turns out it still has value, as long as it has good money qualities. This is the same as gold, when you use gold as money. You give something to someone, get the token (the gold coin), and you are promised nothing, but you can trade the gold.

You are aware that you are making my point here, right?

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November 19, 2014, 03:45:06 AM
 #383

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

He (dinofelis) is correct and can demonstrate it intelligently.

Look, the meme that floats around the net saying "money as debt" is bogous (they can't even stand up and say money is debt).

I'm not claiming that he is wrong.

I'm saying that you can develop a better understanding of the world by drawing the line in a slightly different place.

Let me try another angle: Debt can be tradeable, it can have a high or low interest rate and a long or short maturity. The more tradeable, the lower interest rate, and the longer maturity, the more money-like it is. Debt that is tradeable, has zero interest, and will never be paid back, is equivalent to money. That is, you lend something to someone, get a paper that says you will never get the principal back an never any interest. Why would you hold it? It turns out it still has value, as long as it has good money qualities. This is the same as gold, when you use gold as money. You give something to someone, get the token (the gold coin), and you are promised nothing, but you can trade the gold.

You are aware that you are making my point here, right?

No.

Maybe you are confused: kjj: "Money is debt.  This includes dollars, bitcoins, and even gold."
This is correct: Debt can be money.


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November 19, 2014, 06:51:55 AM
 #384

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

He (dinofelis) is correct and can demonstrate it intelligently.

Look, the meme that floats around the net saying "money as debt" is bogous (they can't even stand up and say money is debt).

I'm not claiming that he is wrong.

I'm saying that you can develop a better understanding of the world by drawing the line in a slightly different place.

Let me try another angle: Debt can be tradeable, it can have a high or low interest rate and a long or short maturity. The more tradeable, the lower interest rate, and the longer maturity, the more money-like it is. Debt that is tradeable, has zero interest, and will never be paid back, is equivalent to money. That is, you lend something to someone, get a paper that says you will never get the principal back an never any interest. Why would you hold it? It turns out it still has value, as long as it has good money qualities. This is the same as gold, when you use gold as money. You give something to someone, get the token (the gold coin), and you are promised nothing, but you can trade the gold.

You are aware that you are making my point here, right?

No.

Maybe you are confused: kjj: "Money is debt.  This includes dollars, bitcoins, and even gold."
This is correct: Debt can be money.


I would like to add something to this discussion.

In the end it becomes semantics of course.
If you say that blue is the color of blood, then blue can be red :-)

It is funny but many years ago I also thought that money was debt, and I defended it in the same way as kjj is doing.  And then you come to such extensions of the concept of "debt" that you start realizing that your argument doesn't hold anymore.  Then I read von Mises and Rothbard.  And then things became much clearer ;-)

I went to say, against the solid argument "but a guy who digs for gold in his garden, and finds some, to whom does he have debt ?" and I started arguing something of "debt against the earth" or other nonsense.  That's when I knew I was in fact wrong :-)

The  core property of the word "debt" is that you have no choice but to do what your debt claim you signed, says, and the only exception is when you can't  or when you are a scammer, and law enforcement can be put to work to make you pay off your debt.  

However, the properties of "having earned it in return for something else" (or found it, or made it, or got it through a gift...), "having the right and possibility to trade it, to exchange it for something else", "having the right to hold it indefinitely (not having to give it back)", "not engaging in anything such as interest".... is nothing else but part of the definition of PROPERTY, ownership.

If you redefine debt as being a subset of the properties of ownership, and leave out its core definition of "having engaged and being forcibly obliged to do what you engaged to", then the word debt has become empty of meaning.

Then red is blue.

But it is true that modern monetary systems are full of debt-related assets, and for a long long time, government-issued bank notes where a theoretical debt of the government to issue gold for it (although practically, they couldn't and did everything to escape their obligation - being the law enforcement agency, they could get away with that scam, of course).  This is how the confusion between debt and money set in.  It is a very common confusion.  I can only point to Rothbard to get a clear view on it.  It is mindbogglingly clearly written.

