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A little secret that will make the world fall apart (alumnit.ca)
89 points by soundsop on Jan 28, 2009 | hide | past | web | favorite | 113 comments

The dollar is backed by taxing power of the US government - there are 300 million people who must pay taxes to US gov and the latter only accepts dollars. These 300m people will do anything to stay out of jail so they will trade whatever they have for dollars, thus insuring continuous demand year after year.

Money is not worthless.

What you just said means absolutely nothing: "backed by the taxing power of the US government". First and far most, when everybody comes running to the US government to cash in on their dollars, there is no taxing power between heaven and earth powerful enough to satisfy all the creditors. And what do you imagine the government paying them with?

For regular folks your statement is even more airy; when they start to figure out that their precious greenback has nowhere to go but down; are they gonna call their local representatives and ask them to change the dollars into gold (oops, no can't do, no more gold standard!) or euros/yen/whatever?

Face it; the dollar is backed by NOTHING! And thank god most people don't realize this because we would be in a much deeper hole then we are now.

Have you acted on these convictions you seem to feel so strongly? Have you e.g. bought options to buy gold in the future at a price much higher than the present one?

Yes, I have. I have placed certain bets against the dollar. There is not a single doubt in my mind that the dollar will keep loosing it's value - with some minor exceptions in the short term.

With all the billions of fresh created money (created out of thin air) being pumped into the US economy at the moment, the real devaluation of the dollar will pick up speed.

Interesting; what kind of bets?

Next to buying small amounts of gold and silver, I have made a couple of lucrative forex transaction. Since I receive my income in euros in Europe and live in Thailand (baht rate is connected to the dollar), I have been able to increase my income quite a bit when the dollar hits new lows.

I'm probably missing something. If the dollar is worthless because it isn't backed by real goods, why are gold and silver valuable? Just because of common consent, i.e. most throughout history have considered gold and silver to be exchangeable for goods? If that's your reasoning, then the same applies to the dollar, except on a lesser scale.

Here's some good information from an old thread (there's more links and information within the thread):

Source: http://news.ycombinator.com/item?id=410830

1. It is needed for industrial/electronics purposes.

2. It is internationally recognized as being valuable, regardless of culture. That is, cultures as diverse as India, China, England, Russia, pan-Arabic (i.e. non-Jews in the Middle East) have all viewed gold as having value, and that over at least 1000 years of recorded history each.

3. It does not corrode or rot the way paper money does. In Israel they recently found some Byzantine-era gold coins, aside from the obvious numismatic/collector value they still retain value for the gold itself.

4. Gold does not require a government to enforce its value. It's value is innate or intrinsic to the thing itself. As such if a government falls or decides to modify the value of a paper dollar (as Mexico, Argentina etc. have done in the past) then the value changes. Gold that you have in your pocket cannot have its value modified by a government order.

Only items 1 and 2 represent sources of gold's 'value'.

Item 3 is simply a property of gold (which you may or may not find advantageous). For instance, the same thing can be said about granite. It does not rot like paper, but that has nothing to do with it's value as a currency.

Item 4 is simply an extension of item 2. The reason a single government cannot control the value of gold is because all the other government's of the world don't go along with it. This is great if your government is somewhat careless with it's money supply, but doesn't have anything to do with 'intrinsic value'.

Regarding 1, using gold as a currency drives up the costs of using it for industrial/electronics purposes, just like using granite as a currency would drive up the price of countertops. But the fact that gold has a practical use does impart it with some value.

However, the value of gold as a currency is entirely due to Item 2. Gold is worth something because everyone agrees it is worth something. It would be interesting to see how this came about. I'm willing to bet gold's value originated in it's scarcity (and the exclusivity of showing it off), but obviously it has nothing to do with anything 'intrinsic' to gold. It's just as likely that an accident of history would have revealed some other rare metal that royalty desired to show off, which would have imparted 'value' on this metal instead of gold.

The reason gold holds value today is entirely historical. People value it precisely because people have always valued it.

Well, quite. Tell that to Gordon Brown who flogged off the UK's gold reserves at 1/3 of the current price (he even announced weeks in advance that he was planning to dump a load of gold on the market which further drove down the price).

Common consent doesn't have much to do with the real value of precious metals.

