Real money vs debt, and the value of bitcoin. (Mitchell-Innes credit theory)

[bitcoinBull]

tldr: The value of bitcoin comes most directly from trust in exchanges (or trust in the ability to sell bitcoin at a certain price).

What would Mitchell-Innes think? This excerpt from "Debt: the first 5,000 years" by David Graeber, is enlightening:

Mitchell-Innes was an exponent of what came to be known as the Credit Theory of money, a position that over the course of the nineteenth century had its most avid proponents not in Mitchell-Innes's native Britain but in the two up-and-coming rival powers of the day, the United States and Germany. Credit Theorists insisted that money is not a commodity but an accounting tool. In other words, it is not a "thing" at all. You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement, and as the credit theorists correctly noted, historically, such abstract systems of accounting emerged long before the use of any particular token of exchange.

The obvious next question is: If money is a just a yardstick, what then does it measure? The answer was simple: debt. A coin is, effectively, an IOU. Whereas conventional wisdom holds that a banknote is, or should be, a promise to pay a certain amount of "real money" (gold, silver, whatever that might be taken to mean), Credit Theorists argued that a banknote is simply the promise to pay something of the same value as an ounce of gold. But that's all that money ever is. There's no fundamental difference in this respect between a silver dollar, a Susan B. Anthony dollar coin made of a copper-nickel alloy designed to look vaguely like gold, a green piece of paper with a picture of George Washington on it, or a digital blip on some bank's computer. Conceptually, the idea that a piece of gold is really just an IOU is always rather difficult to wrap one's head around, but something like this must be true, because even when gold and silver coins were in use, they almost never circulated at their bullion value.

...

What credit theorists like Mitchell-Innes were arguing is that even if Henry gave Joshua a gold coin instead of a piece of paper, the situation would be essentially the same. A gold coin is a promise to pay something else of equivalent value to a gold coin. After all, a gold coin is not actually useful in itself. One only accepts it because one assumes other people will.

In this sense, the value of a unit of currency is not the measure of the value of an object, but the measure of one's trust in other human beings.

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[mirelo]

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form.

How could money (gold) be credit in this example?

[bitcoinBull]

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form.

How could money (gold) be credit in this example?

To simplify, let's also assume that we're the last two people on earth.

The only reason I'm willing to accept an ounce from you, in exchange for my knife, is because I trust that you won't kill me with the knife and take back your shoes. If I thought that you would use the knife to kill me, I would never trade it for gold, and therefore the gold would be worthless (there's nobody else on earth we can use it to trade with).

So let's assume I trust you, first and foremost that you won't kill me. But I also trust that in the future, I can use the gold to haggle with you and trade it for something else you might have. If I didn't expect that I could use it to pay you in the future (say for some of the meat you hunted with your new knife), it would have no value and I would never have accepted it from you as payment for the knife.

So the gold is only credit, and its value is strictly limited by how much we trust each other to use it for trades.

[mirelo]

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form.

How could money (gold) be credit in this example?

To simplify, let's also assume that we're the last two people on earth.

The only reason I'm willing to accept an ounce from you, in exchange for my knife, is because I trust that you won't kill me with the knife and take back your shoes. If I thought that you would use the knife to kill me, I would never trade it for gold, and therefore the gold would be worthless (there's nobody else on earth we can use it to trade with).

(It was me to accept an ounce of gold for half the exchange value of my pair of shoes, but never mind: taking your slightly modified example instead...) If the "only reason" for you to accept my ounce of gold in return for your knife were your trusting me, than you would be just as willing to accept anything else instead. Anything else would be as good as gold: your trust in me would enable me to declare anything as money. Clearly, that trust is not the only reason for you to accept my gold (as you pointed out yourself right after saying this): trust cannot constitute a motivation for you to accept my gold but rather is just a requirement for it.

So let's assume I trust you, first and foremost that you won't kill me. But I also trust that in the future, I can use the gold to haggle with you and trade it for something else you might have. If I didn't expect that I could use it to pay you in the future (say for some of the meat you hunted with your new knife), it would have no value and I would never have accepted it from you as payment for the knife.

So the gold is only credit, and its value is strictly limited by how much we trust each other to use it for trades.

According to this logic, the prospect of having exchange value in the future would turn anything into credit.

Just like gold, my knife will also have an exchange value in the future. Does that make it credit? Perhaps only money becomes credit just for having an exchange value in the future. Yet if so, then what makes it money? Let us assume it must be credit in order to be money. Then, how can money be the only thing to become credit for having an exchange value in the future (if it must already be credit)?

All this mess vanishes once we remember that credit is merely the promise of repaying someone else's money after some time, so money must already exist in order for credit even to be possible (this requires a whole new level of trust going far beyond not being killed: it requires trusting the borrower to repay the loan).

[bitcoinBull]

So let's assume I trust you, first and foremost that you won't kill me. But I also trust that in the future, I can use the gold to haggle with you and trade it for something else you might have. If I didn't expect that I could use it to pay you in the future (say for some of the meat you hunted with your new knife), it would have no value and I would never have accepted it from you as payment for the knife.

So the gold is only credit, and its value is strictly limited by how much we trust each other to use it for trades.

According to this logic, the prospect of having exchange value in the future would turn anything into credit.

And you would be absolutely correct. Otherwise, how can you explain that throughout history, everything from sea-shells to tally sticks to little green pieces paper, have all been able to act as a currency.

Just like gold, my knife will also have an exchange value in the future. Does that make it credit?

No, because the knife actually has a use-value. The knife has use-value regardless of whether or not I trust you, because I can use it to kill and skin animals, etc.. The knife's value (in this scenario) does not derive from our trust relationship whatsoever. So the knife is not credit (in this scenario).

(if it were a ceremonial knife made of precious metal, then we could assume it would have additional exchange value above and beyond its cutting utility, and the scenario would be different).

Perhaps only money becomes credit just for having an exchange value in the future. Yet if so, then what makes it money? Let us assume it must be credit in order to be money. Then, how can money be the only thing to become credit for having an exchange value in the future (if it must already be credit)?

See, presuming that money and credit are different things gets you into a circular paradox. It is resolved quite elegantly when you realize that money and credit are the very same thing.

[johnyj]

tldr: The value of bitcoin comes most directly from trust in exchanges (or trust in the ability to sell bitcoin at a certain price).

What would Mitchell-Innes think? This excerpt from "Debt: the first 5,000 years" by David Graeber, is enlightening:

Conceptually, the idea that a piece of gold is really just an IOU is always rather difficult to wrap one's head around, but something like this must be true, because even when gold and silver coins were in use, they almost never circulated at their bullion value.

True, to be more precisely, a paper note or a piece of gold are both used to present the valuable things that back them, e.g. you can always exchange them for such amount of goods. It means, if you have valuable things, you could always issue money of equivalent value

However, you can just write a paper note, while you must work a lot to produce a piece of gold. This is the fundamental difference between paper notes and gold

Overtime, the valuable things that back the paper note/gold will be consumed or depreciated and eventually disappear from the economy. So, those issued money will lose their value, since there is no corresponding valuable thing behind these money now

But this is not true for gold, since the gold itself is a result of work, thus itself contains value

The counter argument is that work does not decide value, supply and demand do. But it is the same, if nothing is backing the paper note and gold, the demand for paper note will be 0 and the demand for gold still exists, as industry material and jewelry(a significant demand in certain countries like India)

[mirelo]

So let's assume I trust you, first and foremost that you won't kill me. But I also trust that in the future, I can use the gold to haggle with you and trade it for something else you might have. If I didn't expect that I could use it to pay you in the future (say for some of the meat you hunted with your new knife), it would have no value and I would never have accepted it from you as payment for the knife.

So the gold is only credit, and its value is strictly limited by how much we trust each other to use it for trades.

According to this logic, the prospect of having exchange value in the future would turn anything into credit.

And you would be absolutely correct. Otherwise, how can you explain that throughout history, everything from sea-shells to tally sticks to little green pieces paper, have all been able to act as a currency.

If merely having an exchange value in the future made anything money, then we could only buy or sell things that lacked future exchange value: otherwise, those things would be the money with which we buy them or for which we sell them, rather than what we buy with money or sell for it. Many things have once represented money, but not only because of their future exchange value (otherwise, almost anything would always be money, leaving us just a few, quite uninteresting things to buy - and serious problems in choosing the money to buy them with).

Just like gold, my knife will also have an exchange value in the future. Does that make it credit?

No, because the knife actually has a use-value. The knife has use-value regardless of whether or not I trust you, because I can use it to kill and skin animals, etc.. The knife's value (in this scenario) does not derive from our trust relationship whatsoever. So the knife is not credit (in this scenario).

It was you to say that merely having a future exchange value made anything money.

Still, gold also has a use value independently of being money, as does cattle, silver, and salt. They are also useful "regardless of whether or not I trust you," and even so they can be - as once were - money.

(if it were a ceremonial knife made of precious metal, then we could assume it would have additional exchange value above and beyond its cutting utility, and the scenario would be different).

So its metallic utilities would make it useless, then credit, hence money?

Perhaps only money becomes credit just for having an exchange value in the future. Yet if so, then what makes it money? Let us assume it must be credit in order to be money. Then, how can money be the only thing to become credit for having an exchange value in the future (if it must already be credit)?

See, presuming that money and credit are different things gets you into a circular paradox. It is resolved quite elegantly when you realize that money and credit are the very same thing.

It is not a matter of just "presuming" things, but rather of explaining how things are the way we "presumed" them to be: the circularity arises from trying to explain, by using your own argument, how money and credit could be the same.

[johnyj]

Credit is always risky, since there is always a risk of future. You can promise me to make a $1M house to back the value of your issued $1M money, but what if that house's market price drops to $500K after it is constructed? It means that the value of all your issued money will be cut by half

[mirelo]

True, to be more precisely, a paper note or a piece of gold are both used to present the valuable things that back them, e.g. you can always exchange them for such amount of goods. It means, if you have valuable things, you could always issue money of equivalent value

However, you can just write a paper note, while you must work a lot to produce a piece of gold. This is the fundamental difference between paper notes and gold

Overtime, the valuable things that back the paper note/gold will be consumed or depreciated and eventually disappear from the economy. So, those issued money will lose their value, since there is no corresponding valuable thing behind these money now

But this is not true for gold, since the gold itself is a result of work, thus itself contains value

The counter argument is that work does not decide value, supply and demand do. But it is the same, if nothing is backing the paper note and gold, the demand for paper note will be 0 and the demand for gold still exists, as industry material and jewelry(a significant demand in certain countries like India)

Money does not necessarily (and should not) represent its own exchange value: rather, it necessarily represents the exchange value of all commodities it can buy.

[bitcoinBull]

If merely having an exchange value in the future made anything money, then we could only buy or sell things that lacked future exchange value: otherwise, those things would be the money with which we buy them or for which we sell them, rather than what we buy with money or sell for it. Many things have once represented money, but not only because of their future exchange value (otherwise, almost anything would always be money, leaving us just a few, quite uninteresting things to buy - and serious problems in choosing the money to buy them with).

Not just commodities can be bought and sold, money can be bought and sold too. That's why there's a giant market of currency exchange. You're creating another false dichotomy that money and commodities are always entirely separate things (sometimes they are, but not always). The other false dichotomy is that money and credit are separate things. In reality, its blended together on a spectrum: pure credit/currency on one end, and commodities with no exchange-value on the other.

It was you to say that merely having a future exchange value made anything money.

Still, gold also has a use value independently of being money, as does cattle, silver, and salt. They are also useful "regardless of whether or not I trust you," and even so they can be - as once were - money.

Its having a future exchange-value based on trust which makes something a currency. Not "future exchange-value based on use", which is a total misuse of the term exchange-value. future exchange-value (the gold) is a separate thing from future use-value (the knife).

But we do agree, having a use-value does not preclude something from also functioning as money. Commodities can have a dual-function as both currency and as commodity (again, in the real world, its a complex blend). The point is that, as a currency, its exchange-value is derived separately from its use-value. The exchange-value comes from the network of trust among people who will accept it as payment, even if have absolutely no intention of using it themselves (just an intention to exchange it again in the future).

(if it were a ceremonial knife made of precious metal, then we could assume it would have additional exchange value above and beyond its cutting utility, and the scenario would be different).

So its metallic utilities would make it useless, then credit, hence money?

No, its ceremonially-precious quality would give it exchange-value (derived from the trust and agreement that it is precious). That is entirely separate from its utility as a cutting tool (its use-value).

It is not a matter of just "presuming" things, but rather of explaining how things are the way we "presumed" them to be: the circularity arises from trying to explain, by using your own argument, how money and credit could be the same.

Okay, credit/IOUs have value based on trust, that should be obvious (an untrusted IOU is worthless). Money/currency have value based on exchange. And that exchange-value is always in flux, clearly, the price of gold and bitcoin are constantly changing. Changing based on what? Based on the trust that it can be taken to the market and exchanged at x price in the future, in other words, that it can serve as a "good-as-gold" "buyer-owes-u" x in the future. If that trust collapses, the price collapses.