Money can normally be made by people.  If you can find gold, or if you would in one way or another, be able to make gold (by nuclear transmutation of peanut butter, say :-) ), then you can do so.  It is ONLY the special thing of fiat money which is forbidden to make, because that's the very property of fiat money that only gets its scarcity by law enforcement forbidding to make more of it, except some privileged elite.  It is what is fundamentally wrong with it.

What makes an asset (something you own) "money" is the fact that it can very easily be traded for most or all other assets and that it is mainly, or exclusively used for that purpose.



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November 19, 2014, 02:32:17 PM
 #385

I went to say, against the solid argument "but a guy who digs for gold in his garden, and finds some, to whom does he have debt ?" and I started arguing something of "debt against the earth" or other nonsense.  That's when I knew I was in fact wrong :-)

The  core property of the word "debt" is that you have no choice but to do what your debt claim you signed, says, and the only exception is when you can't  or when you are a scammer, and law enforcement can be put to work to make you pay off your debt.  

However, the properties of "having earned it in return for something else" (or found it, or made it, or got it through a gift...), "having the right and possibility to trade it, to exchange it for something else", "having the right to hold it indefinitely (not having to give it back)", "not engaging in anything such as interest".... is nothing else but part of the definition of PROPERTY, ownership.

Ugh.

Start with a bank loan.  It says who will repay it (the payer), who they will repay to (the payee), and how much they will repay (the payment).  Very clearly a debt, no arguments from anyone (I think).

Now consider a bearer bond.  The payee has been abstracted away, but still a debt.

Next, say I take a piece of paper and write "IOU" on it and sign my name, then trade it to a friend for help moving furniture.  Now both the payee and the payment have been abstracted away.  Is that a debt?  I would say that it is, even though it doesn't say what I owe, or to whom, and no court would compel me to trade anything in particular to get it back.

Now say that a group of us get together and decide together to define a unit of measurement, and print a bunch of these IOU notes in various values, and with no specific final redeemer.  Again, I would argue that these represent debt that has been fully abstracted.  No named payer, no named payee, no fixed payment.  Since they have no final redemer, they represent that you have done something good for society in general.  And they have no fixed value beyond the abstract UOM printed on them, leaving the bearer and the present redeemer to negotiate the terms of trade.

Now consider another group developing the exact same scheme, but using gold instead of notes, and weight instead of printed denominations.  Is the essence changed?  Of course not.

Now the man that finds gold in his yard hasn't created a "debt against the earth" or anything silly like that.  He has done something good for society: he has found more money.

Now, if anyone prefers to consider debt only to exist when a specific person is bound by threat of violence to a specific performance, I can't stop them.  Nor can I if they prefer any other combination of un-abstracted properties.  I won't even say that they are wrong.  But I will say that they will have a much harder time understanding money in that system.

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November 19, 2014, 03:22:14 PM
 #386


Start with a bank loan.  It says who will repay it (the payer), who they will repay to (the payee), and how much they will repay (the payment).  Very clearly a debt, no arguments from anyone (I think).

Now consider a bearer bond.  The payee has been abstracted away, but still a debt.

Yes, the issuer still HAS TO give the holder of the bond something, at a given date.  
The bond is an asset, which is a debt of the issuer (government, company issuing the bond).

As an asset, you can try to trade it.  The one accepting the trade is accepting an asset (the bond), which is also in this case, a debt, and is probably the main reason why the person accepting to trade something (say a car) in exchange for the bond accepts it as a value carrier: he can cash in on the debt when the bond expires ; or he can trade it further.  In as much as such bonds are easily traded before they expire, they become money.

Quote
Next, say I take a piece of paper and write "IOU" on it and sign my name, then trade it to a friend for help moving furniture.  Now both the payee and the payment have been abstracted away.  Is that a debt?  

No, this isn't a debt anymore, because the original issuer (you) doesn't engage in doing anything with it anymore.