The reason why gold and silver are "valuable" and the dollar is not, lies in the fact that gold and silver can not be created "out of thin air". This was exactly the reason why, in better days, currency was backed by gold or silver, thus transferring the intrinsic value of precious metals onto the currency.

No, the reason they have "value" is by common consent. The scarcity issue determines what options are available to manage the money supply, but gold/silver is still only valuable to me if someone else wants it.

If I were starving on an island, I'd much rather have a sandwich than a bar of gold. Gold is worthless without someone else around who wants it, just like fiat money.

The dollar cannot be created out of thin air either. The constraints are not physical, sure, but they are there.

Really? Care to name a few?

The US government has "outsourced" control of the money supply to a cartel of private banks who have, as far as I know, no restrictions on the amount of money that they're allowed to create.

This is where it really get's odd, banks pretend to have money but they don't. When the big banks lend 1 billion they did not create 1 Billion even if it looks like they did. The secret is there is more money in circulation than there is cash. So when you write a check, it just get's deposited in another account somewhere. So your bank can then borrow that money back if it needs to.

In the end there is more debt than there is money. So there is a lot of people who are constantly looking for money and they can't all get it at the same time. The actual amount of money is less important than the amount of debt out there. If Debt > money then there is demand.

PS: It's far less harmful for society to mess with the value of pretend money, than to take a useful thing like gold, and prevent people from using it for useful things. And because people don't have gold debt it's value is far more flexible. I don't think gold is worth much, and I don't own any, but I don't want to get into gold trading because guessing when the bubble pops is risk I don't need.

I really like how you communicated your point by repeating it in 5 different ways, including an if statement.

So, you're saying the government won't do anything to stop banks printing off reams and reams of money indiscriminately? Sure, like all things, power can be abused. But no power is absolute. It is all dependent, at least to some degree.

"Money is created through forms of credit and debt, i.e., when banks make loans and debtors accept them, the money instantly exists. Only a fiat system can allow this form of money creation." http://www.theoildrum.com/node/4611

Ok, I stand corrected, then. I didn't realize banks can make money whenever they want. Thus, money is really a form of speculation.


I reverse my position. Sure, banks have the prerogative create money, but their ability to do so is based on people using the banks. Once banks no longer provide value for people, they lose their money creation ability. So, even banks are limited in their printing of money.

There goes the HN spam filter.

'What you just said means absolutely nothing: "backed by the taxing power of the US government".'

Money is recursive. The US government's acceptance of dollars is the base case. The US Military, Police, and various other force-directing agencies are the induction step.

It isn't entirely worthless, nor is its worth entirely intrinsic. It lives in the middle. Glib generalizations that put it on one end or the other are wrong.

I never stated that the dollar would be completely worthless, I only stated that it's backed by absolutely nothing.

For all the same reasons, it does not matter that the US government accepts dollars. It matters what you will get back for those dollars. When, if ever, people will come to collect en masse, the US government will have no means what so ever to pay of those creditors, in other words, the government becomes insolvent and the dollar plunges.

When the creditors come, they will get back what they have borrowed: Dollars. Why should that be a problem?

Remember: The US is indebted primarily in Dollars. Not in cars, gold or Euros. They can not go bankrupt for lack of their their own currency.

It's not backed by nothing. That's empirically, objectively false. You just don't like what's backed by. In another comment of yours,

"In my world, goods and services I purchase are the final goods, not the money I need to purchase them."

This is also objectively wrong. Sorry, the dollar is backed by the US government and I'm afraid those things are derived, not fundamental.

You are mistaking what you want to be for what actually is. And because of money's recursive nature, regardless of what you think about that, the fact that a dollar can be used to pay off Uncle Sam means it's usable to pay for a loaf of bread, too.

Furthermore, it doesn't matter what you base a currency on, it will always work this way. Base it on something like gold and the currency will still have higher order effects that aren't directly connected to gold. That's the entire purpose of money, to reduce the problem of trade to a single universal currency and thereby enable an economy to develop, instead of being stuck on barter. Barter may be concrete, but that's just about the only positive thing going for it.

(Even a barter-based economy will still prove vulnerable to bubbles and all the other problems of a money-based economy, it just won't also generate enough wealth to survive such things. Some things like economic cycles are fundamental to economies themselves and can be seen in economies where Man has no participation at all. Ecology can be seen as a degenerate case of Economics with no intelligent participation.)