Physical gold is just a token which measures the credit backing by the gold market. So instead of an "i-owe-u" its a "gold-market-owes-u". And obviously a "gold-market-owes-u" is only as valuable as the collective trust in the gold market.

[bitcoinBull]

Credit is always risky, since there is always a risk of future. You can promise me to make a $1M house to back the value of your issued $1M money, but what if that house's market price drops to $500K after it is constructed? It means that the value of all your issued money will be cut by half

And what if the market price of gold drops by half? Then the value of my gold is also cut in half. So in practice, a piece of gold is just another way to hold a quantity of credit.

Good example, thank you.

[mirelo]

If merely having an exchange value in the future made anything money, then we could only buy or sell things that lacked future exchange value: otherwise, those things would be the money with which we buy them or for which we sell them, rather than what we buy with money or sell for it. Many things have once represented money, but not only because of their future exchange value (otherwise, almost anything would always be money, leaving us just a few, quite uninteresting things to buy - and serious problems in choosing the money to buy them with).

Not just commodities can be bought and sold, money can be bought and sold too. That's why there's a giant market of currency exchange. You're creating another false dichotomy that money and commodities are always entirely separate things (sometimes they are, but not always). The other false dichotomy is that money and credit are separate things. In reality, its blended together on a spectrum: pure credit/currency on one end, and commodities with no exchange-value on the other.

Let me give you an example from my book Representational Monetary Identity (http://omniequivalence.com/money-as-multiequivalence/):

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x. Direct exchange cannot give those three owners their desired commodities, none of which belongs to whom (x to B) wants the commodity owned by whom (z by C) wants it (wants x).

The monetary solution to this problem consists in a fourth commodity becoming money so those three owners can exchange their other three commodities. In that exchange, only one commodity can perform the role of money at a time: the monetary function excludes the commodity function.

To understand what does it mean for us to buy or sell money itself, you must begin by understanding this.

It was you to say that merely having a future exchange value made anything money.

Still, gold also has a use value independently of being money, as does cattle, silver, and salt. They are also useful "regardless of whether or not I trust you," and even so they can be - as once were - money.

Its having a future exchange-value based on trust which makes something a currency. Not "future exchange-value based on use", which is a total misuse of the term exchange-value. future exchange-value (the gold) is a separate thing from future use-value (the knife).

Neither trust nor utility can give anything an exchange value, whether monetary or not: trust is merely a requirement for social interaction in general, and utility, for exchange value in general and monetary value in particular.

But we do agree, having a use-value does not preclude something from also functioning as money. Commodities can have a dual-function as both currency and as commodity (again, in the real world, its a complex blend). The point is that, as a currency, its exchange-value is derived separately from its use-value. The exchange-value comes from the network of trust among people who will accept it as payment, even if have absolutely no intention of using it themselves (just an intention to exchange it again in the future).

Exchange value is never "derived from" utility: although a commodity must be useful to have exchange value, its exchange value does not originate from its utility. Likewise, although we must trust each other to buy from and sell to each other, the exchange value of our commodities and money does not come from our trusting each other (otherwise, the more we trusted each other, the more valuable our commodities and money would become).

(if it were a ceremonial knife made of precious metal, then we could assume it would have additional exchange value above and beyond its cutting utility, and the scenario would be different).

So its metallic utilities would make it useless, then credit, hence money?

No, its ceremonially-precious quality would give it exchange-value (derived from the trust and agreement that it is precious). That is entirely separate from its utility as a cutting tool (its use-value).

The question was: how its metallic properties could enhance its exchange value? In your terms: why those properties would affect our "agreement" on its exchange value? Do not objective properties affect the exchange value of things? Otherwise, would it not be just a coincidence that some things are consistently more expensive than others?

It is not a matter of just "presuming" things, but rather of explaining how things are the way we "presumed" them to be: the circularity arises from trying to explain, by using your own argument, how money and credit could be the same.

Okay, credit/IOUs have value based on trust, that should be obvious (an untrusted IOU is worthless). Money/currency have value based on exchange. And that exchange-value is always in flux, clearly, the price of gold and bitcoin are constantly changing. Changing based on what?

Now we are talking. Take more time on the question before trying to answer it: this is not an easy one.

Based on the trust that it can be taken to the market and exchanged at x price in the future, in other words, that it can serve as a "good-as-gold" "buyer-owes-u" x in the future. If that trust collapses, the price collapses.

In my example above, those three owners can choose a fourth commodity to represent money just in the context of that particular exchange. In this case, money would need not be valuable in the future: the only trust required would be that of the owners in each other (that they would not kill - or steal - each other, etc).

Physical gold is just a token which measures the credit backing by the gold market. So instead of an "i-owe-u" its a "gold-market-owes-u". And obviously a "gold-market-owes-u" is only as valuable as the collective trust in the gold market.

So the more we trust gold to have an exchange value in the future, the more valuable it will be?

One thing is to trust more on the future monetary value of gold; another is to trust on more monetary value of the future gold.

[johnyj]

Credit is always risky, since there is always a risk of future. You can promise me to make a $1M house to back the value of your issued $1M money, but what if that house's market price drops to $500K after it is constructed? It means that the value of all your issued money will be cut by half

And what if the market price of gold drops by half? Then the value of my gold is also cut in half. So in practice, a piece of gold is just another way to hold a quantity of credit.

Good example, thank you.

If the assets that back the currency disappeared, then paper note will lose all of its value, while gold still keep some of its value, since the demand for gold still exists

If the value of gold drops by half, things will get complex. Because gold still have some assets that back it, its exchange value might still be stable for a while, like paper notes. Of course eventually it will impact the exchange rate of its underlying assets, otherwise you can get same amount of asset with less value

In this case we suppose that the underlying assets is the measurement of value, but in reality it is more likely the value of gold is the standard (we say the value of asset appreciated instead of gold value dropped), because it is scarce, have universal equivalence and always have a demand (That demand will never disappear, because of the existing of women )

[mirelo]

Credit is always risky, since there is always a risk of future. You can promise me to make a $1M house to back the value of your issued $1M money, but what if that house's market price drops to $500K after it is constructed? It means that the value of all your issued money will be cut by half

And what if the market price of gold drops by half? Then the value of my gold is also cut in half. So in practice, a piece of gold is just another way to hold a quantity of credit.

Good example, thank you.

If the assets that back the currency disappeared, then paper note will lose all of its value, while gold still keep some of its value, since the demand for gold still exists

There are no longer any assets backing most of the currency, only debt.

If the value of gold drops by half, things will get complex. Because gold still have some assets that back it, its exchange value might still be stable for a while, like paper notes. Of course eventually it will impact the exchange rate of its underlying assets, otherwise you can get same amount of asset with less value

Sheer gold money has no backing: it rather backs all its proxies.

In this case we suppose that the underlying assets is the measurement of value, but in reality it is more likely the value of gold is the standard (we say the value of asset appreciated instead of gold value dropped), because it is scarce, have universal equivalence and always have a demand (That demand will never disappear, because of the existing of women )

Gold was the monetary standard until 1971, and even then it was already just a partial standard: the other part was already just debt.

[johnyj]

There are no longer any assets backing most of the currency, only debt.

Debt simply means assets in the future, it is exchangeable with current assets, with a risk premium

[mirelo]

There are no longer any assets backing most of the currency, only debt.

Debt simply means assets in the future, it is exchangeable with current assets, with a risk premium

An asset is anything non-monetary that we take as a monetary value, which is impossible without money. Debt is my obligation of repaying a sum of money to whoever loaned it to me. If I can choose to express a debt in assets, it is only because I can express those assets in money.

[johnyj]

There are no longer any assets backing most of the currency, only debt.

Debt simply means assets in the future, it is exchangeable with current assets, with a risk premium

An asset is anything non-monetary that we take as a monetary value, which is impossible without money. Debt is my obligation of repaying a sum of money to whoever loaned it to me. If I can choose to express a debt in assets, it is only because I can express those assets in money.

Government bond and MBS are both assets. Given enough premium, you can payback your debt with some other assets like house/land/gold/bitcoin. When people default on their mortgage loan thus be free from debt, the banks get their house as a payment of debt

[mirelo]

There are no longer any assets backing most of the currency, only debt.

Debt simply means assets in the future, it is exchangeable with current assets, with a risk premium

An asset is anything non-monetary that we take as a monetary value, which is impossible without money. Debt is my obligation of repaying a sum of money to whoever loaned it to me. If I can choose to express a debt in assets, it is only because I can express those assets in money.

Government bond and MBS are both assets. Given enough premium, you can payback your debt with some other assets like house/land/gold/bitcoin. When people default on their mortgage loan thus be free from debt, the banks get their house as a payment of debt

Government bonds are the obligation the government has of repaying the face value of those bonds to their holders, with interest. It is only because government bonds are the promise of money that we can treat them as if they were already money. However, this can only be true as long as we believe on that promise.

Regarding houses or land (let us leave bitcoins out of this for a while), again: we could not treat them as money if they had no monetary value, which requires their expression in money that is just money (and not an asset).

Finally, we can only call a government bond an asset as long as we mistake the debt it represents for actual money to then mistake that money by a particular asset.

[AndrewWilliams]

Mitchell-Innes theory could really apply to ASIC manufacturers and their consumers.

BFL is a great example :rolleyes:


IE:
I will only sell you my miner if I can make more than if I mined myself. :p

[Zarathustra]

Graeber is right. Debt is the only real money. All other goods are assets and valued in debt.

[User705]

I'm more of a fan of the classic qualities of money durability, divisibility, transportability, and noncounterfeitability.  Modern credit/debt fails a number of those points so it's hard to see it as money.  Bitcoin on the other hand fits all four rather well.

[mirelo]

Graeber is right. Debt is the only real money. All other goods are assets and valued in debt.

Today, most money is debt. However, money is essentially different from debt since:
 
1. Debt depends on money.

2. Money does not depend on debt.

The confusion between debt and money is in the origin of the present monetary crisis.

[johnyj]

Government bonds are the obligation the government has of repaying the face value of those bonds to their holders, with interest. It is only because government bonds are the promise of money that we can treat them as if they were already money. However, this can only be true as long as we believe on that promise.

Regarding houses or land (let us leave bitcoins out of this for a while), again: we could not treat them as money if they had no monetary value, which requires their expression in money that is just money (and not an asset).

Finally, we can only call a government bond an asset as long as we mistake the debt it represents for actual money to then mistake that money by a particular asset.

Monetary value is a very vague term, same thing can have different monetary value if the money's value changed. This is clearly visible that USA good's value represented in Euro constantly changes depends on the exchange rate between USD and EURO

Essentially the value only depends on supply and demand, in a world that everything's supply and demand constantly changing, their value also fluctuates, and this also include money itself, means that money's value could also drop to zero if the demand disappeared

Currently the fiat money's value do not disappear because there is a demand for transaction with those money, but mostly because there is only one type of currency. If there are more credible currencies, "monetary value" becomes more complex

From money creator's view, money is not a debt but an asset, just like gold mined by the miners, and paper notes created by the FED. FED created money, money becomes their asset, and they lend this money to government, they receive government bonds in exchange

[herzmeister]

it's just a matter of definition, really.

At the end of our day, we trade our work. I mow the lawn for you, so you owe me a favor in return.

How we do this bookkeeping and keep this information reliable is a question of the available toolset.

Gold/Silver coins are just tools to store and transport the information of value, as are ledgers or tally sticks.

We now live in the information age, so tools like time banking or Bitcoin make sense.

All tools have certain advantages and disadvantages, which mostly revolve around the issue of trust.

Gold/Silver coins don't corrode and you don't have to trust a government, that's why some people like them, that's why they make good tools. But they're still tools. They only carry the information of value, they are not the original value itself (of me having mowed the lawn). They underlie external risk, as they can inflate/deflate in value (imagine massive population decrease for example).

[mirelo]

Monetary value is a very vague term, same thing can have different monetary value if the money's value changed.

Monetary value and "the money's value" are the same thing, which makes your statement a tautology.

From money creator's view, money is not a debt but an asset, just like gold mined by the miners, and paper notes created by the FED. FED created money, money becomes their asset, and they lend this money to government, they receive government bonds in exchange

Regarding the FED's money, there is not an act of money creation followed by an act of loaning: those two acts are one and the same. What "backs" the newly created money is nothing other than the act of loaning it. This is how debt and money get confused with each other.

[mirelo]

it's just a matter of definition, really.

At the end of our day, we trade our work. I mow the lawn for you, so you owe me a favor in return.

How we do this bookkeeping and keep this information reliable is a question of the available toolset.

Gold/Silver coins are just tools to store and transport the information of value, as are ledgers or tally sticks.