You created an ASSET, a piece of paper.  If people want to do something to obtain ownership of that paper, then that's their business.  It is a piece of paper that isn't worth anything in court (contrary to a bond): you cannot enforce anything.  Now, if you are a famous artist, and you swear on your mother's head that you won't sign more than 5 such papers a month, then these autographs may become collectables.  People may collect these assets as if they were famous paintings.  They may get value.  But they are not a debt at all.  You created an asset (a piece of paper).   Your friend was a nice, gullible man who did work (moving furniture) against an asset, your piece of paper.

But is not a debt anymore, because it doesn't contain the defining property of debt: liability !

Quote
Now say that a group of us get together and decide together to define a unit of measurement, and print a bunch of these IOU notes in various values, and with no specific final redeemer.  Again, I would argue that these represent debt that has been fully abstracted.  No named payer, no named payee, no fixed payment.  Since they have no final redemer, they represent that you have done something good for society in general.  And they have no fixed value beyond the abstract UOM printed on them, leaving the bearer and the present redeemer to negotiate the terms of trade.

You've just created some assets.  They are not "debt", because by definition, they do not engage in any liability.  You can desire to possess them, or not.  Nobody is obliged.  You could just as well have decided to have created paintings and issued those.  Your pieces of paper are just slightly less artistic assets than paintings you could have issued.

These assets are not debt.  And btw, you didn't do anything for society.  You just got seigniorage.  Your first piece of paper with IOU got you a free move of furniture from your friend.  His problem to be gullible :-)  

The day he would like you to move his furniture, and you tell him to shove his piece of paper where you think, you make him see the difference between a (worthless) asset, and a real debt :-)  If you had issued a bond, the guy would just go to court and you wouldn't tell the judge to shove it.

Quote
Now the man that finds gold in his yard hasn't created a "debt against the earth" or anything silly like that.  He has done something good for society: he has found more money.

Finding "more money" does not do ANYTHING for society.  It does something for the creator of it: seigniorage !  It devaluates the rest of the money in circulation, that's all it does.

Really, read Rothbard now.  He considers all those issues and he's a much better writer than I am :-)

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November 19, 2014, 03:39:03 PM
 #387

Now, if anyone prefers to consider debt only to exist when a specific person is bound by threat of violence to a specific performance, I can't stop them.

Because that's what defines a debt: a liability.  The promised execution of your part of a contract.

Quote
  Nor can I if they prefer any other combination of un-abstracted properties.  I won't even say that they are wrong.  But I will say that they will have a much harder time understanding money in that system.

I'm affraid *you* have an erroneous grasp on the concept of money.  But again, read Rothbard.
Money is not "an honest man's promise", although this is a very common misconception.

Money is a valued asset, that is mainly used as an intermediate asset to store the value of the two halves of an exchange: the first half where you did something for someone else and obtained it, and the second half where you hope that others are going to do something for you.

It is easy to see where the "debt" concept comes from: you think that when you "do something for someone, society OWES YOU a return".

There could be a giant ledger, where all someone does for someone else, is valued, noted, and is a "credit" on the name of that person, which can afterwards make a claim on his contribution to society to "get something back".

However, that collectivist/communist vision is NOT what money is about.  Money is not the big ledger of what you've done for others, and what you're entitled to to get back.

Money provides a similar macro-effect, but doesn't WORK that way.  Money is rather based upon a free society, and not a collectivist-communist "organiser of all actions", which means that at every single interaction, you have to cover your valued actions for others against stuff others may want.  Because if you don't, nobody's going to care about what was the good you did to society.

Money is a means to not to have to do "good for free".  It implements the function to claim back your contribution, but not with an enforcible debt of society towards you (which is not possible in a free society), but rather with your owning of a desired and rare asset.  The desire of others to possess that asset is what replaces the "debt of society towards you" but the responsibility to have it have value to make that claim, is entirely your speculative business.