Currencies do not need to be backed by anything. They are simply intermediary goods, valuable because of a coordination game. There is no "collecting in mass". The dollar is the final good. The U.S. has no debts outstanding in anything other than dollars ( which is quite a nice situation to be in).

In my world, goods and services I purchase are the final goods, not the money I need to purchase them.

About "collecting en masse", I guess time will tell. You might be right, for those holding large amounts of dollars (China for example) a "run on the US government" would be a bad thing, they're better off unloading their less valuable currency gradually and exchanging them for something with intrinsic value such as gold and silver. And in the mean time, the dollar will keep on loosing it's value.

Is gold really any less arbitrary than paper money?

Couldn't advances in technology create cheap alternatives to gold that would destroy its value?

Indeed. This is the point that gold-standard people don't seem to get. Gold is just as arbitrary as anything else. More so, even, because it is absolutely /useless/ in any aspect except as a valuable. It's too soft to do anything with. Furthermore, it has issues with being a finite supply that is occasionally moved around (no control over the monetary supply).

Steel. Now /that's/ what we should back our money with. Everybody needs steel. At least until carbon nanotubes get popular...

Another thing is control.

Having a gold standard means that gold mining companies can manipulate your currency. Suddenly find a huge new vein? Inflation! Go for a decade without any new discoveries? Deflation!

Ask someone who supports a gold-backed currency if they would be willing to back their currency with oil, and they look at you like you are crazy... as they should. But it's no more crazy than gold. Oil producing countries just have a more visible bad rap, so the problem with that particular commodity is more obvious.

I'd rather be in control of my own money supply thank you very much. Why you would want to leave it up to fate and potentially hostile entities is beyond me.

That's not true tho'; it's resistance to corrosion makes gold industrially valuable.

Currencies should be backed by something pretty fundamental. Eventually it has to be the Joule.

High entropy joules are 'intrinsically' worthless and easy to come by.

It is actually its finite amounts that make it valuable. Anything that can be produced at will not hold up as a currency.

Actually it's the demand that makes it valuable. (And the demand stems from everyone agreeing that it is valuable.)

There is a finite amount of uranium on earth too, but the only reason it's considered valuable is because there is demand for nuclear applications.

Only a little over 10% of gold is used for industrial applications. Without the demand provided by people agreeing that gold has value as a currency, the price of gold would plummet. The high value of gold is self-fulfilling... it's based on people's faith that everyone else thinks it is valuable.

But we do create more of it (or dig it out of the ground and refine it, as it were), there's simply a practically finite rate at which we can grow the gold supply.

So the value of gold should in fact deflate over time, as we produce more and more of it.

No, we mine it. We may discover more of it. But in ground reserve quantities are generally factored into the price of the stock of gold mining companies. So it is rather finite, and the more we explore and mine, the less likely we would be to discover more of it. Until someone invents the Philosopher's Stone.

No, we don't. No matter how you look at this, gold is not "created". Cold is extracted from gold mines, the only thing humans can do it try to find, but they simply can not create it.

Key here is that the total amount of gold on this planet is finite - not the production or extraction rate - making it truly valuable. Same thing applies to other natural resources such as oil, natural gas and diamonds.

>but they simply can not create it.

I seem to remember reading that that's not the case anymore. As in, we actually can make gold through transmutation. The amount of energy required to do so is bigger than the "value" of the resultant gold tough.

Wait, you can grow diamonds in a laboratory.

But Carbon is finite, too. (And on the same note, Dollars are finite, too. We have to store the bits somewhere.)

>We have to store the bits somewhere.

+1 for the fine, fine irony. Intended or otherwise as it might have been.

Actually, the real bottom line is work transfer, which can be measured in energy. Energy can produce material goods. If I give you 1MJ in exchange for work, you could do something with it.

  The only law money needs to follow is conservation, which energy fits. OTOH, the US government does screw around with the conservation law a lot, but it does apply to normal people.

http://news.ycombinator.com/item?id=424877 http://news.ycombinator.com/item?id=426142

12 points by demallien 20 days ago | link

Hey! Put some carriage returns in there! You're screwing up the page rendering...

I know this is off-topic, but every time I see a post like this, I feel like I'm back on /. during the 90's, why does this site feel the need to make the page wider than screen whenever pre-formatted text has long lines. (Other sites solve this by inserting scroll bars or forcing line wraps, but not this one.)