We now live in the information age, so tools like time banking or Bitcoin make sense.

All tools have certain advantages and disadvantages, which mostly revolve around the issue of trust.

Gold/Silver coins don't corrode and you don't have to trust a government, that's why some people like them, that's why they make good tools. But they're still tools. They only carry the information of value, they are not the original value itself (of me having mowed the lawn). They underlie external risk, as they can inflate/deflate in value (imagine massive population decrease for example).

There is an essential difference between Bitcoin and bank money: Bitcoin distinguishes the object representing money (the "available toolset") from the money itself (monetary value). It does that by representing money with a private key (monetary value), then metarepresenting it with a public key (monetary representation). By doing this, Bitcoin prevents the confusion between debt and money.

[johnyj]

it's just a matter of definition, really.

At the end of our day, we trade our work. I mow the lawn for you, so you owe me a favor in return.

How we do this bookkeeping and keep this information reliable is a question of the available toolset.

Gold/Silver coins are just tools to store and transport the information of value, as are ledgers or tally sticks.

We now live in the information age, so tools like time banking or Bitcoin make sense.

All tools have certain advantages and disadvantages, which mostly revolve around the issue of trust.

Gold/Silver coins don't corrode and you don't have to trust a government, that's why some people like them, that's why they make good tools. But they're still tools. They only carry the information of value, they are not the original value itself (of me having mowed the lawn). They underlie external risk, as they can inflate/deflate in value (imagine massive population decrease for example).

There are many human desire, consumable things and services are just part of them, the demand for accumulating a large amount of saving so that people can retire early is also very real for everyone. Historically recessions happened not because people had less consumable goods, most often it is because that people had produced too much consumable goods but without corresponding consumption (lacking of money)

Actually the demand for money is always the highest due to money's universal equivalence property. You might get bored by eating same bread or watching the same lawn in your backyard, but you never get bored by getting more money. That's the reason money usually hold its value very well even people know that it costs almost nothing to make. As long as other people accept, no questions

Then, since accumulating money itself is a demand, it is important to know what kind of money you will get. You would like to get deflative money instead of inflative money, a money with a production cost instead of a money without a production cost

Gold/silver is more valuable than paper money because even the payment function is totally removed, they can still be used to produce luxuries and tools, and they bear a production cost, which is the fundamental support for their price

[mirelo]

it's just a matter of definition, really.

At the end of our day, we trade our work. I mow the lawn for you, so you owe me a favor in return.

How we do this bookkeeping and keep this information reliable is a question of the available toolset.

Gold/Silver coins are just tools to store and transport the information of value, as are ledgers or tally sticks.

We now live in the information age, so tools like time banking or Bitcoin make sense.

All tools have certain advantages and disadvantages, which mostly revolve around the issue of trust.

Gold/Silver coins don't corrode and you don't have to trust a government, that's why some people like them, that's why they make good tools. But they're still tools. They only carry the information of value, they are not the original value itself (of me having mowed the lawn). They underlie external risk, as they can inflate/deflate in value (imagine massive population decrease for example).

There are many human desire, consumable things and services are just part of them, the demand for accumulating a large amount of saving so that people can retire early is also very real for everyone. Historically recessions happened not because people had less consumable goods, most often it is because that people had produced too much consumable goods but without corresponding consumption (lacking of money)

Actually the demand for money is always the highest due to money's universal equivalence property. You might get bored by eating same bread or watching the same lawn in your backyard, but you never get bored by getting more money. That's the reason money usually hold its value very well even people know that it costs almost nothing to make. As long as other people accept, no questions

Then, since accumulating money itself is a demand, it is important to know what kind of money you will get. You would like to get deflative money instead of inflative money, a money with a production cost instead of a money without a production cost

Gold/silver is more valuable than paper money because even the payment function is totally removed, they can still be used to produce luxuries and tools, and they bear a production cost, which is the fundamental support for their price

Once "the payment function is totally removed," then gold has no longer any monetary value. Otherwise, even with no commodity exchange value, it can still function as money: its monetary value essentially consists in its equivalence to everything it can buy - just like the monetary value of any other form of money.

[johnyj]

From money creator's view, money is not a debt but an asset, just like gold mined by the miners, and paper notes created by the FED. FED created money, money becomes their asset, and they lend this money to government, they receive government bonds in exchange

Regarding the FED's money, there is not an act of money creation followed by an act of loaning: those two acts are one and the same. What "backs" the newly created money is nothing other than the act of loaning it. This is how debt and money get confused with each other.

The root of this question: Does government own FED?

If they do, then money created by FED is backed by government's own bond, no questions

But this has been discussed many times, FED is a private organization and the ownership of the FED lies in a group of regional reserve banks, and none of them belong to the government. They have 3 mandate from the congress: Maximum employment, stable prices, and moderate long-term interest rates. As long as they can achieve this, government have no more control over their decision. They can claim the ownership of the whole country (by printing money) while achieve these 3 goals

http://theunjustmedia.com/Banking%20&%20Federal%20Reserve/The%20Federal%20Reserve%20is%20Privately%20owned.htm

[mirelo]

From money creator's view, money is not a debt but an asset, just like gold mined by the miners, and paper notes created by the FED. FED created money, money becomes their asset, and they lend this money to government, they receive government bonds in exchange

Regarding the FED's money, there is not an act of money creation followed by an act of loaning: those two acts are one and the same. What "backs" the newly created money is nothing other than the act of loaning it. This is how debt and money get confused with each other.

The root of this question: Does government own FED?

If they do, then money created by FED is backed by government's own bond, no questions

But this has been discussed many times, FED is a private organization and the ownership of the FED lies in a group of regional reserve banks, and none of them belong to the government. They have 3 mandate from the congress: Maximum employment, stable prices, and moderate long-term interest rates. As long as they can achieve this, government have no more control over their decision. They can claim the ownership of the whole country (by printing money) while achieve these 3 goals

http://theunjustmedia.com/Banking%20&%20Federal%20Reserve/The%20Federal%20Reserve%20is%20Privately%20owned.htm

The FED is a banking cartel regulated by the government, which is its only client, just like we can be clients of commercial banks. If the government owned the FED, then by making loans to the government the FED would be making loans to itself, which does not make any sense. Government bonds are just a form of debt, so dollars being backed by government bonds just means their being backed by debt. As I said before, dollars are utterly backed by the act of the FED loaning them to the government, represented by bonds.

(Please watch the following video before answering to this post: http://www.youtube.com/watch?v=04MPZgyhG5s.)

[johnyj]

The FED is a banking cartel regulated by the government, which is its only client, just like we can be clients of commercial banks. If the government owned the FED, then by making loans to the government the FED would be making loans to itself, which does not make any sense. Government bonds are just a form of debt, so dollars being backed by government bonds just means their being backed by debt. As I said before, dollars are utterly backed by the act of the FED loaning them to the government, represented by bonds.

(Please watch the following video before answering to this post: http://www.youtube.com/watch?v=04MPZgyhG5s.)

I have seen this video before, the fact that there are so many different versions about how FED works just proved that no one really understand how it works

The most simple way is to look at the ownership of the newly created money

If you don't have the ownership of some money, how can you loan those money to someone else? That would be crime. I can lend you all the money in the FED if I don't need to have the ownership of those money  

Let's do a step by step analysis: When government sell $1 billion asset (bond, since debt=asset in the future) to FED, FED must first have the ownership of that $1 billion money, then government get the ownership of those money from FED, in exchange they transfer the ownership of their bond to FED. Now the FED owns the bond, means they become the creditor of the government

If government issue money by themselves, they would issue $1 billion money backed by their $1 billion worth of assets (bond). But there is a HUGE difference here: They would have BOTH the ownership of the issued money and the ownership of their asset. They spend money to exchange for some products/services, and if someone come back to redeem the money, they give them asset

So, if FED belongs to government, then it does not matter who have the ownership of those bonds, government will own those bonds anyway. But if it is really so, how come they could have that huge amount of national debt owed to FED?

[Adrian-x]

Graeber is right. Debt is the only real money. All other goods are assets and valued in debt.

Now we just need a unit of measure by which to denominate the "debt" and a way to account for past and future debt that is impervious to manipulation.

I think Bitcoin will work well, those who don't have it are indebted to those who have it, problem solved.

And while we are at it let's take an honest look at "Debt" an asset a risk to the lender and a liability to the borrower.

[mirelo]

The FED is a banking cartel regulated by the government, which is its only client, just like we can be clients of commercial banks. If the government owned the FED, then by making loans to the government the FED would be making loans to itself, which does not make any sense. Government bonds are just a form of debt, so dollars being backed by government bonds just means their being backed by debt. As I said before, dollars are utterly backed by the act of the FED loaning them to the government, represented by bonds.

(Please watch the following video before answering to this post: http://www.youtube.com/watch?v=04MPZgyhG5s.)

I have seen this video before, the fact that there are so many different versions about how FED works just proved that no one really understand how it works

Just pay attention to whom tells which version.

The most simple way is to look at the ownership of the newly created money

The government owes it to the central bank, to which it hence belongs.

If you don't have the ownership of some money, how can you loan those money to someone else?

There is no money before the central bank loans it to the government: it is the act of loaning the money that creates it, hence making the central bank its owner.

That would be crime. I can lend you all the money in the FED if I don't need to have the ownership of those money  

It is the loan that creates the ownership: before that loan, there is no money, hence no ownership.

Let's do a step by step analysis: When government sell $1 billion asset (bond, since debt=asset in the future) to FED, FED must first have the ownership of that $1 billion money, then government get the ownership of those money from FED, in exchange they transfer the ownership of their bond to FED. Now the FED owns the bond, means they become the creditor of the government

The FED has no money: what it has is the power to loan money that did not yet exist before that loan.

If government issue money by themselves, they would issue $1 billion money backed by their $1 billion worth of assets (bond).

This makes no sense: the government could not loan money to itself.

But there is a HUGE difference here: They would have BOTH the ownership of the issued money and the ownership of their asset. They spend money to exchange for some products/services, and if someone come back to redeem the money, they give them asset

The difference here is that the money the government owed to itself would be already paid since the debtor and the creditor would be the same.

So, if FED belongs to government, then it does not matter who have the ownership of those bonds, government will own those bonds anyway. But if it is really so, how come they could have that huge amount of national debt owed to FED?

Again: if the government owned the FED the latter could not make loans to the former.

[mirelo]

Graeber is right. Debt is the only real money. All other goods are assets and valued in debt.

Now we just need a unit of measure by which to denominate the "debt" and a way to account for past and future debt that is impervious to manipulation.

I think Bitcoin will work well, those who don't have it are indebted to those who have it, problem solved.

And while we are at it let's take an honest look at "Debt" an asset a risk to the lender and a liability to the borrower.

Debt is the circumstance of owing monetary value to someone, which requires money to express this monetary value as different from that circumstance. Bitcoin is precisely the first form of money unmistakable by debt: with Bitcoin, debt is the circumstance of owing bitcoins to someone, and never those bitcoins themselves.

[solex]

A fundamental of economics is that only products can buy products (labor, goods, raw materials). A debt is simply a promise of future product delivery.

Money is a place-holder, it facilitates exchange of products by temporarily replacing one product in a transaction. It makes commerce far more efficient because barter relies upon two products in a transaction, whereas money allows for just one. Money needs to be a store of value for future use.

Currency is a structured form of money to make storage, accounting and exchange easier. Government debt can be declared to be fiat currency by government diktat. Bitcoin is a revolutionary currency as it comes with an inbuilt payments system, scarcity, and supports long-distance transactions.

Gold makes good money, as it can't be counterfeited, and might seem intrinsically valuable. However, a kilo of gold can be worth less than a litre of water. It all depends upon the price (desirability) of a product as how much money is needed in a transaction, so products can be arbitrarily expensive...

[mirelo]

A fundamental of economics is that only products can buy products (labor, goods, raw materials).

A fundamental of economics is that only money can buy anything. Additionally, money needs not be a product: there are historical records or people using huge, unmovable stones - not produced by anyone - as money.

A debt is simply a promise of future product delivery.

Money is a place-holder, it facilitates exchange of products by temporarily replacing one product in a transaction. It makes commerce far more efficient because barter relies upon two products in a transaction, whereas money allows for just one. Money needs to be a store of value for future use.

Debt is not "simply a promise of future product delivery."

Debt requires money: with non-monetary (direct) exchange, the concept of debt becomes impossible since there is no way of representing the exchange value of the product having its delivery delayed.

Currency is a structured form of money to make storage, accounting and exchange easier. Government debt can be declared to be fiat currency by government diktat. Bitcoin is a revolutionary currency as it comes with an inbuilt payments system, scarcity, and supports long-distance transactions.

Gold makes good money, as it can't be counterfeited, and might seem intrinsically valuable. However, a kilo of gold can be worth less than a litre of water. It all depends upon the price (desirability) of a product as how much money is needed in a transaction, so products can be arbitrarily expensive...