Indeed, if money were to be a ledger of what good you did to society, then it would be strictly forbidden to *produce* money because that would give you the right on a claim without the beneficial action to society.  It would be cheating in the ledger.  This is what seigniorage is about.  For money to implement "just return" it has to be a pure collectable.

And now you see that "digging up gold" would violate the "ledger of the debt of society towards you for former good deeds".  And that is what it does, btw.

So no, gold is not a debt.  But a rare asset of which not much can be produced, has similar effects, when accepted as money, as your debt-driven "ledger of all good deeds". 
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November 19, 2014, 04:13:12 PM
 #388

Bah. I've said what I needed to say, and I'm done.  The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

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November 19, 2014, 04:18:34 PM
 #389

Bah. I've said what I needed to say, and I'm done.  The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

Read Rothbard.
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November 19, 2014, 04:26:26 PM
 #390

Bah. I've said what I needed to say, and I'm done.  The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

Read Rothbard.

What makes you think I haven't?

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November 19, 2014, 07:43:56 PM
 #391


Read Rothbard.

What makes you think I haven't?

From Rothbard:
Quote
A most important truth about money now emerges
from our discussion: money is a commodity. Learning
this simple lesson is one of the world’s most impor-
tant tasks. So often have people talked about money
as something much more or less than this. Money
is not an abstract unit of account, divorceable from
a concrete good; it is not a useless token only good
for exchanging; it is not a “claim on society”; it is
not a guarantee of a fi xed price level. It is simply a
commodity. It differs from other commodities in
being demanded mainly as a medium of exchange.

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November 19, 2014, 08:30:09 PM
 #392

Are you surprised that I don't agree with everything I read?  Shouldn't you be concerned that both you and Rothbard are incapable of using orthogonal categories?

Money is certainly a commodity, but that doesn't exclude it from other categories.  No one claims that an apple isn't fruit because it is a commodity, nor that it isn't food because it is round.

Further, an apple is still useful when detached from society, but money is not.  At least not in the abstract; a tangible manifestation of money might still be useful.  If you ignore or diminish the social aspect of money, you lose something.  The notion isn't necessarily wrong, per se, but it isn't as useful as it would be if it were complete.

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November 19, 2014, 09:12:01 PM
 #393

Are you surprised that I don't agree with everything I read?  Shouldn't you be concerned that both you and Rothbard are incapable of using orthogonal categories?

The point is that if you had read Rothbard, and you had a good argument against it, and then you find a similar argument as Rothbard's on a forum, you would have been able to develop.  The point is not so much that you disagree with him, but that you don't seem to present an argument based upon clear definitions and logical deductions, together with explicit premises, to attack the view.

You haven't argued anything against the point I made, that if you insist on money being a debt, that you have to strip the word "debt" from its core property, which is forcible liability, and that the only thing you leave to the word "debt" is a subset of the definition of "ownership".

I do not agree necessarily with Rothbard on everything either (especially his idea that "useless tokens cannot be money" :-) ), but the nice thing about Rothbard is the clearness of his writing concerning the concepts that make up money.

But it is especially striking, because, as I said before, long ago I had exactly the position you are now defending, because the only money I knew about was fiat money.  It was when confronted with evident questions concerning gold, that I started doubting about my own understanding, and it became clear when I read Rothbard.   So if you had wandered a similar path, I'm sure you could have given a convincing argument as to why, nevertheless, "money is debt".  But you didn't.

So, could I ask you:

what is your definition of debt, and how do you distinguish it from your definition of "property" or "ownership" ?

What distinguishes "debt" in your conceptual framework from "ownership" ?

And in what way, in your thinking, must a monetary asset then necessarily have the "debt" properties, apart from the simple "ownership" properties ?  And how does that work out with gold ?

It might also be that you are actually using the word "debt" for the word "value", instead of "ownership".  But as you claim "money is debt", again, it has to be the distinguishing property that sets debt apart from value that must always be part of your concept of "money".

