The Concept of Currency

[Jamshyd]

Does anyone else here feel petrified at the idea of currency?

Take a $100 bill. This is a lot of money (at least, for most people), right? but the bill's actual worth is no more than a piece of toilet paper. You can't write on it, you can't wrap things with it. Therefore its functional value seems to be limited to asswipe.

Yet, it is worth $100! Holy shit!

I am completely terrified by the fact that the whole world runs (and eternally suffers and fleetingly prospers) on pieces of toilet paper that may or may not represent a certain amount of shiny metal that is supposedly stored somewhere safe (has anyone actually seen it, personally?).

What is even more scary is "digital" money. The number printed on my bank statement represents my theoretical part of the total number of supposedly valuable asswipes that the bank owns.

I don't know, but the fact that the defining aspect of human life is the struggle for an asswipe that represents a supposed piece of shiny metal that one has never personally seen give me little reason to have any faith in humanity...

I'm not an economist by any stretch (being number-dyslexic and all).. in fact I am reading a highschool economy textbook as we speak to edify myself. So can any economically-savvy people here allay my fears?

 

[yougene]

Currency is what inter-connects the world. It's what keeps countries like Russia, China, and the U.S from duking it out on the battle field. Instead, everyone has everyone else by the balls. It's an ideal configuration in a sense.

Currency is like the oxygen of infrastructural growth. HEALTHY infrastructural growth is Good, no?


The American Dollar is no longer backed up by a piece of metal. It's backed up by a promise of the U.S government. This may change though.

 

[swilow]

I wouldn't say petrifies me, but it confuses me. I really feel that thing- piece of paper (plastic in Aus) equalling money; does not compute. That said, its probably simpler then bartering.

 

[TRPPNASS_DSCOMONKE]

^I would say a "worth"less but yes, simpler form of bartering. the paper has no "worth" to me because, as Jam pointed out you cant do anything with it for fear of damaging it.

Jam- i feel you. ive had this thought before and does slightly dismay me. because when things get bad my papers arent gonna mean shit, lol.

 

[B9]

Currency is like the oxygen of infrastructural growth. HEALTHY infrastructural growth is Good, no?

No! Because it inevitably ends up being UNHEALTHY, it's just that we've had it that long it seems we couldn't manage without it.

It's a piece of paper that promises you something, whether you get that something rather depends upon other factors.

The main problem with it is that it becomes a commodity in itself - promises as commodity smacks of "trust in me".

Money doesn't worry me as such but the blind adherence to capitalist doctrine certainly does & mainly because most people just cannot even conceive of living any other way.

I watched the first episode of " The Story of Maths" on BBC4 the other night. Apparently maths was first recorded being used in Egypt to calculate tax (tribute) from farmers.

What a wonderful pedigree

I could go on BUT I've said it all before.

 

[MyDoorsAreOpen]

Where's Obyron when we need him? He had a lot to say on this topic.

Essentially his take on money, which I found myself agreeing with, is that it's at its core nothing more than the quantifying of the value of one wanted thing in terms of another wanted thing. If you and I decide that an armful of picked wild apples from you is good for one axe sharpening by me on my stone, then we're using money. Money is something of a concept where 'ought' becomes 'is' -- it's a mathematical quantification of how widely thought of as 'desirable' that exact item is, right now. Or, if you will, how often and strongly 'I/One ought to have that item' is thought about that item.

 

[yougene]

No! Because it inevitably ends up being UNHEALTHY, it's just that we've had it that long it seems we couldn't manage without it.

All institutions fall into disarray. Market economies are no exception. But we enjoy the internet and other worthwhile infrastructures in part because the economy keeps everything glued together.

 

[Kul69]

Currency is heavily based on trust. Yes, you can think it's scary that if that trust is broken so is the value of currency. However, I think it's a necessary component of modern society.

We have barter which has an inherent "coincidence of wants" problem as well as being unwieldy. Then there's "commodity money" like salt, rum, wine, gold, silver, whatever. This solves the previous problems with barter systems. However, do you really want to store piles of these "commodity monies" in your home? This gave rise to banks. You could give them your commodity and they would give you a receipt that you could redeem at any time.

Now, this is where I think your concerns start to come into play...

People started to trade commodity receipts. The banks realized no one was actually redeeming these receipts. So, they started making receipts that weren't backed on anything and giving them out as loans. Thus the fractional reserve system was born. Now if everyone wanted to redeem their receipt there was no longer enough commodity to cover it. Bank runs could destroy confidence and trust and thus the "receipt" of value.

There are also positives though that have given rise to modern society. The ability to get loans easily, being able to work in ways that don't produce actual commodities.

Also, you call currency "toilet paper" but it's far from it. If we were trading toilet paper everyone would be counterfeiting it. Our currency is still scarce and hard to counterfeit which is the basic requirement of a currency.