The value of money is essentially the value of the products it can buy rather than - despite possibly mistaken by¹ - its own value.

1. Bitcoin makes that confusion impossible.

[solex]

A fundamental of economics is that only products can buy products (labor, goods, raw materials).

A fundamental of economics is that only money can buy anything. Additionally, money needs not be a product: there are historical records or people using huge, unmovable stones - not produced by anyone - as money.

A debt is simply a promise of future product delivery.

Money is a place-holder, it facilitates exchange of products by temporarily replacing one product in a transaction. It makes commerce far more efficient because barter relies upon two products in a transaction, whereas money allows for just one. Money needs to be a store of value for future use.

Debt is not "simply a promise of future product delivery."

Debt requires money: with non-monetary (direct) exchange, the concept of debt becomes impossible since there is no way of representing the exchange value of the product having its delivery delayed.

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

Debt was originally one of labor, for example, where a tenant performed farm-work in exchange for accommodation and food. Only later did it become monetary. A 30-year mortgage is effectively monetizing 30-years of future labor.

Debt does not require money, but it can be monetized and represented by currency. Bitcoin is a currency which has no debt component. It is in no way debt backed.

[mirelo]

A fundamental of economics is that only products can buy products (labor, goods, raw materials).

A fundamental of economics is that only money can buy anything. Additionally, money needs not be a product: there are historical records or people using huge, unmovable stones - not produced by anyone - as money.

A debt is simply a promise of future product delivery.

Money is a place-holder, it facilitates exchange of products by temporarily replacing one product in a transaction. It makes commerce far more efficient because barter relies upon two products in a transaction, whereas money allows for just one. Money needs to be a store of value for future use.

Debt is not "simply a promise of future product delivery."

Debt requires money: with non-monetary (direct) exchange, the concept of debt becomes impossible since there is no way of representing the exchange value of the product having its delivery delayed.

You are putting the cart before the horse.

Money comes after products and their direct exchange, not before.

Money is a product substitute to make commerce easier.

1. Money needs not be a product of labor (more on that below).
2. What defines money is not that it substitutes for products, but rather how it does that: with direct exchange products already substitute for products.
3. Money does not merely make exchange easy: in some cases, it makes it possible (more on that below).

Those immovable stones enabled single product transactions by representing a product on one side of the exchange.

The circumstance of money being a product is irrelevant regarding its function as money: its monetary value comes from expressing the exchange value of the products it can buy, not from expressing its own exchange value.

With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

Money is not just a concept: it is an object. Money solves the following, objective problem (http://omniequivalence.com/money-as-multiequivalence/):

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x. Direct exchange cannot give those three owners their desired commodities, none of which belongs to whom (x to B) wants the commodity owned by whom (z by C) wants it (wants x).

Debt was originally one of labor, for example, where a tenant performed farm-work in exchange for accommodation and food. Only later did it become monetary. A 30-year mortgage is effectively monetizing 30-years of future labor.

Debt does not require money, but it can be monetized and represented by currency.

As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.

Bitcoin is a currency which has no debt component. It is in no way debt backed.

On that we agree.

[bitcoinBull]

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.

Debt does not require money, but it can be monetized and represented by currency. Bitcoin is a currency which has no debt component. It is in no way debt backed.

That is not really true. The price of bitcoin is backed by the trust in exchange debt. Here's how: I wire transfer MtGox $100 to buy a bitcoin. Now MtGox is in debt to me for $100. I use that $100 USD to buy 1 BTC (which means now someone else is trusting mtgox to hold $100 USD for them). Now I'm trusting mtgox to hold 1 BTC for me (and MtGox is in debt of 1 BTC to me). Now I can withdraw this 1 BTC, and mtgox is no longer in debt to me. But MtGox is still in debt for $100 to someone else, and MtGox will remain in debt as long they have customers.

Now, you could have bitcoins that are in no way backed by debt. But in order to do so, you have to go back to when bitcoins were nothing more than worthless digital blips in a piece of p2p software: blips without a price, blips without value. The only thing that gives bitcoins real-money value is the trust that people have in exchanges to pay back held debt.

[mirelo]

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.

Money originates from social interaction: it does not originate individually, within the head of a king, no matter how clever.

Debt does not require money, but it can be monetized and represented by currency. Bitcoin is a currency which has no debt component. It is in no way debt backed.

That is not really true. The price of bitcoin is backed by the trust in exchange debt. Here's how: I wire transfer MtGox $100 to buy a bitcoin. Now MtGox is in debt to me for $100. I use that $100 USD to buy 1 BTC (which means now someone else is trusting mtgox to hold $100 USD for them). Now I'm trusting mtgox to hold 1 BTC for me (and MtGox is in debt of 1 BTC to me). Now I can withdraw this 1 BTC, and mtgox is no longer in debt to me. But MtGox is still in debt for $100 to someone else, and MtGox will remain in debt as long they have customers.

Owing money makes that money the object of a debt, not itself that debt. Money becomes itself a debt when created by a loan.

Now, you could have bitcoins that are in no way backed by debt. But in order to do so, you have to go back to when bitcoins were nothing more than worthless digital blips in a piece of p2p software: blips without a price, blips without value. The only thing that gives bitcoins real-money value is the trust that people have in exchanges to pay back held debt.

What gives bitcoins monetary value is people willing to exchange something valuable for them, just like with any other form of money.

[bitcoinBull]

What gives bitcoins monetary value is people willing to exchange something valuable for them, just like with any other form of money.

But that's begging the question: what makes people willing to exchange something valuable for bitcoins? Answer: the trust that they can trade the bitcoins for debt on exchanges, and that the exchanges are capable of paying said debt.

[Zarathustra]

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.

Money originates from social interaction: it does not originate individually, within the head of a king, no matter how clever.

No, money originates from organized violence. Organized violence (state and church, militarism and patriarchal religion) indebted the people with a tax. This started the economy, the market and the money, which is a derivative of owed taxes. No state - no market - no collectivism and instead of it we find the self-sufficient communities. These are the historic facts. A barter economy beyond the state (organized violence) is Science Fiction. In the rainforest, where organized violence (state and church) is absent, you won't find a market/economy. You'll find self-sufficient communities beyond any business.

[johnyj]

The most simple way is to look at the ownership of the newly created money

The government owes it to the central bank, to which it hence belongs.

So government owes money to FED, and FED belongs to government, so the government owes money to himself. If the government owes large amount of the national debt to himself, who cares  

If you don't have the ownership of some money, how can you loan those money to someone else?

There is no money before the central bank loans it to the government: it is the act of loaning the money that creates it, hence making the central bank its owner.

Again, if you loan something that does not exist and do not belong to you to someone else, that is fraud

That would be crime. I can lend you all the money in the FED if I don't need to have the ownership of those money  

It is the loan that creates the ownership: before that loan, there is no money, hence no ownership.

This has nothing to do with the sequence: After the loan, there is money, and there is ownership, who get this ownership and what did they pay for it?

Let's do a step by step analysis: When government sell $1 billion asset (bond, since debt=asset in the future) to FED, FED must first have the ownership of that $1 billion money, then government get the ownership of those money from FED, in exchange they transfer the ownership of their bond to FED. Now the FED owns the bond, means they become the creditor of the government

The FED has no money: what it has is the power to loan money that did not yet exist before that loan.

Don't think in the way of loan, that just make it more difficult to see the simple truth. Loan is just a way to exchange the ownership, it does not CREATE the ownership, if some ownership were created out of nothing after a loan process, something must went wrong

To create ownership for something, either you create it by work(plant a flower/dig out the gold), or you rob it (conquer a country). Never heard about that you can get the ownership of something by loan it  

If government issue money by themselves, they would issue $1 billion money backed by their $1 billion worth of assets (bond).

This makes no sense: the government could not loan money to itself.

If you have one ounce of gold, you can issue a note that worth one ounce of gold, and that note get a transaction value of one ounce of gold (backed by your gold reserve). No loan involved here. Same, the government can issue notes that worth their corresponding asset without using any loan process. But unfortunately, they don't have this right today, both of the presidents who ever tried to issue government money have been assassinated
http://www.michaeljournal.org/lincolnkennedy.htm

But there is a HUGE difference here: They would have BOTH the ownership of the issued money and the ownership of their asset. They spend money to exchange for some products/services, and if someone come back to redeem the money, they give them asset

The difference here is that the money the government owed to itself would be already paid since the debtor and the creditor would be the same.

That's true, by this means, government will not have a debt, their net asset value is positive

[mirelo]

What gives bitcoins monetary value is people willing to exchange something valuable for them, just like with any other form of money.

But that's begging the question: what makes people willing to exchange something valuable for bitcoins? Answer: the trust that they can trade the bitcoins for debt on exchanges, and that the exchanges are capable of paying said debt.

What makes people willing to exchange something valuable for gold? It is the monetary properties of gold: its divisibility, homogeneity, durability, etc. The same happens with Bitcoin: society chooses its money according to its monetary utility.

[mirelo]

The most simple way is to look at the ownership of the newly created money

The government owes it to the central bank, to which it hence belongs.

So government owes money to FED, and FED belongs to government, so the government owes money to himself. If the government owes large amount of the national debt to himself, who cares  

It is usually the creditor that owns the debtor.

If you don't have the ownership of some money, how can you loan those money to someone else?

There is no money before the central bank loans it to the government: it is the act of loaning the money that creates it, hence making the central bank its owner.

Again, if you loan something that does not exist and do not belong to you to someone else, that is fraud

If it walks like a duck, looks like a duck, sounds like a duck...

That would be crime. I can lend you all the money in the FED if I don't need to have the ownership of those money  

It is the loan that creates the ownership: before that loan, there is no money, hence no ownership.

This has nothing to do with the sequence: After the loan, there is money, and there is ownership, who get this ownership and what did they pay for it?

As you already concluded yourself, this is not legitimate ownership.

Let's do a step by step analysis: When government sell $1 billion asset (bond, since debt=asset in the future) to FED, FED must first have the ownership of that $1 billion money, then government get the ownership of those money from FED, in exchange they transfer the ownership of their bond to FED. Now the FED owns the bond, means they become the creditor of the government

The FED has no money: what it has is the power to loan money that did not yet exist before that loan.

Don't think in the way of loan, that just make it more difficult to see the simple truth. Loan is just a way to exchange the ownership, it does not CREATE the ownership, if some ownership were created out of nothing after a loan process, something must went wrong

Central banks take advantage of the confusion between money and its representation, just like commercial banks do. The process is the same: creating money by loaning it.

To create ownership for something, either you create it by work(plant a flower/dig out the gold), or you rob it (conquer a country). Never heard about that you can get the ownership of something by loan it  

You never heard it from the FED or the government (understandably), but there are many other people already talking about it for quite some time.

If government issue money by themselves, they would issue $1 billion money backed by their $1 billion worth of assets (bond).

This makes no sense: the government could not loan money to itself.

If you have one ounce of gold, you can issue a note that worth one ounce of gold, and that note get a transaction value of one ounce of gold (backed by your gold reserve). No loan involved here. Same, the government can issue notes that worth their corresponding asset without using any loan process. But unfortunately, they don't have this right today, both of the presidents who ever tried to issue government money have been assassinated
http://www.michaeljournal.org/lincolnkennedy.htm

Go research how fractional-reserve banking originated: goldsmiths issuing certificates for gold they did not have. In 1971, Nixon severed the last requirement for gold convertibility there still was, leading us to where we are today.

But there is a HUGE difference here: They would have BOTH the ownership of the issued money and the ownership of their asset. They spend money to exchange for some products/services, and if someone come back to redeem the money, they give them asset

The difference here is that the money the government owed to itself would be already paid since the debtor and the creditor would be the same.

That's true, by this means, government will not have a debt, their net asset value is positive

I am trying to show you the government cannot own the FED since the latter loans money to the former.

[mirelo]

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.

Money originates from social interaction: it does not originate individually, within the head of a king, no matter how clever.

No, money originates from organized violence. Organized violence (state and church, militarism and patriarchal religion) indebted the people with a tax. This started the economy, the market and the money, which is a derivative of owed taxes. No state - no market - no collectivism and instead of it we find the self-sufficient communities. These are the historic facts. A barter economy beyond the state (organized violence) is Science Fiction. In the rainforest, where organized violence (state and church) is absent, you won't find a market/economy. You'll find self-sufficient communities beyond any business.

Money is much older than the state or the church. Just do a little research.

[bitcoinBull]

What gives bitcoins monetary value is people willing to exchange something valuable for them, just like with any other form of money.

But that's begging the question: what makes people willing to exchange something valuable for bitcoins? Answer: the trust that they can trade the bitcoins for debt on exchanges, and that the exchanges are capable of paying said debt.

What makes people willing to exchange something valuable for gold? It is the monetary properties of gold: its divisibility, homogeneity, durability, etc. The same happens with Bitcoin: society chooses its money according to its monetary utility.