Depends on your browser. From what I remember, the pre's do properly size and have scrollbars in FF2, but not in FF3. The problem has to do with td cells expanding to fit their content I think.

There is a GM script that fixes this in FF3: http://userscripts.org/scripts/show/25039

Energy comes in a lot of grades. Low-entropy energy is useful (e.g. electricity). High-entropy energy is useless (e.g. the oceans at their normal temperature).

Sorry about that guys!

Thanks for telling me how to not do that in the future. In this case, for some reason the edit button has disappeared... possibly because it was posted a while ago.

Fix the bug!

Well you can carry around gold chips which have a lot of value. A gold coin is worth quiet a bit. Can't say the same for a steel coin. Have to carry around a lot more silver (in volume) to get the same value.

I suggest Germanium. (ducks)

Gold arose as a monetary standard through the decentralized choice of the marketplace. Metallic standards have been in use for more than two millenia.

In contrast, a pure fiat system has only been in place since the 1970s, and all previous examples of fiat systems in history ended with disaster. This one might be the first stable fiat system, who knows?

But it is a lack of perspective to deem a gold standard as kooky, strange, and new and consider fiat as proven, reliable, and stable. Our system is a bold new experiment.

Unlike fiat money, gold cannot be manufactured cheaply. This limits government's power to obtain it. Think of Zimbabwe. If you were a wage earner in Zimbabwe, would you rather keep your retirement fund in Zimbabwean dollars or gold? These are two extremes along a continuum of ways to store wealth.

Gold is a good way to store wealth because it is durable, of limited supply, dense in space and value, portable, fungible, dividable, identifiable, and universally valued now and for the foreseeable future.

Zimbabwean paper money is portable, fungible, dividable, and identifiable, but its performance on the other characteristics makes it it an overall poor way to store value.

All forms of government-created fiat money are in danger of going the way of Zimbabwean dollar. The issuing government can just decide to print more, thus devaluing the existing money.

Other ways of storing value have their own problems. Some people use land, but while land is potentially very valuable, it's not portable, fungible, or universally valuable. Businesses organized as corporations can be used to store value, and many people save for their retirement this way (by buying stocks). This has the benefit that in good times, the value of your investment can grow by itself. Unfortunately, it can also shrink by itself in bad times. Also, shares of corporations are not easily dividable.

My point is that forms of money (stored wealth) are not arbitrary.

Actually what he described is the basis for Fiat money systems everywhere. As long as the government demands that all entities doing business pay a tax in dollars, the dollars will be worth something to those entities. (It's worth freedom to do business.)

From Wikipedia: http://en.wikipedia.org/wiki/Fiat_currency

The unifying feature of all fiat money is its (typically exclusive) acceptability to the government for payment of taxes.

And yet again: http://www.absoluteastronomy.com/topics/Fiat_currency

Therefore the integrity of the financial system requires that there be a different ultimate form of backing, such as the acceptability of the fiat currency in payment of tax.

You missed my point: US citizens will always accept your dollars because they want to stay out of jail. This means they will give up whatever they have and give it to you. The entire sum of non-dollar poessions(goods and labor) of all US citizens are backing US dollar.

More generally, you can/have to use dollars for any transaction with the government. E.g. buying oil leases, grazing rights, etc.

And this applies not just to transactions with the government, but to any (U.S.) transactions whatsoever. You can see evidence of this on every dollar bill: "This note is legal tender for all debts, public and private [emphasis added]". It's illegal to refuse dollars, even for private debts.

Threatening people with imprisonment to force them to accept dollars should seem fishy, though, and it's a hint that there's something rotten about fiat currency. Unlike commodity money, whose supply is limited by physical scarcity, fiat money can be expanded without limit, and the result is both sad and predictable. Consider: (1) monetary expansion benefits debtors, who can repay debt in inflated dollars; (2) U.S. monetary policy is set by the Federal Reserve, whose officials are appointed by the U.S. Federal Government; (3) the U.S. Federal Government is the world's largest debtor. It doesn't take a rocket scientist to figure out what is going to happen in this scenario.

While no one can legally refuse dollars to settle debt, it's perfectly legal to refuse any other dollar transaction. If I trade my chickens for fish and fish only there is nothing illegal about this.