Way back, I realised that I couldn't get out of that mess when assuming that "money is debt".  So I'm really curious as how you will do...

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November 19, 2014, 09:43:44 PM
 #394

But it is especially striking, because, as I said before, long ago I had exactly the position you are now defending, because the only money I knew about was fiat money.  It was when confronted with evident questions concerning gold, that I started doubting about my own understanding, and it became clear when I read Rothbard.  So if you had wandered a similar path, I'm sure you could have given a convincing argument as to why, nevertheless, "money is debt".  But you didn't.

Given that you've studiously avoided understanding my position, I find it hard to believe that you ever held it yourself.  Much more likely, you are assuming that I hold the same belief that you once held, and you are arguing against that.

For evidence of this, I point out that you have repeatedly countered arguments that I did not make, while ignoring what I actually have said.  In fact, that is about all that you have done here.

You could claim that since money isn't a claim on a specific thing, or from a specific person, that it doesn't qualify as debt.  But this is just a matter of definition, and not a universal one because plenty of people would draw that line in a slightly different place.  You can certainly choose to define debt in a narrow sense that excludes various categories of similar concepts, but what good does it do you?

No, debt means that somebody is liable.

Do you really not see that you are just going around in a circle?

It is not interesting to me if you choose to draw a line that divides some debt-like things from some other debt-like things.

The  core property of the word "debt" is that you have no choice but to do what your debt claim you signed, says, and the only exception is when you can't  or when you are a scammer, and law enforcement can be put to work to make you pay off your debt. 

Now, if anyone prefers to consider debt only to exist when a specific person is bound by threat of violence to a specific performance, I can't stop them.  Nor can I if they prefer any other combination of un-abstracted properties.  I won't even say that they are wrong.  But I will say that they will have a much harder time understanding money in that system.

You've just created some assets.  They are not "debt", because by definition, they do not engage in any liability.

The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

if you insist on money being a debt, that you have to strip the word "debt" from its core property, which is forcible liability, and that the only thing you leave to the word "debt" is a subset of the definition of "ownership".

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November 20, 2014, 05:27:04 AM
 #395

The root of our disagreement is not that you haven't repeated your claim often enough, and I don't suspect that anything I write will cause you to think beyond repeating it yet again.

I haven't seen any reasoning that leads to your position.  I've done everything I can to point out that monetary assets are not always based upon enforceable liabilities, which is to me what is the core meaning of the word debt:

if you insist on money being a debt, that you have to strip the word "debt" from its core property, which is forcible liability, and that the only thing you leave to the word "debt" is a subset of the definition of "ownership".

You seem to see that otherwise, which is why I asked you what is your definition of the word debt (which clearly cannot contain "enforceable liability" then, and in what way that definition is then different from your definition of the word "property" or "value". 

It could also be that you want to argue that debt is still enforceable liability, but then you should show in what way the possession of gold can lead the owner to force others to do something specific for it.

The point being that if you use words with other than its usual meaning in a claim, then you should be clear about it.

You can say that blood is blue, if you redefine "blue".
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November 20, 2014, 05:33:44 AM
 #396

Given that you've studiously avoided understanding my position, I find it hard to believe that you ever held it yourself.  Much more likely, you are assuming that I hold the same belief that you once held, and you are arguing against that.

I don't know.

What I held as a position, was about this:
As money is a "token of value" you get when you do "good to someone else", this is a sign of a debt the society has towards you, and you can claim your debt by spending the money.

In other words, money would be the big ledger where all you do for others is written, and allows you to get it back from society ; instead of writing it in a central ledger, it is done by distributing tokens, called money.

That sounds nice, but cannot explain several properties of monetary assets.
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November 20, 2014, 07:30:13 AM
 #397

The point being that if you use words with other than its usual meaning in a claim, then you should be clear about it.

You can say that blood is blue, if you redefine "blue".

Heh.  I just quoted myself saying it like 3 times.  How was that not clear?