Go do some research on what our currency is made out of. I can tell you it's made by Crane and called "rag" paper and is a composite linen/silk. It's specifically made for the U.S. mint. Go try to buy some.

I don't know, but the fact that the defining aspect of human life is the struggle for an asswipe that represents a supposed piece of shiny metal that one has never personally seen give me little reason to have any faith in humanity...

Struggling for currency as the defining aspect of human life is your own opinion/decision. You don't need to trust in currency. I personally have several different types of gold/silver bullion. You could maintain a bank account simply to cash your paycheck and then immediately purchase gold or any other commodity. However, with any commodity how can you be so sure of its retained value either?

What if all of the sudden a scientist figures out a way to create gold from lead? Sure, it's highly improbably but still possible. Just like it's highly improbable that people will all go cash out their bank assets and purchase a bunch of gold instead. However, it's still possible.

 

[Jamshyd]

Go do some research on what our currency is made out of. I can tell you it's made by Crane and called "rag" paper and is a composite linen/silk. It's specifically made for the U.S. mint. Go try to buy some.

Alright then, it is toilet paper made from special materials .

Note that I was talking about the functional value of a bill. For all we know it could be made out of spider-web silk and designed with the most esoteric of forge-protection. Still, as-is, if it loses its $100 value, what else can I do with it but use it as asswipe? I recall reading an account of the Khmer Rouge takeover. When they outlawed money, many cambodians used their money as asswipe.

However, with any commodity how can you be so sure of its retained value either?

Exactly, any form of currency, be it paper or metal, is fucking scary.

Thanks for your explanations though, i appreciate them.

 

[Maya314]

Preemptive apologies if this post is long winded and dryer than toast. Also, it bounces around a lot.

Jamshyd, you are 100% justified in your fear of currency. Until about a year and a half ago I was completely oblivious to this, but now I'm in the same boat as you.
First of all (to everyone) don't allow your lack of understanding of economics to intimidate you. As a moderator of Philosophy and Spirituality I assume you have a deep rooted understanding/desire for true understanding that gives you what no ledger can: a discernment of right and wrong.

To lend a helping hand to right brained people like myself, I personally think of it like this: Economics, like any science (hard or social), is NOT just about processes (i.e. Math) but understanding cause and effect relationships and their coalescence with the greater whole. If you don't understand what you're measuring, why would you measure? Anyhow, back to the point.

Currency, under proper circumstances, is indeed a wonderful thing. Bartering is a folkway; some would stick up their noses and call it an archaic custom, some do it as a realistic means of getting needs met. The biggest problem is, like any thing/idea (the constitution?), it can be tampered with. This is why a lot of people hate religion. It splinters, transfigures until the core concept of belief is an underlying "huh?".

http://www.gold-eagle.com/editorials_04/greene032104.html - overall definition
http://www.kwaves.com/fiat.htm - history of fiat money in the U.S. (recommended for purposes)

Notice how fiat money never existed in the U.S. until the Civil War (is there such a thing as a civil war?) where there was a higher demand for money? Some economists would argue that government policy created demand, which in certain respects is fair BUT you'll notice that the definition includes a government promise to repay the debts in GOLD. Notice how other times when we go off of a "real" monetary system are when we need excessive amounts of money to finance wars.

Many schools of economic thought are hard pressed to explain the causes and effects of this because, unfortunately many economic schools are concerned with fractioned aspects, and not the whole science. Value theory, supply side, natural rate of unemployment, etc. It was this kind of economics I "learned" (slept through lol) in high school. Luckily for me, however, my humble, good hearted uncle explained to me a few simple economics truths that helped me embark on an understanding of economics. He informed me of an economic school that studied causes and effects, understood that social sciences are reliant on understanding human action (praxeology) if they are to truly understand anything; Austrian Economics.

I'll cut myself off here, but considering that our money is based on nothing real (I think I read that with all the gold we have our dollar, adjusting for inflation, is worth only 4 cents on the dollar, but I could be wrong) and highly inflated, now is a time of great change in the way the world works. This goes beyond the bipartisan "McCain or Obama" ruse that blinds most of America to what the real problems are. I'm not quite a libertarian, but I'm voting for Ron Paul in '08.

Here's a few links for anyone interested:
http://mises.org/etexts/austrian.asp - brief history
http://cepa.newschool.edu/het/schools/austrian.htm - outline of beliefs
http://www.youtube.com/watch?v=CAPgFoJh9f8 - Ron Paul's personal interpretation, why he spends so much time calling the greedy out on unsustainable policies.
http://www.youtube.com/watch?v=by430chzT98 - How the federal reserve works and personal quotes from founding fathers on why they didn't write one into the constitution. It is very liberal/biased, but true.

