
The Meaning of Money - aquarin
http://aquaviva.wordpress.com/2007/04/01/the-meaning-of-money/
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dageroth
I don't think that a central authority is necessary for money to work, at
least not in form of a monopolist. Actually the current systems are rather
unsatisfying because a state can loose its credibility and thus the trust in
its curreny quite fast, basically as soon as war looms on the horizon or it
becomes apparent that it will default on its debt. In the last 25 years over
87 currencies crashed. And because of the monopoly of the state on money the
whole economy is usually going down along. For my part I would therefore
abandon the monetary monopoly of the state and allow competition, allow
companies to issue money. When they connect their name to the currency and
have no legal power to make their money legal tender they will have a much
stronger incentive to provide a good and stable money. Hayek wrote a
fascinating treatise on the denationalisation of money, and with the ongoing
globalisation sooner or later we will get used to juggle with more than one
currency in our pockets. Second Life seems to be a step in the direction that
companies start to issue private currencies and when states, especially in the
developing countries, will fail to keep their currency stable chances are that
they will be replaced by private currencies.

Equally interesting and probably easier to believe are gold backed currencies
with competing private institutes issuing goldbacked money.

Still, its great to see people thinking about money in another way than just
how to get it.

~~~
aquarin
"central authority is necessary for money to work" - No I don't mean "central
authority" just some authority that is responsible for "following the rules"
in given market. This can be a company that issued virtual money in online
game for example. If participants in virtual world do not trust in the fact
that the company will play fair game (e.g. that all participants in the
virtual game will have equal power to trade, and that the quantity of money
and quantity of virtual goods will grow by some known way.), then the virtual
money value will decrease.

------
palish
This article can apply to situations other than real life. Anyone creating a
virtual economy may benefit from reading this and other economics articles.

For example, iminlikewithyou's virtual economy. #4 may apply here:

 _"The size of the market is determined by the number of participants who want
to exchange money for goods and goods for money."_

So iminlikewithyou's virtual market size is the number of active users, right?
Well, not necessarily. If a number of active users have no incentive to bid
anymore, for whatever reason, the market size goes down. If it drops below a
certain critical point, then people may lose faith in the market due to lack
of goods and leave the service. Of course, I feel they're doing an awesome job
and I don't expect this to happen. It's just an example.

The best markets are those with the highest number of people _wanting to
trade_.

I think that creating virtual economies inside of a product is interesting
because you have to create something people want (the startup's product) and
then something people want inside the product (virtual goods, which happen to
be cute women and men in iminlikewithyou's case). So if creating something
people want is difficult, would creating something people want squared be
difficult squared?