And in my opinion, I'm not claiming that red is blue.  I'm claiming that the distinction between bright grey and white isn't so sharp.  And at risk of breaking the color analogy, that people who are able to see bright grey and white as being similar rather than different have a distinct advantage in thinking clearly about certain subjects.

What I held as a position, was about this:
As money is a "token of value" you get when you do "good to someone else", this is a sign of a debt the society has towards you, and you can claim your debt by spending the money.

In other words, money would be the big ledger where all you do for others is written, and allows you to get it back from society ; instead of writing it in a central ledger, it is done by distributing tokens, called money.

Amusingly enough, that is exactly how bitcoin works.  Yap stones too, basically.

Bitcoin is a very good approximation of the platonic ideal of "money".  It is such a good approximation that bitcoins don't really exist, not even intangibly.  It is only a ledger.  Click a few threads right here in the Economic sub-board, and you'll see people twisting their minds into all manner of crazy contortions trying to fit the abstract nature of bitcoin into whatever rudimentary philosophy of money they happen to have.

Bitcoin doesn't "embed the electricity of mining".  It doesn't provide the "useful service" of hashing quasirandom numbers.  It isn't an asset, except by the very loosest definition of asset.  It isn't a commodity, except again in the very loosest sense.  No one is forced to accept or acquire it.  It annihilates the regression theorem.  And so on...

That sounds nice, but cannot explain several properties of monetary assets.

I doubt that any model could explain all of the properties of money.  Money is just too damn big of a topic to reduce to a single analogy.  I haven't even seen a definition that is both correct and non-circular.  Actually, the only "correct" definition of money that I've ever seen is that "Money is what people use as money".  Kinda like how a dictionary can tell you what the word "river" means, assuming that you already know what a river is, and aren't too concerned about the edge cases.

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November 20, 2014, 02:43:32 PM
 #398


What I held as a position, was about this:
As money is a "token of value" you get when you do "good to someone else", this is a sign of a debt the society has towards you, and you can claim your debt by spending the money.

In other words, money would be the big ledger where all you do for others is written, and allows you to get it back from society ; instead of writing it in a central ledger, it is done by distributing tokens, called money.

Amusingly enough, that is exactly how bitcoin works.  Yap stones too, basically.

Bitcoin is a very good approximation of the platonic ideal of "money".  It is such a good approximation that bitcoins don't really exist, not even intangibly.  It is only a ledger.  Click a few threads right here in the Economic sub-board, and you'll see people twisting their minds into all manner of crazy contortions trying to fit the abstract nature of bitcoin into whatever rudimentary philosophy of money they happen to have.

Ok, we're getting somewhere.  I think this is the fundamental misunderstanding then.  True, bitcoin works with a public ledger.  That ledger is centralized in a way, because it is the only way to have collectables with data, as data can be copied.  (it is centralized not in the sense that a single group of people commands it, but it is centralized in the sense that all the data are within one single ledger).  Collectables and ledgers are mathematically equivalent in a way: a finite and immutable number of tokens, assigned to different owners, with only one owner at a time.  In other words, the fact that bitcoin works with a centralized ledger (the blockchain), and that other collectables work with a distributed ledger of OWNERSHIP (by just possessing the tokens without it being written down in a ledger) are simply two different ways of describing OWNERSHIP.

But that is not what I was talking about.  I was talking about a "ledger of debt of society with respect to individuals".  Now, that would be a ledger in which is written down value, not tokens.  If I had done 8 hours of a certain type of work in that ledger, then society would "owe me" the equivalent of 8 hours of work of a certain type", which I could claim at any moment into something equivalent.  That is not what bitcoin, nor any other property of collectables, writes down in his ledger. 

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Bitcoin doesn't "embed the electricity of mining".  It doesn't provide the "useful service" of hashing quasirandom numbers.  It isn't an asset, except by the very loosest definition of asset.  It isn't a commodity, except again in the very loosest sense.  No one is forced to accept or acquire it.  It annihilates the regression theorem.  And so on...