If you really want to know what the dollar is backed by, you should read Confessions of an Economic Hitman.Yes, some may take what was said in the book for hyperbole, but i firmly believe that the dollar is backed by the power of the U.S. Military.But what the dollar is backed by is irrelevant. Currency values will rise and fall with the general prevailing theories of economists;in the end all modern monetary systems are simply backed by the belief in the system.For the US dollar, that belief stems largely from the network effects of the dollar, as well as the relative ease of doing business and fair regulation in the U.S.

Pearls to swine, people will continue to lose money shorting the dollar. Its like Microsoft...you can love it or hate it, but its not going away.

Well for the past year Microsoft stock has continued to slide down.

if you do not make any money, your tax is zero. therefore, no jail time and no need for dollars.

If you do not make money, you starve.

Also, it's not just taxes - there are tens of trillions of dollars of outstanding dollar denominated debt. Millions of people and corporations have contractual obligations to deliver dollars. If they renege on those obligations, their creditors will seize very real assets (buildings, houses, etc).

no one that participates in this forum is in danger of starving due to lack of income. you could make zero money in the next year and not starve. someone will feed you. it is also highly improbable that anyone that reads HN would find themselves without a roof over their head by making zero dollars within the next year. these fears are highly overrated.

the fears are real for others. and to build an economy around solving these problems is interesting.

Stop being pedantic. At some point everyone must trade their labor for goods other people produce. This transaction incurs taxes that you must pay in dollars, or you go to jail.

not pedantic at all. I have not made a net income to be taxed in years (yes local governments have profited from transactional taxes; sales taxes). As a consequence, I have not starved to death (obviously) and am not writing this post from jail. However, I have provided much value to my community in terms of goods and services. If you were to come to my community and ask about me, you will find many that value my contributions to our local society.

I believe now is a great time to think about alternate economies instead of holding steadfast to rules that govern the current domain.

This situation works because you have something that substitutes for cash in your community... trust.

Cash is a way to create trust between two parties that don't know each other.

Without cash, if I walked into Best Buy for a TV, I'd offer to trade goods or services for it. Since Best Buy doesn't know me from Adam, they have no way to know whether I'll make good on my promise (they can't trust me), and so giving me the TV is a risk. However, Best Buy probably trusts the US Government to continue accepting dollars for tax payments, so dollars are valuable and trustworthy. If I give Best Buy some dollars, they are immediately useful in paying taxes.

Likewise if I work for Best Buy, and there was no money, Best Buy would 'pay' me by providing everything I ask for up to a certain standard of living. I'd have to trust Best Buy not to abuse this situation. It's far easier to be paid in dollars, because I can trust that businesses I buy from will value dollars... because they can trust that the government will value dollars (for tax payments).

The only way to survive without trust (either the real thing or via cash, which is really trust in a third party), is for everyone to be totally self-sufficient. Specialization is a huge economic boost, so giving it up means a lower standard of living for everyone. However, if everyone were truly self-sufficient, there would be no need to trade goods/services, and hence no need for trust or cash.

>At some point everyone must trade their labor for goods other people produce. This transaction incurs taxes that you must pay in dollars, or you go to jail.

If everyone just worked for non-profits focused on providing for people, that statement isn't true =P. Not exactly what you meant...

The problem with that logic is, if you don't work and have to rely on someone else to feed you, that means I have to work twice as hard to feed my family and now feed you.

There's something wrong when 30% (soon to be 50%) of the population doesn't pay taxes, and expects the rest of us to provide for them, IMHO.

It follows the same logic as why its really easy to get your license back after a DUI in america: There's a reason to stay within the system and play by the rules. Which is cheaper than the alternative of you driving w/o a license or registration (or insurance) and seriously injuring someone and fleeing the scene.

Welfare/Social Aid/Safety Net programs add value in the same way. By allowing an unemployed programmer to continue paying his rent, you prevent him from using his skills for evil. Or something along those lines.

Likewise, there is "the law of unintended consequences" where we are finding that people born into welfare tend to stay on welfare. For their entire life. And bear children in welfare. Obviously that cycle is a problem.

I think the safety net needs a through debugging and re-tuning to make it both more effective and more cost efficient. However, I still think its cheaper than the alternatives and their intended and unintended consequences.

I'm not proposing we all act as dilettantes and don't provide value to our communities. I work about 90 hours a week and do provide value. I simply prefer to have the money circulate in a tighter community.