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

[solex]

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

First-mover status. 99.9% of the merchants which accept cryptocurrency will take bitcoins and not alt-coins. The public do not want to see dozens of alt-coins which are a confusing duplication. So, basically, the alt-coins are not recognized as currency outside the cryptographic community.

[mirelo]

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

First-mover status. 99.9% of the merchants which accept cryptocurrency will take bitcoins and not alt-coins. The public do not want to see dozens of alt-coins which are a confusing duplication. So, basically, the alt-coins are not recognized as currency outside the cryptographic community.

Some alt-coins do offer possible improvements over Bitcoin. For instance, PPCoin offers proof-of-stake, which in the long run tends to offer lower energy consumption, lower fees and increased network security. Other examples are Primecoin (proof-of-work with prime numbers) and Anoncoin (first Zerocoin implementation). These experiments may be valuable for Bitcoin by testing possible improvements to it without requiring their implementation on Bitcoin itself. Some day, Bitcoin may implement some of those improvements, or even its monetary value could be transferred to a new Bitcoin implementation via proof-of-burn (in itself another possible improvement). However, given the already rich ecosystem built around Bitcoin and its momentum, in addition to the already established Bitcoin "brand" (thanks to all media coverage so far), it is hard to see any alt-coin competing with it, as you put it, "outside the cryptographic community."

[bitcoinBull]

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

First-mover status. 99.9% of the merchants which accept cryptocurrency will take bitcoins and not alt-coins. The public do not want to see dozens of alt-coins which are a confusing duplication. So, basically, the alt-coins are not recognized as currency outside the cryptographic community.

Precisely. What makes bitcoin so much more valuable is the fact that merchants trust them enough to accept them, and more importantly that there is already a big market for them on (trusted) exchanges. My point is that the value of bitcoin comes mostly from the trust that people have in the market. Not so much its intrinsic properties (or the various alt-coins would be of equal value).

[Zarathustra]

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.

Money originates from social interaction: it does not originate individually, within the head of a king, no matter how clever.

No, money originates from organized violence. Organized violence (state and church, militarism and patriarchal religion) indebted the people with a tax. This started the economy, the market and the money, which is a derivative of owed taxes. No state - no market - no collectivism and instead of it we find the self-sufficient communities. These are the historic facts. A barter economy beyond the state (organized violence) is Science Fiction. In the rainforest, where organized violence (state and church) is absent, you won't find a market/economy. You'll find self-sufficient communities beyond any business.

Money is much older than the state or the church. Just do a little research.

No, it is not. Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

[mirelo]

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

First-mover status. 99.9% of the merchants which accept cryptocurrency will take bitcoins and not alt-coins. The public do not want to see dozens of alt-coins which are a confusing duplication. So, basically, the alt-coins are not recognized as currency outside the cryptographic community.

Precisely. What makes bitcoin so much more valuable is the fact that merchants trust them enough to accept them, and more importantly that there is already a big market for them on (trusted) exchanges. My point is that the value of bitcoin comes mostly from the trust that people have in the market. Not so much its intrinsic properties (or the various alt-coins would be of equal value).

Let me give you an example to evidence your mistake: do people board a plane because of its ability to fly or because of their trust on that ability?

Although people use a form of money because they trust it, they can only trust it because of its monetary properties. Trust needs justification, which ultimately comes from the properties of its object. Because people trust the monetary properties of an object, they collectively decide to use it as money, which makes it so. However, this would not be possible (or would result in a plane crash) if the same object did not have those properties in the first place.

Unfortunately, we are about to see an instance of such a misplaced monetary trust.

[murraypaul]

As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.

You seem to suggest that a barter economy could not exist without money, which is wrong.
I can agree to mow your lawn for a week if you fix my car.
We need to agree that the value obtained by each of us is relatively even, but we don't need to be able to express that value in monetary terms.

[mirelo]

Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

Money originates from the problems presented by direct exchange, as I already showed here: https://bitcointalk.org/index.php?topic=298681.msg3203857#msg3203857. Although a private group can partially control it, money originates from the market.

[mirelo]

As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.

You seem to suggest that a barter economy could not exist without money, which is wrong.
I can agree to mow your lawn for a week if you fix my car.
We need to agree that the value obtained by each of us is relatively even, but we don't need to be able to express that value in monetary terms.

By definition, barter is direct, non-monetary exchange.

[murraypaul]

As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.

You seem to suggest that a barter economy could not exist without money, which is wrong.
I can agree to mow your lawn for a week if you fix my car.
We need to agree that the value obtained by each of us is relatively even, but we don't need to be able to express that value in monetary terms.

By definition, barter is direct, non-monetary exchange.

You said:
a) if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor
b) This independently expressible exchange value requires money

You have therefore said that accommodation and food cannot be owned in exchange for labour.
But that is clearly possible in a barter economy.

[mirelo]

As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.

You seem to suggest that a barter economy could not exist without money, which is wrong.
I can agree to mow your lawn for a week if you fix my car.
We need to agree that the value obtained by each of us is relatively even, but we don't need to be able to express that value in monetary terms.

By definition, barter is direct, non-monetary exchange.

You said:
a) if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor
b) This independently expressible exchange value requires money

You have therefore said that accommodation and food cannot be owned in exchange for labour.
But that is clearly possible in a barter economy.

I said they could not be owed in exchange for labor without having an independently expressible exchange value. The concept of debt (owing something to someone) refers to monetary value, which requires its independent expression. However, if you take the word "owing" as just meaning I must give you the precise object for which you already gave me another object in exchange (rather than any other object having the same exchange value - or money), then you can apply that word to barter.

[murraypaul]

I said they could not be owed in exchange for labor without having an independently expressible exchange value. The concept of debt (owing something to someone) refers to monetary value, which requires its independent expression. However, if you take the word "owing" as just meaning I must give you the precise object for which you already gave me another object in exchange (rather than any other object having the same exchange value - or money), then you can apply that word to barter.

I disagree.
People can owe a debt of labour/service, and have done so throughout history.

[mirelo]

I said they could not be owed in exchange for labor without having an independently expressible exchange value. The concept of debt (owing something to someone) refers to monetary value, which requires its independent expression. However, if you take the word "owing" as just meaning I must give you the precise object for which you already gave me another object in exchange (rather than any other object having the same exchange value - or money), then you can apply that word to barter.

I disagree.
People can owe a debt of labour/service, and have done so throughout history.

Owing labor is just owing the exchange value of the expected product of that labor. In today's labor market, this gets obscured by the standard labor-time interval. However, that interval merely standardizes the time required in producing a monetary value: once you consistently don't deliver that value in time, you get fired.

[murraypaul]

Owing labor is just owing the exchange value of the expected product of that labor. In today's labor market, this gets obscured by the standard labor-time interval. However, that interval merely standardizes the time required in producing a monetary value: once you consistently don't deliver in time, you get fired.

In feudal times, lords had an obligation to provide their own military service, and that of a set number of their serfs, when called upon by the King.
It wasn't until much later that they had the option of providing money instead, to buy themselves out of that service.
The debt of labour came first, the monetary equivalent much later.

Indeed you could say that the same is true now of any country with compulsory national service. You owe a debt of labour, which does not have a monetary equivalent buy-out option.

[mirelo]

Owing labor is just owing the exchange value of the expected product of that labor. In today's labor market, this gets obscured by the standard labor-time interval. However, that interval merely standardizes the time required in producing a monetary value: once you consistently don't deliver in time, you get fired.

In feudal times, lords had an obligation to provide their own military service, and that of a set number of their serfs, when called upon by the King.
It wasn't until much later that they had the option of providing money instead, to buy themselves out of that service.
The debt of labour came first, the monetary equivalent much later.

You are mistaking the concrete form in which the King accepted its payment with the absence of its monetary expression (even if we both know the monetary value of your debt with me, I can choose not to accept its payment with money). If that monetary expression were absent, then this "owing" was not a debt (in the sense of owing the monetary value of something rather than just its concrete objectivity).

[murraypaul]

You are just defining yourself as being right.

[mirelo]

You are just defining yourself as being right.

You must be more specific.

[Zarathustra]

Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

Money originates from the problems presented by direct exchange, as I already showed here: https://bitcointalk.org/index.php?topic=298681.msg3203857#msg3203857. Although a private group can partially control it, money originates from the market.

You are 'showing' science fiction. Visit the self-sufficient, stateless communities in the rainforest and ask about money.
No tax - no money (contract debt), which is a derivative of the tax (enforced debt), which is a derivative of the weapon.

[mirelo]

Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

Money originates from the problems presented by direct exchange, as I already showed here: https://bitcointalk.org/index.php?topic=298681.msg3203857#msg3203857. Although a private group can partially control it, money originates from the market.

You are 'showing' science fiction. Visit the self-sufficient, stateless communities in the rainforest and ask about money.
No tax - no money (contract debt), which is a derivative of the tax (enforced debt), which is a derivative of the weapon.

The communities to which you refer hardly have any need for money. As I showed before (please read this: http://omniequivalence.com/money-as-multiequivalence/), money arises from a concrete need, namely to make possible for different owners of different commodities to exchange them no matter in which configuration (one situation in which money has historically arisen was in exchanges between different communities).

Although I understand your passionate revolt against present oppression, you must be careful to avoid generalizing your particular predicament to all historical times. Trying to solve the problems of society by eliminating money is like trying to solve your problems by shooting your own head (no doubt it would have some effectiveness, but I suspect this is not exactly what we want).

[johnyj]

People had the need to exchange different products, but to reach that goal, they must find something that everyone want and accept as payment medium, so grain has been used as money for some time. But grain can not hold value for a long time, finally it is fixed on gold. Fiat money's value mostly come from the government's power, but ironically the government is not the beneficiary of fiat money

[mirelo]

People had the need to exchange different products, but to reach that goal, they must find something that everyone want and accept as payment medium, so grain has been used as money for some time. But grain can not hold value for a long time, finally it is fixed on gold. Fiat money's value mostly come from the government's power, but ironically the government is not the beneficiary of fiat money

No, it is the beneficiary of inflation (the expression "fiat money" is not a good one given its myriad of different meanings).

[Zarathustra]

Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

Money originates from the problems presented by direct exchange, as I already showed here: https://bitcointalk.org/index.php?topic=298681.msg3203857#msg3203857. Although a private group can partially control it, money originates from the market.

You are 'showing' science fiction. Visit the self-sufficient, stateless communities in the rainforest and ask about money.
No tax - no money (contract debt), which is a derivative of the tax (enforced debt), which is a derivative of the weapon.

The communities to which you refer hardly have any need for money. As I showed before (please read this: http://omniequivalence.com/money-as-multiequivalence/), money arises from a concrete need, namely to make possible for different owners of different commodities to exchange them no matter in which configuration (one situation in which money has historically arisen was in exchanges between different communities).

Yes, of course do the stateless communities not have any need for money. This need arises as soon as the communities are being confiscated by militarists and priests (aka the state mafia) and enforced to pay tax (protection money).

Patriarchy = state mafia, citizens (protection money paying slaves), business, markets, organized violence.
Anarchy = self-sufficiency of humans

[ronimacarroni]

Okay zarathustra, I'm going to play along.
Lets say there is no military or police to protect people's property, no foreign threat and everyone has a cow, a bull, a pair of chicken and seeds to start off their self sufficient lives.
What happens next.

[mirelo]

Organized violence (complicity of priests and militant chieftains - aka patriarchy and state) was established 10'000 years ago. That startet collectivism, market, money etc. and ended the anarchy, the self-sufficiency of mankind.

Money originates from the problems presented by direct exchange, as I already showed here: https://bitcointalk.org/index.php?topic=298681.msg3203857#msg3203857. Although a private group can partially control it, money originates from the market.

You are 'showing' science fiction. Visit the self-sufficient, stateless communities in the rainforest and ask about money.
No tax - no money (contract debt), which is a derivative of the tax (enforced debt), which is a derivative of the weapon.

The communities to which you refer hardly have any need for money. As I showed before (please read this: http://omniequivalence.com/money-as-multiequivalence/), money arises from a concrete need, namely to make possible for different owners of different commodities to exchange them no matter in which configuration (one situation in which money has historically arisen was in exchanges between different communities).

Yes, of course do the stateless communities not have any need for money. This need arises as soon as the communities are being confiscated by militarists and priests (aka the state mafia) and enforced to pay tax (protection money).

Patriarchy = state mafia, citizens (protection money paying slaves), business, markets, organized violence.
Anarchy = self-sufficiency of humans

Please consider the following problem.

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x.

How would you make that exchange possible?