It is an asset !  The asset is a specific amount of satoshis of which there only exist so many.  The asset are the satoshis themselves, as collectables, in the same way as rare post stamps, or a quantity of rare metal, or Rembrandt paintings.  You can VALUE those assets as much or as few as you want, but they are assets.  You could number all the satoshis from 1 to 21 10^14, and then you are the proud owner of certain specific satoshis, which nobody else can own on the blockchain.  It is an abstract kind of possession, but it is a possession nevertheless. 

It would be similar to having a ledger of stars in the milky way.  You could own certain stars.  The only thing that makes up that ownership is the fact that you have bought that star in a ledger.  As long as there is no interstellar travel or any use for remote stars, your ownership of a star is equivalent to the ownership of a satoshi, with the sole difference that that ownership of a star has to be written down by trusted people in the star ledger, and the satoshis are protected by cryptography.  You can abstract away the physical star, and in the end you only possess a few tokens of which there are a finite and fixed number.  Like you can own a finite number of gold atoms.  Or you can own a finite number of Rembrandt paintings.

The difference with the "debt ledger" is that in a debt ledger, society is OBLIGED (because debt) to return to you the value of what you gave to society.  This is only possible in a totally communist system.

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That sounds nice, but cannot explain several properties of monetary assets.

I doubt that any model could explain all of the properties of money.  Money is just too damn big of a topic to reduce to a single analogy.

On the contrary.  Money as an asset you can possess, and for which there is a market with offer and demand, is EXACTLY what describes money.  No more, no less. That is the great lesson from Rothbard.  Money is nothing else but a very tradable asset, which, for that purpose, is also used as a store of value, and for which hence exists a demand, explicitly based on that demand for store of value.

With that "model" of money, you explain all its aspects.  You explain price, you explain exchange rates, you explain inflation.  Money is an asset that is used speculatively to be traded again.  That's all there is to it.

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  I haven't even seen a definition that is both correct and non-circular.  Actually, the only "correct" definition of money that I've ever seen is that "Money is what people use as money".  Kinda like how a dictionary can tell you what the word "river" means, assuming that you already know what a river is, and aren't too concerned about the edge cases.

No, really not.  Money is an asset (that is, something you can possess and hold - so not a service for instance), which is mainly, or exclusively used speculatively to trade it later against other stuff, and which is in general traded very easily.  Not more, not less.

Some assets have monetary aspects, like real estate.  Some assets are essentially money, like gold (except for its usage in jewelry and industry).  From the moment that an asset is mainly used to store value in (that is, speculatively held to trade it against other stuff, and not for its usage as a capital good or consumption good) and are easily tradable, it is money.

With that concept, you explain all economic aspects of money.
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November 20, 2014, 03:22:54 PM
 #399

You are looking at the trees, but you can't see the forest.

With a few pathological exceptions, if you ask people about money, they will tell you that they value it in terms of what they can get for it.  That is, for what useful goods and services they would have directly traded their goods and services for if money did not exist.

I get it that, to you, the medium is the only important part of this.  But there are times when viewing the exchange as the important part is more useful.  Additionally, I remain uninterested in accepting your strict definition of debt and your incomplete definition of money  Your arguments that grow from these roots show only your inability to see the bigger picture.

By the way, your notion of digital collectibles falls apart if you know how a bank works, particularly the checking system.  (Or, for that matter, Ripple.)  In the banking system, dollars are just entries in a database.  They are not finite, they are not immutable.  Paper dollars are just bearer checks used to facilitate adjusting those database records up and down.

Further, your understanding of bitcoin is weak.  Bitcoin has no such concept as "ownership", nor a concept of "exclusive".  Ownership is a social concept, but Bitcoins are traded by providing solutions to scripts.  Any valid solution will be accepted by the network, regardless of the wishes of "the owner".  These forums are full of stories from people who imagined themselves to be "owners" of bitcoins, but were wrong.  The bitcoin ledger is very abstract.