If you grow your own food you must pay prperty tax on land. If you trade with others for food you must pay sales tax.

The only way to not pay taxes is to live on donations from others (who paid tax on that which they gave you).

You've only shown dollars having no value for one person; this is not true of all people.

For example: property tax. Not everyone pays it, but many must. These people need dollars, so they are willing to do stuff for them. The stuff that they are willing to do provides the value of the dollar -- regardless of what the non-taxpayers think or do.

I think you may be confusing two things here. The federal debt indeed is backed by the taxing power of the US government. That is, if you lend it 100 dollars today, you can have some confidence that you will get them back plus interests in the future.

But the dollar isn't backed by much; it's backed by trust, which itself depends on the acts of the Fed (i.e. it really depends on what the Fed does). If you can buy two widgets for 100 dollars today, you don't have much confidence that you'll be able to buy them in the future.

In either case, there's nothing to guarantee your purchasing power. With gold, your purchasing power isn't 100% protected either (because new gold is digged every day) but at least you're much safer from arbitrarily high inflation.

But you are obviously correct when you say that money isn't worthless.

I suspect the only kind of passive income that works is slavery.

I believed this when I was younger, but now I've amended my position. Paper money isn't worthless - it has no inherent value, which is true. But if we all agree upon it as a means of exchange and set fair rules on how it's made and spread, then we're good.

The issue isn't with paper money, it's with making the rules excessively complicated or unfair, or just outright breaking the money rules. Paper money is conducive to that though - any currency specialists have an idea for creating a better way?

I've always wondered about a private (non-government) diversified commodities-backed currency floating against international currencies, with liquid electronic and paper notes - and simple yet rigid rules and governance on how to absorb new purchases into the system and buy assets with it, and what reserves to keep for people cashing out. This is one of those things I sit and think about, but I reckon it'd be hard to do. Thoughts?

You would need to back up the currency with commodities that have 1) minuscule storage costs and 2) a very high stocks to flow ratio. Also, all commodities used must have identical stocks to flow ratio, or the pricing between the commodities will be very unstable. As a result, using a single commodity is ideal.

As luck has it, such a currency exists. Simply log into your brokerage account and buy the GLD ETF. It's only been around for four years, it will be very interesting to see how it does versus the dollar in the long term. If I was a Fed chairman, I would be worried.

Sounds good. A penny mutual fund with zero commission trades could be a good alternative to traditional money.

my thought is: "counterparty risk".

I entirely agree with the author's main point:

  there may simply be not enough important things to 
  do to keep everyone busy
If people only bought what's truly needed then only a tiny fraction of the world population would be employed. I for one am very glad that people keep inventing iPods and other stuff to keep everyone productively occupied.

As long as any human needs or wants are unfilled, there's infinite potential for people to do work. We can always be healthier, have lower infant mortality, make knowledge easier to diffuse, and make products cheaper. Nowdays, we can eat peanut sauce made in Thailand, tea from China, beef from Nebraska, chocolate from Belgium, coffee from Brazil almost anywhere in the world.

Philosophically, how much of this is "important"? I think overall, looking at the world in big chunks of time, things have been and will continue to get better. I talked with a PhD Physicist friend of mine recently for a while, and he sold me on how awesome the world is going to be when the cost of electricity approaches zero - without getting into a ton of details, it's going to be a massive party. Battery and transistor advancements meaning running a 1 pound, high powered laptop for weeks without charging it, free internet throughout the entire globe even in the most remote places, and a hell of a lot of human knowledge freely available to everyone in all of the major languages.

I'm pretty psyched for humanity, and think there's a hell of a lot to be done. We're not perfect, but we're generally trending upwards with a few blips here and there.

That is neat, how does your friend foresee free electricity coming about? Something specific like "alternative energies," fusion, etc.? Or just the general trend of people trying to develop and diversify sources of energy?

He was talking fusion, but I don't have enough background in the hard sciences to really make sense of the nuances of personally. He did give me some impressive general numbers about how a single reaction could power New York City for something like 10 years. Maybe fusion will happen, or perhaps something else, but a lot of the most talented people on the planet are working on more/cheaper power so I'd bet on something breaking through.

I always thought our current problem is not really producing energy but rather transporting it? So if you have a reactor in New York City it'll be rather useless for the people in, say, Moscow. That's the reason nobody is doing this power the world by establishing solar power plants in the Sahara project. Could someone clear this up?