[Adrian-x]

People had the need to exchange different products, but to reach that goal, they must find something that everyone want and accept as payment medium, so grain has been used as money for some time. But grain can not hold value for a long time, finally it is fixed on gold. Fiat money's value mostly come from the government's power, but ironically the government is not the beneficiary of fiat money

To this point Adam Smith illustrates how wheat  corn is invested in labour to mine metals, over time the least corrosive being most valuable. This value then reflects stored labour and provides utility that increases productivity. These metals leverage ones ability to be both more productive and destructive. Plunder and stealing then create a chain reaction for a Mafia state to protect plunder and grow,  

While mirelo insight has been thorough and concise there is anthropological evidence to suggest that money doesn't logically evolve from barter. I think it may be a little premature to rule out that money is a meme that evolved as trust broke down and as Mafia state developed.

The one thing Bitcoin does is it removes the fiscal ability to steel it through violent force and having lots of it doesn't allow you to forge weapons, you need to engage in cooperative and mutually beneficial interaction to leverage the benefits. Not to mention participation is voluntary.

It is the first step in curing our collective insanity.  

[Adrian-x]

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x.

How would you make that exchange possible?
[/quote]

It isn't possible once a community grows parts a size where a social network of trust no longer functions.

This idea doesn't conflict with the regression theory of money, it just adds some specialized anthropological insight into when and how it started.

There was a paper also written by someone at the world bank (or the FED) who defined the need for money purely as a trust phenomenon, helped me understand the claim money doesn't evolve from barter. 

[pinnpe]

The thing with an debt based currency is you always loose, when people eventually get tired of loosing.....

There is a modern currency with real value, it's called "CrowdFunding" one can start her/his company and give supporters
premium products @ no extra cost. Crowdfunding is valuable because you create communities/companies/commodities
"Triple C, for the Rick Ross readers among us" anywho. This even goes beyond the borders of trust, because there is
LOVE, Love in the community (people can relate to eachother), Love in/for the company (because their customers/company
is there everything), Love for the commodity (If you create an extremely durable product (good example Dyson) even if it
eventually breaksdown, they will buy a new one of the exact same brand, because the product was so good.
Planned obsolescence is only an invitation to NEVER use your product again. In the past the use to make products that
could last FOREVER and now those products are returning.

For me personally Bitcoin is valuable because:
- Unlimited amounts of national/international transfers @ a low costs
- Inflation proof
- Solid crypto
- Decentralized/ on my computer/ I can back it up
(or trust in the ability to sell bitcoin at a certain price) Bitcoins can function without fiat currency, like community currencies
did for centuries, it's only when you pay tax that they play a role if a community choose to.
- YOU CAN BUY DRUGS WITHIT AND NOT GIVE A FUCK ABOUT THE GOVERNMENT BS ABOUT FIGHTING A DRUGWAR.

Some people jerk off to this everyday "Let 1 Bitcoins be worth 1 million dollar", I don't really care what the fiat price is, as
long as I can transfer it from A to B, without any BS I'm ok with it. Infact what would ABSOLUTELY make it more valuable
is if it is less volatile. Less volatility makes it like fiat currencies, which ordinary people and companies trust.

[Zarathustra]

Okay zarathustra, I'm going to play along.
Lets say there is no military or police to protect people's property, no foreign threat and everyone has a cow, a bull, a pair of chicken and seeds to start off their self sufficient lives.
What happens next.

As soon as some people started to enslave animals and to treat them as a property, they startet to enslave humans and treat them as a property as well. It is the same, and therefore the same problem: Submissive, violent and slavish moral. As long as a majority of the citizens and consumers accept this kind of 'human' being, as long they will have organised violence against themselves and against others.

[Zarathustra]

Please consider the following problem.

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x.

How would you make that exchange possible?

In a stateless community, you won't find 3 different owners of commodities.

[mirelo]

Please consider the following problem.

Let us imagine three owners A, B, and C of commodities x, y, and z, respectively, of whom A wants y, B wants z, and C wants x.

How would you make that exchange possible?

In a stateless community, you won't find 3 different owners of commodities.

Sorry, but in exactly which way the social division of labor and its corresponding notion of private property would depend on the state?

[mirelo]

Okay zarathustra, I'm going to play along.
Lets say there is no military or police to protect people's property, no foreign threat and everyone has a cow, a bull, a pair of chicken and seeds to start off their self sufficient lives.
What happens next.

As soon as some people started to enslave animals and to treat them as a property, they startet to enslave humans and treat them as a property as well. It is the same, and therefore the same problem: Submissive, violent and slavish moral. As long as a majority of the citizens and consumers accept this kind of 'human' being, as long they will have organised violence against themselves and against others.

You made no single mention to money (I guess this is not your subject after all).

[mirelo]

There was a paper also written by someone at the world bank (or the FED) who defined the need for money purely as a trust phenomenon, helped me understand the claim money doesn't evolve from barter. 

Money requires trust, not conversely. While exchange cannot evolve without money.

[johnyj]

People had the need to exchange different products, but to reach that goal, they must find something that everyone want and accept as payment medium, so grain has been used as money for some time. But grain can not hold value for a long time, finally it is fixed on gold. Fiat money's value mostly come from the government's power, but ironically the government is not the beneficiary of fiat money

No, it is the beneficiary of inflation (the expression "fiat money" is not a good one given its myriad of different meanings).

The government do not benefit since it just accumulated larger and larger debt, owed to the central bank. Back to the simple question: Who owns the FED? Who get the ownership of newly created money? (If the government own the FED, they won't have that debt. If FED do not have the ownership of the money, they can't use it to purchase anything)

People always scared about hyperinflation (which causes 10% loss of their work), but they don't care that someone taking the ownership of all the money(which means they lose 100% of their work), this is the most absurd thing I can think of

[mirelo]

People had the need to exchange different products, but to reach that goal, they must find something that everyone want and accept as payment medium, so grain has been used as money for some time. But grain can not hold value for a long time, finally it is fixed on gold. Fiat money's value mostly come from the government's power, but ironically the government is not the beneficiary of fiat money

No, it is the beneficiary of inflation (the expression "fiat money" is not a good one given its myriad of different meanings).

The government do not benefit since it just accumulated larger and larger debt, owed to the central bank.

That debt is money, so more debt means less valuable money. The government benefits because it spends the money before it can affect the social perception of the resulting, expanded money supply. This is how inflation transfers monetary value from the already existing money to the newly created one, hence from you to the FED-government partnership.

Back to the simple question: Who owns the FED?

Suppose the airway companies form a cartel, which the government enforce by law. Then, who owns that cartel?

Who get the ownership of newly created money? (If the government own the FED, they won't have that debt. If FED do not have the ownership of the money, they can't use it to purchase anything)

People always scared about hyperinflation (which causes 10% loss of their work), but they don't care that someone taking the ownership of all the money(which means they lose 100% of their work), this is the most absurd thing I can think of

The FED creates money by loaning it to the government. A citizen of the USA holding that money then holds a debt that citizen's government has with the FED, hence partially a debt that same citizen has with the FED (at the same time, the expansion of such a debt makes money less and less valuable, so citizens are less and less able to pay their growing debt with the FED).

[johnyj]

Back to the simple question: Who owns the FED?

Suppose the airway companies form a cartel, which the government enforce by law. Then, who owns that cartel?

I can give you a hint: In china, the government (to be more specifically, the communist party) OWNS the central bank, so most of the large building in china are government buildings, like congressional house, government office building, high speed train station etc... while in western most of the large buildings are banks' office

The FED creates money by loaning it to the government.

If this definition is coming from the FED, then it is no use, since fool would be telling you the truth if they are printing money for themselves

[mirelo]

Back to the simple question: Who owns the FED?

Suppose the airway companies form a cartel, which the government enforce by law. Then, who owns that cartel?

I can give you a hint: In china, the government (to be more specifically, the communist party) OWNS the central bank, so most of the large building in china are government buildings, like congressional house, government office building, high speed train station etc... while in western most of the large building are banks' office

As I told you before: if an institution owns another institution, then the latter cannot loan money to the former. The Chinese central bank is a cartel - just like the FED - owned by the members of that cartel (in the case of the FED, banks control its shares, despite not being able to sell them in the market - which is a mechanism to enforce the cartel).

The FED creates money by loaning it to the government.

If this definition is coming from the FED, then it is no use, since fool would be telling you the truth if they are printing money for themselves

They are not just "printing" (digital) money: they are loaning it (to the government) into existence: the government bonds given in exchange for that money represent this debt.

[johnyj]

Back to the simple question: Who owns the FED?

Suppose the airway companies form a cartel, which the government enforce by law. Then, who owns that cartel?

I can give you a hint: In china, the government (to be more specifically, the communist party) OWNS the central bank, so most of the large building in china are government buildings, like congressional house, government office building, high speed train station etc... while in western most of the large building are banks' office

As I told you before: if an institution owns another institution, then the latter cannot loan money to the former.

Good, so you agree that government and FED have totally different ownership

The FED creates money by loaning it to the government.

If this definition is coming from the FED, then it is no use, since fool would be telling you the truth if they are printing money for themselves

They are not just "printing" (digital) money: they are loaning it (to the government) into existence: the government bonds given in exchange for that money represent this debt.

I recommend you forget about the word "loan" for a while, because it will make easy things complicated. The government bonds are like any other product, they can be sold to any entities: Japanese/Chinese government combined together owns more US government bonds than FED. However, any of the other person buy bonds using hard-earned cash while FED buy bonds using printed money, there is no loan process involved at all

Or, if you really like to use the word "loan" to complex the matter, then it will be like this: The average people loan money to US government in exchange for their bonds. But still, they must first work to earn those money and then loan them to US government, while FED do not need to work to earn those money, they just create them out of nothing

[mirelo]

Good, so you agree that government and FED have totally different ownership

What I am saying from the beginning (unlike you above, on the Central Bank of China) is that no central bank could belong to the same government to which it loans money. Additionally, as I also said, the FED and the US Government have a partnership, which would likewise not be possible if either owned the other.

The FED creates money by loaning it to the government.

If this definition is coming from the FED, then it is no use, since fool would be telling you the truth if they are printing money for themselves

They are not just "printing" (digital) money: they are loaning it (to the government) into existence: the government bonds given in exchange for that money represent this debt.

I recommend you forget about the word "loan" for a while, because it will make easy things complicated.

Government bonds represent a debt the government has with the bond holder: we cannot forget about that without forgetting about the bond itself (nobody buys a bond for its aesthetic beauty, but rather because it entitles its holder to become a government creditor, then to earn interest on government debt).

Or, if you really like to use the word "loan" to complex the matter, then it will be like this: The average people loan money to US government in exchange for their bonds. But still, they must first work to earn those money and then loan them to US government, while FED do not need to work to earn those money, they just create them out of nothing

Most money people use to buy bonds is already a loan from the central bank to the government. This is precisely because the FED did not have that money before loaning it to the USA, so any additional monetary value resulting from its creation can only originate from that loan itself.

[johnyj]

Most money people use to buy bonds is already a loan from the central bank to the government. This is precisely because the FED did not have that money before loaning it to the USA, so any additional monetary value resulting from its creation can only originate from that loan itself.

It does not matter what that money originally come from, be it a loan, or robbed from the banks, or lost by someone, or counterfeited, etc... The only important is how did you acquire that money: As long as you get it through work or trading, then from your point of view, it has value, since you paid valuable things in exchange for it. But from central bank's point of view, those money should have no value since they paid nothing valuable in exchange for it, they just declare the ownership of those printed money and start to loan them out to government. This was not the case under a gold standard, where they also have to work/operate business to exchange gold as reserve, then print money based on that reserve

[mirelo]

Most money people use to buy bonds is already a loan from the central bank to the government. This is precisely because the FED did not have that money before loaning it to the USA, so any additional monetary value resulting from its creation can only originate from that loan itself.

It does not matter what that money originally come from, be it a loan, or robbed from the banks, or lost by someone, or counterfeited, etc... The only important is how did you acquire that money: As long as you get it through work or trading, then from your point of view, it has value, since you paid valuable things in exchange for it.

Money that originates from a loan is worth the corresponding debt, regardless of what we then sell for it or buy with it. Money does not get its value just from our exchanging something for it, but rather must be valuable before we can buy anything with it or sell anything for it (otherwise nobody would want it in exchange for something valuable to begin with). The value of most money we use today comes from an either public or private liability.

But from central bank's point of view, those money should have no value since they paid nothing valuable in exchange for it, they just declare the ownership of those printed money and start to loan them out to government. This was not the case under a gold standard, where they also have to work/operate business to exchange gold as reserve, then print money based on that reserve

Instead of not having any monetary value, the FED's money should not add any such value to the economy because it does not represent additional value in wealth - not because it has not been exchanged for something valuable (as I just told you, money does not get its value just from our exchanging it). Unfortunately, the FED's money does add exchange value to the economy: this exchange value comes from the same act that created its monetary representation - a loan.