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November 20, 2014, 06:25:14 PM
 #400

You are looking at the trees, but you can't see the forest.

With a few pathological exceptions, if you ask people about money, they will tell you that they value it in terms of what they can get for it.  That is, for what useful goods and services they would have directly traded their goods and services for if money did not exist.

Yes.  Of course, we agree here.  It is a speculative asset, which means exactly that.  It is something you are willing to do something for to obtain it, not for its use as a consumption good (bread), or for use as a capital good (a production machine), but with the main or sole idea to trade it later for something you do value as a consumption good or as a capital good (or service).

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I get it that, to you, the medium is the only important part of this.  But there are times when viewing the exchange as the important part is more useful.  Additionally, I remain uninterested in accepting your strict definition of debt and your incomplete definition of money  Your arguments that grow from these roots show only your inability to see the bigger picture.

Then, again, what is *your* definition of debt, and in what respect is it then different from ownership ?  It is nice to talk about "the bigger picture" but as long as you don't use clearly defined terms, and logical deductions linking them to clearly stated starting hypotheses, there's no picture at all !

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By the way, your notion of digital collectibles falls apart if you know how a bank works, particularly the checking system.  (Or, for that matter, Ripple.)  In the banking system, dollars are just entries in a database.  They are not finite, they are not immutable.  Paper dollars are just bearer checks used to facilitate adjusting those database records up and down.

Absolutely.  But dollars are not collectibles.  They are assets that are produced and destroyed by privileged economic actors. 

A ledger can also treat non-collectables, but then it is a ledger with sources and sinks ("created asset" and "destroyed asset").   After all, a ledger is nothing else but a centralized database where ownership of assets is written down ; ownership which can also be distributed by simply owning the asset physically. 

The only reason why bitcoin has a public centralized ledger is that the asset is a piece of data, and that one WANTS them to be collectables.  Now, contrary to physical assets, data can very very easily be copied, and then these data are not collectables anymore.  To turn data assets into collectables, one needs a ledger.  Now, banks use "leaky" ledgers with sources and sinks, but bitcoin uses a non-leaky ledger.

The point is: ledgers are just other ways to describe PROPERTY.

Of course some assets are debt related.  But not all.  And what characterizes money, is not debt, but is what you wrote on top: it is a speculative asset you essentially only own because you speculate upon being able to trade it later for something useful.


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Further, your understanding of bitcoin is weak.  Bitcoin has no such concept as "ownership", nor a concept of "exclusive".  Ownership is a social concept, but Bitcoins are traded by providing solutions to scripts.  Any valid solution will be accepted by the network, regardless of the wishes of "the owner".

With bitcoin, ownership is not a social concept anymore.  Ownership is only a social concept if you need social consensus to make your property rights work.  Ownership of a house is usually a social concept: if there is no social consensus that you own a house, then anybody can come into your house and live there.  You need social consensus to drive the others out (to appeal to the violence monopolist who is the state or its representative, the police).

But there always have been assets that do not need social consensus.  Usually physically small objects which you can hide don't need social consensus.  You just physically hold them, and you can hide them.  That's the way you can enforce your ownership of them without consensus.

With bitcoin, you don't need social consensus either (apart from the bitcoin protocol itself).  The "solution to the script" can normally only be found when you have the private key, and a private key is something you can hide.  Without that private key, no matter how much social consensus there is that those satoshis actually belong to someone else, nobody can find the solution to the script.  By definition, the owner is the one who has access to the private key.

If the private key is known to several people, then indeed, ownership is ill defined, and will turn out to be finally assigned to the first of those people using that key to solve the script.

Bitcoin doesn't use social consensus as means to enforce ownership, but cryptography.  A bit in a similar way as owners of physical objects can use a safe, locked doors, or hidden places to enforce their ownership, without social consensus.

If the protection fails, then ownership enforcement fails too.  That's the case when one breaks open your safe, or when one gets one's hands upon your private key.

But all this has nothing to do with your claim that money is debt.
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