
Why there’s no money: the imaginary part of financial systems - ph0rque
http://vinay.howtolivewiki.com/blog/other/why-theres-no-money-the-imaginary-part-of-financial-systems-3235
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javajosh
As a piece of rhetoric, it's not bad. I'm certainly sympathetic to the
author's viewpoint. As a piece that gives any insight into the nature of
money, it leaves a lot to be desired. It is true that money is inextricably
intertwined (gotta love that phrase, heh) with the political, social, and
legal constructs that support it. And the notion that money is somehow encoded
in a "web of obligation" rings true. But I guess I'm not really appalled by
this, just like I'm not appalled by the fact that gravity doesn't let me fly,
and certainly the idea that millionaires' wealth is not fluid because of peer
pressure sounds like pure hogwash.

A discussion I'd like to see on HN revolves around a simple scenario. You live
in a village, people only barter with each other. The village grows, and
someone comes up with the idea that money would make it possible to avoid
complex and difficult trades involving real goods. Money is essentially a
convenience. But how do you do it? Even assuming that you have a completely
trustworthy producer of currency, how, exactly, do you introduce money into
the system? It is my belief that a great deal of ignorance is laid bare when
you start thinking through the problems of rolling out a new currency like
this.

Indeed, if and when we can see through this problem, we can evolve our little
society further and faster, and understand how the various types of
institutions we have evolved. Think of it as "economic embryology" - and just
like real embryology yields some incredible insights into the adult organism,
I think the economic embryology gedanken experiment can generate real insights
into a mature economy.

~~~
halhen
> how do you do it?

In Capital volume 1, Marx paints the following logical progression. Whether it
carries any historical truth, I don't know. (Note: there are many more nuances
to it, and you perhaps need to wrestle the original source to get it all)

To establish a single unit of measurement:

a. The simple, isolated, or accidental form of value: Commodities are
exchangeable with other commodities, e.g. 20 yards of linen = 1 coat.

b. The Total or Expanded Form of Value: a commodity is exchangeable with any
other commodity, e.g. 20 yards of linen = 1 coat or = 10 lb tea or = 40 lb
coffee or = 1 quarter of corn or = 2 ounces of gold or = etc.

c. The general form of value: Any of said quantities of commodities are
exchangeable with the original commodity, e.g. 1 coat, 10 lb tea, 40 lb
coffee, 1 quarter of corn, and 2 ounces of gold, are worth 20 yards of linen.

d. The money form: One, or a few, commodities become either the de factor or
the legal "universal equivalent" commodity in which exchange-value is
measured. This universal requires some properties (I'm sure I have forgotten
several):

* It must be uniform. Not all horses are equal, so horses are no good.

* It must be divisible and capable of quantitative differentiation. Half a work horse is less worth than half of a whole, and two halves of work horses does not equal one. Horses are not good for a second reason.

* As trade expands geographically, the value of the universal equivalent needs to be universally recognized. Horses for seamen? More inconvenient than it should be.

* The universal equivalent should not deteriorate. Horses die. They really are no good for this.

Instead, precious metals fulfill these qualities. And just as we use dollars
and cents, gold and silver can be used to differentiate between different
magnitudes of value. (Note: gold and silver still has values as commodities,
which determine the amount of stuff you get for them. See the initial points.)

Still, they do have some problems. They require measurements and tools to
divide. It's not really convenient to go into Starbucks with a lump of silver
to carve the price for a coffee.

So coins are minted, containing the proper amount of each metal. New problems
arise. Cheaters carve metals from the coins to melt and create new. Wear and
tear cheapens the coins. So bills and coins are created as symbols of silver
and gold, but backed by them. The actual precious metal reside elsewhere, and
the bill is just a proof of ownership.

Now, those countries and owners who control precious metals get significant
power. They can withhold or flood the marked at their whim. No good, says the
other countries. So when currency is sufficiently recognized as a means of
payment, one can remove the actual backing and keep the bills and coins only.
And while we're on it, why bother with the bills at all? A balance in a
computer is just as good, right?

~~~
nhaehnle
This is a pretty good summary, except that there is quite a lot of doubt by
anthropologists that the historical succession ever happened like this.
Apparently, various forms of money came into being out of debt, without the
detour via precious metals.

The reasoning is roughly this: When you trade, it is extremely rare for a
"double coincidence of wants" to actually happen with real goods at a fixed
point in space and time. So people extend credit and remember who owes what to
whom. Money then grows out of the increasing formalization of this process.
Coins are then created by a state that wants to make lots of uniform payments
(i.e. payment to soldiers, hence the name soldi for certain Roman coins).

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dgreensp
I was prepared to be moved to some novel point of view on the nature of money,
but the article doesn't ring true.

We _do_ get to choose how to spend our money, and rich Americans who accrue
millions or billions of dollars of personal wealth especially do.