[johnyj]

Money does not get its value just from our exchanging something for it, but rather must be valuable before we can buy anything with it or sell anything for it (otherwise nobody would want it in exchange for something valuable to begin with)

Exactly, if the money printed by FED does not have a value before FED buy anything with it, they could not get its value from their exchanging some government bond for it

[mirelo]

Money does not get its value just from our exchanging something for it, but rather must be valuable before we can buy anything with it or sell anything for it (otherwise nobody would want it in exchange for something valuable to begin with)

Exactly, if the money printed by FED does not have a value before FED buy anything with it, they could not get its value from their exchanging some government bond for it

The FED's money does not exist before buying those bonds: the acts of loaning and creating this money are one and the same, which is why the resulting monetary value is nothing other than that loan itself.

(You keep treating the FED's money as if it were just money while it is rather money mistaken by debt.)

[solex]

Each time the Fed prints a dollar it is producing a paper claim on a dollar worth of future taxes to be paid to the US Treasury by the US taxpayers. The Treasury has sub-contracted the monetizing of its tax income stream to the Fed. The "loaning" in this situation arises because the tax income does not yet exist, so is a Treasury debt to the dollar holder (since 1971 repayable only in printed dollars  )

[mirelo]

Each time the Fed prints a dollar it is producing a paper claim on a dollar worth of future taxes to be paid to the US Treasury by the US taxpayers. The Treasury has sub-contracted the monetizing of its tax income stream to the Fed. The "loaning" in this situation arises because the tax income does not yet exist, so is a Treasury debt to the dollar holder (since 1971 repayable only in printed dollars  )

You forgot to mention the government must repay that dollar bill (to a bond holder) with interest, so the future "tax income stream" must exceed the original dollar bill.

Additionally, the FED does not monetize the government's (already monetary) tax income stream: the FED monetizes the government's debt. Before the FED, although the government could sell bonds in the market and create money, money creation could not be a loan to the government, which hence could not monetize its own debt. As thus, debt monetization (in its public form) was not "subcontracted" to, but rather made possible by, the FED.

[johnyj]

The FED's money does not exist before buying those bonds: the acts of loaning and creating this money are one and the same, which is why the resulting monetary value is nothing other than that loan itself.

(You keep treating the FED's money as if it were just money while it is rather money mistaken by debt.)

Now I understand where is your way of thinking coming from, it is this "loaning and creating money at the same time". Maybe you also think that without that debt, the money can not be created?

Debt and money are totally different things, they do not depend on each other. You dig out some gold, that gold becomes money, no debt involved

Same, you destroyed something valuable, you have a debt to the owner, but you don't necessary need to pay him money, you can work for him to clear your debt. Debt simply means value to be paid in future, it is not necessary to have relation with money

Back to the topic, it does not matter if loaning and creating money happened at the same time or one after another, the result is the same. Have a look at the situation before and after the money creation:

Before:
Government have government bonds. FED has nothing.

(The issuering of government bond is the responsibility of treasury. It has nothing to do with FED. In fact the previous picture indicated that FED only holds 10% of total government bond)

After:
Government have money. FED has bond

So, before and after the money creation, the Government's net worth do not change, they just changed from holding the bond to holding equal value of money. But FED's net worth changed from 0 to the value of those bonds

And at a later time, FED could sell the bonds to get money back (tightening), but then the money they get back will become their asset

So, during this strange money creation process, FED get a boost in net worth without doing anything

[Zarathustra]

Okay zarathustra, I'm going to play along.
Lets say there is no military or police to protect people's property, no foreign threat and everyone has a cow, a bull, a pair of chicken and seeds to start off their self sufficient lives.
What happens next.

As soon as some people started to enslave animals and to treat them as a property, they startet to enslave humans and treat them as a property as well. It is the same, and therefore the same problem: Submissive, violent and slavish moral. As long as a majority of the citizens and consumers accept this kind of 'human' being, as long they will have organised violence against themselves and against others.

You made no single mention to money (I guess this is not your subject after all).

As I said already: Money is debt and has never ever been something different. The first debt is the tax and all other money (debt) arises as a derivative of this first debt, the tax.
Never ever any money (debt) came into existence in a free territory beyond the state. Nobody needs money there, because they are not taxed. They are self-sufficient.

[herzmeister]

you could argue though that self-sufficiency doesn't scale.

Or that top-down structures and hierarchies in human history had an evolutionary advantage after all.

People do like exotic goods after all which the kings and rulers indirectly provided when they issued currency which enabled trade along the (ancient) Silk Road.

So, not every invention by kings and rulers was bad. Some satisfied real demand. Money seems to belong into this category. Money is a tool to organize division of labor on a grand scale. Recognizing that fact, Bitcoin may be the first currency not issued by an authority, and the first without force behind it (to the gold bugs: no, gold was never free, was always mined on territory of rulers and thus initially belonged to them).

[mirelo]

The FED's money does not exist before buying those bonds: the acts of loaning and creating this money are one and the same, which is why the resulting monetary value is nothing other than that loan itself.

(You keep treating the FED's money as if it were just money while it is rather money mistaken by debt.)

Now I understand where is your way of thinking coming from, it is this "loaning and creating money at the same time". Maybe you also think that without that debt, the money can not be created?

Maybe you think the creation of money by the FED is the only form of money creation?

Debt and money are totally different things, they do not depend on each other. You dig out some gold, that gold becomes money, no debt involved

My point is that although debt and money are fundamentally different, they are the same in the fractional-reserve and central banking monetary system (please read this thread from the beginning).

Same, you destroyed something valuable, you have a debt to the owner, but you don't necessary need to pay him money, you can work for him to clear your debt. Debt simply means value to be paid in future, it is not necessary to have relation with money

The term "debt" means a monetary debt when the debtor owes an exchange value, or does not, when the debtor owes a merely concrete object lacking an independent expression of its exchange value. In your example, after destroying someone else's property, if I owe the exchange value of what I destroyed, then this is a monetary debt. Otherwise, if I owe the merely concrete objectivity of something identical to what I destroyed, then this is not a monetary debt. In the context of economics, "debt" usually means a monetary debt.

Back to the topic, it does not matter if loaning and creating money happened at the same time or one after another, the result is the same. Have a look at the situation before and after the money creation:

Before:
Government have government bonds. FED has nothing.

(The issuering of government bond is the responsibility of treasury. It has nothing to do with FED. In fact the previous picture indicated that FED only holds 10% of total government bond)

After:
Government have money. FED has bond

So, before and after the money creation, the Government's net worth do not change, they just changed from holding the bond to holding equal value of money. But FED's net worth changed from 0 to the value of those bonds

Bonds are an instrument of debt: if the government already had something valuable, then it would have no need of going into debt.

And at a later time, FED could sell the bonds to get money back (tightening), but then the money they get back will become their asset

The money that returns to the FED ceases to exist, just like a loan repaid to a commercial bank.

So, during this strange money creation process, FED get a boost in net worth without doing anything

Both the FED and the government appropriate value in exchange for nothing valuable.

[mirelo]

Okay zarathustra, I'm going to play along.
Lets say there is no military or police to protect people's property, no foreign threat and everyone has a cow, a bull, a pair of chicken and seeds to start off their self sufficient lives.
What happens next.

As soon as some people started to enslave animals and to treat them as a property, they startet to enslave humans and treat them as a property as well. It is the same, and therefore the same problem: Submissive, violent and slavish moral. As long as a majority of the citizens and consumers accept this kind of 'human' being, as long they will have organised violence against themselves and against others.

You made no single mention to money (I guess this is not your subject after all).

As I said already: Money is debt and has never ever been something different. The first debt is the tax and all other money (debt) arises as a derivative of this first debt, the tax.
Never ever any money (debt) came into existence in a free territory beyond the state. Nobody needs money there, because they are not taxed. They are self-sufficient.

Once labor gets divided among people, they are no longer individually self-sufficient. Then, as each one owns that one's product, there is the need of exchanging the social product among them. That's where money comes from: it makes that exchange always possible. The alternative is to have the state controlling social production and distributing social product, which is precisely what you don't want.

[herzmeister]

The alternative is to have the state

False dichotomy.

Watch this docu: Living Utopia (The Anarchists & The Spanish Revolution)

Or, for a more modern example of syndicalism, this one: The Mondragon Experiment - Corporate Cooperativism (1980) FULL

I've said it many times, the issue is not about trading ("capitalism") vs sharing ("socialism"). It is about scale. People need to feel in control of their own affairs again, and that works best on a local level (which can also be virtual in the age of the internet).

[murraypaul]

Debt and money are totally different things, they do not depend on each other. You dig out some gold, that gold becomes money, no debt involved

Gold doesn't become money, it stays as gold.
Just as silver stays as silver, pearls stay as pearls and rhino horn stay as rhino horns.
They may have value, but they are still commodities.
Otherwise, what is your definition of money, if it isn't 'anything that has value'?

[johnyj]

The FED's money does not exist before buying those bonds: the acts of loaning and creating this money are one and the same, which is why the resulting monetary value is nothing other than that loan itself.

(You keep treating the FED's money as if it were just money while it is rather money mistaken by debt.)

Now I understand where is your way of thinking coming from, it is this "loaning and creating money at the same time". Maybe you also think that without that debt, the money can not be created?

Maybe you think the creation of money by the FED is the only form of money creation?

My point is that although debt and money are fundamentally different, they are the same in the fractional-reserve and central banking monetary system (please read this thread from the beginning).

FRB is usually the first thing people know when it comes money creation, but after many years research, I can be sure that it has nothing to do with money creation, it is just a term of accounting (same money recorded on the checkbook multiple times). The money creation I'm talking about is the base money, not checkbook money

Banks indeed create more checkbook money when doing the lending, and those checkbook money will disappear when the loan is paid back. That's the reason they did not really create money, they just created a checkbook entry. If you want to withdraw all of those checkbook money, you will find out that the maximum amount that you can withdraw will never be higher than the amount of base money

The term "debt" means a monetary debt when the debtor owes an exchange value, or does not, when the debtor owes a merely concrete object lacking an independent expression of its exchange value. In your example, after destroying someone else's property, if I owe the exchange value of what I destroyed, then this is a monetary debt. Otherwise, if I owe the merely concrete objectivity of something identical to what I destroyed, then this is not a monetary debt. In the context of economics, "debt" usually means a monetary debt.

Have you heard about this: "The debt that can not be paid with money is debt of gratitude"  

Bonds are an instrument of debt: if the government already had something valuable, then it would have no need of going into debt.

Bond is a promise of payment in the future, of course the government don't have something valuable now, but that promise also has value, thus bonds are traded like any other securities freely on the market

[mirelo]

Debt and money are totally different things, they do not depend on each other. You dig out some gold, that gold becomes money, no debt involved

Gold doesn't become money, it stays as gold.
Just as silver stays as silver, pearls stay as pearls and rhino horn stay as rhino horns.
They may have value, but they are still commodities.
Otherwise, what is your definition of money, if it isn't 'anything that has value'?

Gold becomes money when society decides to use it as money, just like with silver or any other form of money.

[murraypaul]

Debt and money are totally different things, they do not depend on each other. You dig out some gold, that gold becomes money, no debt involved

Gold doesn't become money, it stays as gold.
Just as silver stays as silver, pearls stay as pearls and rhino horn stay as rhino horns.
They may have value, but they are still commodities.
Otherwise, what is your definition of money, if it isn't 'anything that has value'?

Gold becomes money when society decides to use it as money, just like with silver or any other form of money.

Or pearls, or rhino horns, or seashells.
There is nothing magical about gold.
Money, as you said, is whatever society decides to accept as a general medium of barter, and assign to it value greater than its intrinsic, commodity, value.
But everything that has value isn't money, it has to be generally accepted as such by society, or by a particular sub-group.
In prisons, for example, cigarettes might function as money.

[mirelo]

The alternative is to have the state

False dichotomy.

Watch this docu: Living Utopia (The Anarchists & The Spanish Revolution)

Or, for a more modern example of syndicalism, this one: The Mondragon Experiment - Corporate Cooperativism (1980) FULL

I've said it many times, the issue is not about trading ("capitalism") vs sharing ("socialism"). It is about scale. People need to feel in control of their own affairs again, and that works best on a local level (which can also be virtual in the age of the internet).

Sorry, but you are not addressing my point: it is not enough just to declare it is a "false dichotomy" - you have to show precisely why. Here is my point again:

Once labor gets divided among people, they are no longer individually self-sufficient. Then, as each one owns that one's product, there is the need of exchanging the social product among them. That's where money comes from: it makes that exchange always possible. The alternative is to have the state controlling social production and distributing social product, which is precisely what you don't want.

To justify your disagreement, you must show precisely where my reasoning went wrong.

[herzmeister]

Sorry, but you are not addressing my point: it is not enough just to declare it is a "false dichotomy" - you have to show precisely why. Here is my point again:

To justify your disagreement, you must show precisely where my reasoning went wrong.