If you have all the free energy you need, doesn't that make it easier to transport?

A wise man once said that a man would live in a cardboard box, were it not for his need to impress women.

Sexual competition will always drive work out of men. And women only recently started working, as a way to avoid depending on men (and a few other good reasons, but I digress).

> And women only recently started working

Nope. The 4-70s US stay-at-home Mom was an abberation. She didn't exist before the Great Depression. (Farmer's wives worked.)

I think there are plenty of important things for people to do (automation, biotech, energy). Unfortunately, I think they are getting harder and harder to do (and ergo fewer and fewer people have the skills necessary to do them (retraining at the local community college, just won't do)).

The other problem seems to be that they are longer term problems with much lower success rates. Businesses, and I get the feeling VCs, are focused on the sure thing with a high return in a short time period. I don't think "important things" fit in that group.

Ultimately I think we will all be enjoying a lot more free time, but it think it will take a painful transition to a different social structure to get there.

If there is no other solution, than what you suggest is ok...but a rather boring and provably unsustainable "ok".

but, there most likely is a better solution...there are many problems to solve in the world that would keep the majority "employed": clean water...disease...racism...housing... Is it possible to build an economy around solving these problems? Since we have never really given a serious attempt at doing so, I guess the answer is yes. Most likely, concepts of "employed", "debt", "education" all have to be redefined to fit this new economy.

Presumably, if an individual wishes to consume far less, they also work far less. There is no reason to work 50 hours a week just to hoard a bunch of dollars until the grave. If they work less, then the supply of employment decreases naturally, and it all balances out. Those who wish to work long hours and consume a lot of goods can still do so. There would be no need for involuntary employment.

Making useless clutter is not productive.

Who decides what is useless? If I compare the enjoyment that I receive from having an iPod and being able to listen to any song I own at pretty much any time I feel like it against the amount of labor that I performed in order to acquire it, I feel like I came away with a pretty good deal. I expect that there is an item or an experience that you value which could only be purchased with labor via money that I would consider useless. That is the whole point of having markets, so that people can make their own decisions about what is and isn't useful to them.

By "productively occupied" I mean "people do something that they think is useful". This in contrast to watching TV where people are occupied but do not have illusion of doing anything.

I believe this distinction is important to the well-being of those people and the community they are in - prolonged idleness has negative effects.

Useless stuff is productive within the bounds of the existing economy. However, that economy is provably unsustainable.

Best to move on and try to build an economy that is sustainable. I suspect such an animal will have a far higher useful::useless ratio.

Mencius Moldbug describes it best:

"Money is the bubble that doesn’t need to pop. As long as there is demand for indirect exchange, at least one asset will be stockpiled by hoarders, hence experience demand that is not a consequence of any direct utility, hence be overvalued. As long as the storage cost for this asset is zero and the supply in existence is fixed, you have a perfect Nash equilibrium - using any other asset as a medium of indirect exchange provides no advantage, and runs the risk of buying into a bubble which will subsequently pop as punters revert back to the stable standard." (source: http://www.interfluidity.com/posts/1233118501.shtml)

The story of the past ten years is that people started trading dollars for substitute stores of value ( houses, stocks, oil futures, etc). But those substitutes were not stable Nash equilibriums. In the long run, supply of housing is elastic and bubble prices cannot be sustained. Prices crashed, and people rushed back to using dollars as a store of value. When demand for dollars increases, it becomes harder to trade goods and labor for dollars, so the price of goods and labor in dollars decreases ( deflation). However, employment contracts and debts are denominated assuming a higher price level. Thus businesses are unable to meet payroll and pay creditors. Businesses fire workers or go out of business. That's the stage we are at now. The solution is to simply renominate the currency by mailing everyone checks, in order to restore/maintain the 2007 price level. This eliminates the frictional problem without creating massive transfers of resources from the private sector to the government.

Nice theory. Though the existence of other currencies complicates the picture.

"[T]here may simply be not enough important things to do to keep everyone busy."

More and more these past few years I think of a favorite old science fiction story by Frederik Pohl called "The Midas Plague."

All production is done by robots. Production has become so, uh, productive that humans spend all their effort just wearing out everything made by the robots. "Poor" people must live in giant mansions with several robots and wear out more stuff than "well-to-do" people, who live in small cottages with few to no robots and enjoy leisurely, intellectual and social pursuits. Comically (or tragically), it's illegal to get a robot to wear something out for you.