What do people choose to do with their money?

* Often they invest it, so that their net worth goes up rather than down, while perhaps supporting a company or cause they believe in. It's true that when you put your money into something, it's no longer liquid. If you inherit a few million dollars and immediately buy a few houses as an investment, you don't have the money, you just have the houses.

* They set up philanthropic foundations. This involves allocating money to ongoing aid. Yes, the money is earmarked, because you (the foundation) earmarked it.

* If you want more money going to innovation, that's great, but it is not an axiom that money, where it exists, should be used to fund particular innovative projects that will transform society. For one thing, people disagree on how important it is to spend money on innovation versus other things. If you want to see a manned mission to Jupiter, say, you can either fund it yourself or convince other people it's a good idea and work out where the money will come from. You can't just complain it's not happening, despite all the money everywhere.

* When wealthy individuals decide how to spend/blow/invest/donate a million dollars (say), I don't think they are ruled by social pressure, their hands tied by the ever-present danger of being shamed into oblivion -- so they decide it is safer to just buy a yacht. This sounds like an externalization of the feeling of self-consciousness some people may have.

Now, one thing I'll say is that money is not necessarily being spent on big
projects in a way that reflects what people want to see. Kickstarter is
helping change this (see [http://www.kickstarter.com/projects/559914737/the-
veronica-m...](http://www.kickstarter.com/projects/559914737/the-veronica-
mars-movie-project)) -- by tapping into discretionary money!

~~~
bitwize
_We do get to choose how to spend our money, and rich Americans who accrue
millions or billions of dollars of personal wealth especially do._

No. Capital is power[0]. Not just power to choose, but power to shape the
choices of others (through marketing, propaganda, laws, etc.). Not power for
the greater good, but power merely for its own sake -- because those in power
fear losing their power. So they tend to use the power (capital, money) they
have in order to consolidate and amplify their power base, which includes
reforming the choices of others (meaning you and me) to their own advantage.
In this way society is "creordered" to serve and benefit those at the top of
the power pyramid.

0\. <http://dissidentvoice.org/2010/05/capital-as-power/>

~~~
dgreensp
You seem to be introducing a new point rather than agreeing or disagreeing
with me or the article. Actually, I think you are agreeing with me. Contrary
to the article, large amounts of money are at the complete disposal of
individuals, corporations, and organizations, who simply don't choose to spend
it in ways we agree with sometimes. For example, they earmark it for Africa
instead of flying cars. We don't know what Apple will do with its $XX billion
piggybank, but I'm pretty happy with what they've done so far. Buffett pledged
most of his billions to philanthropy. I believe these decisions are theirs to
make.

"Capital is power" is a metaphor. Capital certainly grants _purchasing_ power.
Some things (and people) can be bought and some can't. Laws shouldn't be as
purchasable as they are, of course.

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nnq
_Developing OP's points to their natural conclusions and ignoring the awful
math analogy:_ the point would be to _liquify_ / _unfreeze_ as much of the
available wealth as possible, to have it flow to things that could make the
world a better place or solve the "big problems", right? So a strong middle
class with lots of well spread discretionary income, capable to crowd-fund
tons of interesting work would be the solution. Evrika! But NO... there is no
reason for the liquified money to flow in the "right" directions, maybe they's
all be spend on entertainment and we'll have a "brave new world" type dystopia
instead, so maybe it's better to have it "frozen", because at least this way
there is some control over it. _...a more interesting problem imho would be to
see how money actually relates to power/control and to have an information
theoretical way to quantify this power/control - this could really bring new
ways to look at economy, instead of this silly economic mythology with
fluid/solid money, (anti)fragile entities, enigmatic black swans floating
around and other mystical creatures and forces that our analogy loving minds
keep creating._

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Tycho
_Most of the money is made, at root, in one of two ways: oppressing other
people, or destroying the natural world. The political, legal and social
frameworks which enable these acts to be performed are then encoded into the
structures which govern the wealth so-created, and that wealth can no more
flow to constructive ends than water can flow up hill._

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holograham
while it is true we have come up with ingenious ways to "obligate" money,
these constructs have arisen from a want from consumers...a person in the US
chooses to sign up for a 30 year mortgage because he/she values owning a home.
Venture Capitalists choose to obligate their money in risky startups in order
to breath life into fringe ideas that may strike it big. Remembering that
money is a proxy for wealth measurement the reality is that money simply is a
median of exchanging wealth which people are choosing to use.

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leashless
Hm. Wish I'd seen this when it went by, I'm the original author. I think
Graeber's Debt is probably pretty important in grounding any discussion about
money at this point - given how much of our "money" is complex chains of debt,
rather than cash!

------
neave
Great article. Also recommended is Positive Money
<http://www.positivemoney.org/> who aim to highlight this and change the
banking system.