This is a very mechanical and sociopathic view on humans. Probably you've read too much Hoppe or Ayn Rand. Humans are not machines. They also have the capability to share things without involvement of a state. That is why it is a false dichotomy, very clearly. Or do you use currency in your own family to trade tit-for-tat? Similarly, ancient societies consisted of tribes, i.e. extended families. That's why the step to minted coinage is not as straightforward as you believe it to be. Still, they also had "division of labor" to some degree nevertheless. For larger tribes they were some kind of reputation systems in place, if you read anthropologists like Professor (and anarchist) David Graeber, who dispels many myths like Adam Smith's thought experiment (nothing else it was) about the origin of money from barter.

At larger scale, things surely get more complex, but I mentioned that myself. Even then there are other approaches without requiring a state. Again, you should watch the linked documentaries to broaden your horizon, just a little. You have this reductionist view that is too typical for US Libertarians, it already has become a cliché.

[mirelo]

FRB is usually the first thing people know when it comes money creation, but after many years research, I can be sure that it has nothing to do with money creation, it is just a term of accounting (same money recorded on the checkbook multiple times). The money creation I'm talking about is the base money, not checkbook money

Banks indeed create more checkbook money when doing the lending, and those checkbook money will disappear when the loan is paid back. That's the reason they did not really create money, they just created a checkbook entry. If you want to withdraw all of those checkbook money, you will find out that the maximum amount that you can withdraw will never be higher than the amount of base money

According to your definition, 97% of all money circulating in the world today is just "checkbook money": central banks have no bank account from which to withdraw the money they loan to the government: just a (virtual) checkbook. This money becomes in turn the reserves for commercial banks to loan the majority of the world's money into existence. Additionally, only 3% of all money today exists in physical form - and shrinking. The dream of bankers, whether central or commercial, is to make all money digital to eliminate any risk of bank runs. Then, 100% of the world's money would be just "checkbook money."

The term "debt" means a monetary debt when the debtor owes an exchange value, or does not, when the debtor owes a merely concrete object lacking an independent expression of its exchange value. In your example, after destroying someone else's property, if I owe the exchange value of what I destroyed, then this is a monetary debt. Otherwise, if I owe the merely concrete objectivity of something identical to what I destroyed, then this is not a monetary debt. In the context of economics, "debt" usually means a monetary debt.

Have you heard about this: "The debt that can not be paid with money is debt of gratitude"  

As I just told you, in the context of economics, today "debt" is usually a synonym for monetary debt.

Bonds are an instrument of debt: if the government already had something valuable, then it would have no need of going into debt.

Bond is a promise of payment in the future, of course the government don't have something valuable now, but that promise also has value, thus bonds are traded like any other securities freely on the market

The government only sells bonds to the central bank when the market is no longer willing to buy them. This is precisely because the central bank does not require them to be valuable since it can buy them as you put it, "freely."

[mirelo]

Sorry, but you are not addressing my point: it is not enough just to declare it is a "false dichotomy" - you have to show precisely why. Here is my point again:

To justify your disagreement, you must show precisely where my reasoning went wrong.

This is a very mechanical and sociopathic view on humans. Probably you've read too much Hoppe or Ayn Rand. Humans are not machines. They also have the capability to share things without involvement of a state.

I will respond you despite your offensive tone.

My point is precisely the opposite: neither the division of labor nor the resulting need for exchanging the products of labor depend on the state. It is you that are holding the opposite view, despite yourself calling it "sociopathic."

That is why it is a false dichotomy, very clearly.

It is not even clear precisely what you are calling a "false dichotomy."

Or do you use currency in your own family to trade tit-for-tat?

My uncle bought my old monitor, does that qualify?

Similarly, ancient societies consisted of tribes, i.e. extended families. That's why the step to minted coinage is not as straightforward as you believe it to be.

Primitive forms of money are salt, grains, etc, not coins. You are ignoring thousands of years of economic development.

Still, they also had "division of labor" to some degree nevertheless.

Money does not originate directly from the division of labor: it originates from the problems posed by direct commodity exchange, which in turn originates from the division of labor.

For larger tribes they were some kind of reputation systems in place, if you read anthropologists like Professor (and anarchist) David Graeber, who dispels many myths like Adam Smith's thought experiment (nothing else it was) about the origin of money from barter.

Did Mr. Graeber manage to generalize exchange without using money?

At larger scale, things surely get more complex, but I mentioned that myself. Even then there are other approaches without requiring a state.

Again, my point is that neither the division of labor nor the resulting exchange of labor products, whether monetary or not, depend on the state. It is you that are holding the opposite view.

Again, you should watch the linked documentaries to broaden your horizon, just a little. You have this reductionist view that is too typical for US Libertarians, it already has become a cliché.

If you refer to the idea that money depends on the state - which is usually not a libertarian view - then again: I hold precisely the opposite view (namely, that money does not depend on the state).

[johnyj]

FRB is usually the first thing people know when it comes money creation, but after many years research, I can be sure that it has nothing to do with money creation, it is just a term of accounting (same money recorded on the checkbook multiple times). The money creation I'm talking about is the base money, not checkbook money

Banks indeed create more checkbook money when doing the lending, and those checkbook money will disappear when the loan is paid back. That's the reason they did not really create money, they just created a checkbook entry. If you want to withdraw all of those checkbook money, you will find out that the maximum amount that you can withdraw will never be higher than the amount of base money

According to your definition, 97% of all money circulating in the world today is just "checkbook money": central banks have no bank account from which to withdraw the money they loan to the government: just a (virtual) checkbook. This money becomes in turn the reserves for commercial banks to loan the majority of the world's money into existence. Additionally, only 3% of all money today exists in physical form - and shrinking. The dream of bankers, whether central or commercial, is to make all money digital to eliminate any risk of bank runs. Then, 100% of the world's money would be just "checkbook money."

Only the base money is circulating, all the checkbook money can not circulate. Banks loan out the same base money again and again, every time they do it, they keep some checkbook money

For example, a customer deposited $100 to a bank. And then bank loaned out $90 from customer's deposit, after this loan, the customer's deposit should shrink by $90 (they were loaned out, bank A don't have it anymore), but bank A never do that. So on their check book customer's deposit remains unchanged, but in reality it is reduced by $90, so these $90 of checkbook money are just numbers, banks do not have them, and they can't use them either

Your word about dream of bankers is quite interesting, I happened read an article today on local newspaper about a cashless society, I'm going to draw some accounts and see what is the consequence of that. If banks can really avoid bank runs with this approach, people's trust with fiat money will be strengthened, then I suppose that every ambitious guy will try to become FED and start to loan money to the government (What FED is doing does not have any technical content, anyone can do it)

[Zarathustra]

you could argue though that self-sufficiency doesn't scale.

Or that top-down structures and hierarchies in human history had an evolutionary advantage after all.

People do like exotic goods after all which the kings and rulers indirectly provided when they issued currency which enabled trade along the (ancient) Silk Road.

So, not every invention by kings and rulers was bad.

Not every invention by Hinkel was bad. That's not an argument. All in all, a collectivist system is growing rampant per se and destructing the planet.

Some satisfied real demand. Money seems to belong into this category. Money is a tool to organize division of labor on a grand scale.

It is a tool to pay taxes (protection money) to the state mafia. To organize division of labor is a subordinated function.

Recognizing that fact, Bitcoin may be the first currency not issued by an authority, and the first without force behind it (to the gold bugs: no, gold was never free, was always mined on territory of rulers and thus initially belonged to them).

Bitcoin is a liquid asset. No state - no need for liquid assets.

[mirelo]

FRB is usually the first thing people know when it comes money creation, but after many years research, I can be sure that it has nothing to do with money creation, it is just a term of accounting (same money recorded on the checkbook multiple times). The money creation I'm talking about is the base money, not checkbook money

Banks indeed create more checkbook money when doing the lending, and those checkbook money will disappear when the loan is paid back. That's the reason they did not really create money, they just created a checkbook entry. If you want to withdraw all of those checkbook money, you will find out that the maximum amount that you can withdraw will never be higher than the amount of base money

According to your definition, 97% of all money circulating in the world today is just "checkbook money": central banks have no bank account from which to withdraw the money they loan to the government: just a (virtual) checkbook. This money becomes in turn the reserves for commercial banks to loan the majority of the world's money into existence. Additionally, only 3% of all money today exists in physical form - and shrinking. The dream of bankers, whether central or commercial, is to make all money digital to eliminate any risk of bank runs. Then, 100% of the world's money would be just "checkbook money."

Only the base money is circulating, all the checkbook money can not circulate. Banks loan out the same base money again and again, every time they do it, they keep some checkbook money

The monetary base consists in both circulating and reserve money: the part not circulating is called reserves. It is precisely the monetary base that is today 97% checkbook money.

For example, a customer deposited $100 to a bank. And then bank loaned out $90 from customer's deposit, after this loan, the customer's deposit should shrink by $90 (they were loaned out, bank A don't have it anymore), but bank A never do that. So on their check book customer's deposit remains unchanged, but in reality it is reduced by $90, so these $90 of checkbook money are just numbers, banks do not have them, and they can't use them either

Again, 97% of the world's money is "just numbers," which we certainly do use every day. As you correctly said, when a commercial bank makes a loan it does not withdraw the corresponding amount from the source account, hence duplicating that money. This is known as the "multiplier effect," by which commercial banks "multiply" the reserves provided by the central bank. Today, bank money is entirely checkbook money as either it consists in or derives from reserves coming from a central bank's checkbook.

Your word about dream of bankers is quite interesting, I happened read an article today on local newspaper about a cashless society, I'm going to draw some accounts and see what is the consequence of that. If banks can really avoid bank runs with this approach, people's trust with fiat money will be strengthened, then I suppose that every ambitious guy will try to become FED and start to loan money to the government

The end of physical money is not the end of cash: Bitcoin is digital cash.

Banks already made their own money 100% digital. What they want is not make all money digital but rather eliminate any form of money other than theirs. This is what they mean when they talk about money going 100% digital. This would eliminate bank runs for the simple reason that you would never be able to withdraw your money from the banking system: some bank would always have it. Then, banks could finally "multiply" money without worrying about bank runs. If that excites you, well...

[johnyj]

Again, 97% of the world's money is "just numbers," which we certainly do use every day. As you correctly said, when a commercial bank makes a loan it does not withdraw the corresponding amount from the source account, hence duplicating that money. This is known as the "multiplier effect," by which commercial banks "multiply" the reserves provided by the central bank. Today, bank money is entirely checkbook money as either it consists in or derives from reserves coming from a central bank's checkbook.

Banks usually try to confuse people by saying that they are creating money through multiplier effect, but that refers to multiple times of loaning of a part of the same money (first time $90, and then $81, and then $72.9... ), and they add these number together and call it M1. This way of calculation is very absurd: Does taking a $100 note in and out of bank 10,000 times make you a millionare? It is still a $100 note! So M1 is just a measure of circulation speed of money, not the amount of money supply

All of those $100, $90, $81 when they were deposited into bank become some checkbook numbers. After the original deposit has been loaned out, these numbers can not be loaned out again, can not be withdrew, do not have payment function, but they are counted as part of M1

Base money is that $100 note, it is the only money in circulation, not checkbook money, must be created before all the above scheme start to roll out

[johnyj]

Banks already made their own money 100% digital. What they want is not make all money digital but rather eliminate any form of money other than theirs. This is what they mean when they talk about money going 100% digital. This would eliminate bank runs for the simple reason that you would never be able to withdraw your money from the banking system: some bank would always have it. Then, banks could finally "multiply" money without worrying about bank runs. If that excites you, well...

Actually to avoid bank run, banks already borrow from each other in financial crisis, that LIBOR rate is their lifeline. So it seems they have already made the system quite robust, almost no flaw

The only flaw I can think of is the money creation moment when FED suddenly get the ownership of a large amount of money. And since FED is owned by a group of regional reserve banks, all the member banks get dividend based on the value of their share, which is decided by the FED's asset

[mirelo]

Banks already made their own money 100% digital. What they want is not make all money digital but rather eliminate any form of money other than theirs. This is what they mean when they talk about money going 100% digital. This would eliminate bank runs for the simple reason that you would never be able to withdraw your money from the banking system: some bank would always have it. Then, banks could finally "multiply" money without worrying about bank runs. If that excites you, well...

Actually to avoid bank run, banks already borrow from each other in financial crisis, that LIBOR rate is their lifeline. So it seems they have already made the system quite robust, almost no flaw

Banks get their money from the FED, not from each other (lately, they started leaving it there since the FED now pays them above-market interest in return).

The only flaw I can think of is the money creation moment when FED suddenly get the ownership of a large amount of money. And since FED is owned by a group of regional reserve banks, all the member banks get dividend based on the value of their share, which is decided by the FED's asset

The FED will not "suddenly get the ownership of a large amount of money": when it finally chooses to sell those assets, there will be nobody to buy them (there isn't already, which is precisely why it is buying tens of billions in assets every month).