I think I'll reread it today.

Addendum (since I can no longer edit): I reread the story. Never mind the above reference to illegality.

Totally OT but I'll try. You don't also happen to know the name of a SF novel about some project Australia. Somewhat resemblant to what you describe. Physical work unneeded, robots doing everything, energy problem solved, people VR'ing with some spinal implants. Whole thing started as a corp. venture witch sold stocks at a dollar the unit?

While I usually don't think of it in such terms, I've found a good litmus test for me is whether, if I was Phil Connors, something would be of any use to me. Anything that Phil would lose at night, it's possible for anyone to lose, and thus I probably will lose it at some point. My activities tend towards acquiring knowledge, universal skills, and doing things that scare me.

A couple of businesspeople have explained to me that every part of building a business is about reducing risk. They talk about diversification, but then only apply it to money. As personal investments go, money (in any form) looks like one of the riskiest! It's much harder to forget a foreign language, or how to play a musical instrument, than it is to lose money. I'm trying to reduce risk by diversifying my assets to the point where money is a relatively small portion. After all, the happiest people I know don't tend to be those with the most money.

There are two kinds of goods: consumable and capital.

There are two kinds of capital: direct and indirect.

Money is indirect capital, but it is still capital, as long as the financial infrastructure exists.

I'm almost done reading "The Creature from Jekyll Island", by Griffin. Having had little background in finance or economics, much of what's been happening in the financial markets the past several years was just a mystery to me, and about a year ago I decided I wanted to understand how it worked. CFJI has helped quite a bit. It's not an easy read, even though it's well written, simply due to the subject matter (I had to read ch. 10 three times). It nevertheless does a great job of explaining how modern fiat currency systems work, and the mechanisms used by nations' central banks today.

But oh no! My job was producing those useless goods and services! And if people don't buy my useless goods and services, I won't be able to make money, which means I won't be able to buy food, which means I'll starve! PLEASE, SOMEONE, STIMULATE THE ECONOMY SO I DON'T STARVE!

The depressing thing about the great depression of the 1930s, as well as the current potential one, is that there may simply be not enough important things to do to keep everyone busy.

This seems to be the entire premise of the society present in "A Brave New World".

Great synopsis. Who grows food anyhow? Most people have lost this skill, and it's pushed over to "specialists (farmers)". Have you ever tried eating money for lunch? It tastes horrible.

Larry Smith is amazing guy, he is a legend in UW. Although he is an economist, he is particularly fond of computer science nerds :) and encourages them to be bold and creative. See one of his lectures called "Creating Killer Applications" http://csclub.uwaterloo.ca/media/Larry%20Smith:%20Creating%2...

Despite this being sort of a doomer rant, I really got a chuckle from the snarky bit at the end:

"I mean, we can't just give people food for free.

That would be ridiculous."

I petitioned govt to give rice freely to people Below Poverty Line (BPL), an economic indicator of standard of living, used in India.

Since rice is Indians staple food, I assumed that it will have a cascading effect on remaining food items and will help in reducing their prices and inflation.

But to my surprise BPL people started buying exotic products and services with the money saved because of free rice.

> But to my surprise BPL people started buying exotic products and services with the money saved because of free rice.

Did this experience teach you that you really don't know much about human behavior and should stay away from activities where such knowledge is important?

Or, did you double down and keep at it, perhaps with "I'm a good person so what I want is good."?

If you liked this post, you'd enjoy Terry Pratchett's Making Money.

The US dollar gets some of its value from the awesome US military. Worse comes to worse, we can take stuff from others regardless of how poor we are. Its a self-destructive mode of operation and would be used as a means of last resort. (North Korea is an extreme example - the world pays them not to go crazy with their nukes)

A more positive source of the dollar's strength is the US economy and its resourcefulness and innovation (ie hackers:)

3 years back I realized that I am also directly are indirectly responsible for poverty in the world.

you bastard

Man, Hacker News is full of UW students, eh? I see people reading it in class all the time, this article is just more evidence...

money is not useless, simply it's more comfortable to carry and trade with a set of coins/papers than a cow.

Everyone in this forum is stupider for having read this. I award you no points, and may God have mercy on your soul.

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