This story does not have a sad ending, we just have a rough time ahead until we figure out that free markets and real money must exist. Money is currently a subjective commodity, soon to be toilet paper.

 

[Kul69]

^^ Even though it can be scary it's still necessary for a lot of the modern systems we enjoy. There are a lot of scary things out there that could result in some horrible shit but we put them out of our minds because they're improbable and you just have to keep on living.

Also, I think you have to take things out of the context of yourself. If all the financial systems failed and 9/10ths of the people in the world died from starvation would that actually be that bad?

I don't see that as scary, I see it as promising. A chance to start over with the lessons of the past in hand and abundant resources once again. It might be scary if you envision yourself having to live through it but from a viewpoint of society and humanity I see it as a necessary thing that produces golden ages.

Don't you find it scary that all the security you have in the world only exists as a result of physical force which is backed by a system greater than yourself which can easily fail?

All of civilization is fragile and based on trust and cooperation. However, as humans we desire that safety and so we'll always group up and even accept things we personally don't agree with in order to be safe. Basically what I'm saying is there's no reason to be scared because if it all fails something else will take it's place because everyone wants that thing to be there.

 

[neonads]

Currency exists because natural selection dictated it to be the most efficient form of energy transfer within the econosphere. Just like adenosine triphosphate within the biosphere.

Our economic woes are because we are experimenting with newer and more efficient forms of energy transfer - derivatives. The first derivative (the future contract) was designed to cut the waiting time between sale and receipt of goods so the purchaser could trade the product he bought before receiving it from the transport company. Sounds harmless enough on it's own, right? Well when some transport companies failed to deliver on time, or at all, someone had an idea of putting a higher value on that contract to include the risk of default by the transport company. Anything with value can be traded, and so the first derivative was born.

As long as the risk is correctly calculated, derivatives are a more efficient energy transfer mechanism than waiting for goods/services to be in hand before trading.

 

[Maya314]

Don't you find it scary that all the security you have in the world only exists as a result of physical force which is backed by a system greater than yourself which can easily fail?

Somewhere in this attention deficit mess of wires and microfilm I call a brain my Hunter S Thompson gland is cackling in a corner unafraid of everything that will be, BUT my rational, spiritual mind yearns for empathy and truth (no matter how naive it seems). I can't say fuck all without realizing that everybody else on this improbably small planet has that same power. As you implied, we are most definitely interdependent.

I also realize that humanities inability to understand an exponential function ( http://www.youtube.com/watch?v=F-QA2rkpBSY aka two minutes to midnight) or illusory tendency to believe that we are separate from our environment are MASSIVE flaws in our "logical" hierarchy, only proving that the elegant monkeys (man) will have to learn to obey the deterministic(or Darwinist, however you look at it) laws of our planet. If we don't balance it, our planet will find a way. It's got 4.2 billion years on science and civilization. Geo engineering? I'd like to think it could work, but again we're at a paradox where humanity again plateaus because of its' shortcomings.

So to answer your question, I'm not afraid of an uncertain future. I understand human nature and I have access to land where I can grow much of the food/water I'd need. I do, however, have empathy for all the blind people who will be screaming and starving if/when worse comes to worse. The fact that an echelon of infrastructure can crumble because of its' own greedy motives amuses me because it limits us to the basic precepts of common sense/wisdom that have been told/retold throughout all human history/culture.

edited:

Neonads: admittedly my understanding was garbled, but I NOW get what you meant by derivatives/energy exchange. I have a little difficulty figuring out how the intent can stack like a deck of cards in fluid markets and I'm not sure of their impact on Free markets, but that's my naivety for you. I need a bigger encyclopedia, hell thesaurus too.

The Is: Cheers to that, I'm gonna pull on this string on my sweater and see what happens. Whee...

 

[The Is]

I think Warren Buffet said it best when he said

People that make such a big deal about money are retards. Money is nothing more than coupons for goods and services. Does that really bother you or do you think maybe you should cut down on your conspiracy intake?

 

[TRPPNASS_DSCOMONKE]

^lol. cut down on my conspiracy intake? please jebus tell me how, lol.

 

[Obyron]

Gold (and by extension cash) is the corpse of value. Money is a physical representation of an abstract concept. The SI unit of work is the Joule; the American unit of work is the dollar.

The only thing that scares me about cash is the concept of the Managed Float System as opposed to the Gold Standard. I don't really identify with the conspiracy nuts who say that Central Bankers are taking over the world, but I will at least state that I'm not sure I see how this system is better. I really need to do some reading on that.

Otherwise, cash scares me much less than the credit card industry. It basically says, "You could work and then trade that work for goods and services... or we could give you those goods and services now, and you can work 19% to 30% harder." I don't see how anyone thinks this is a good deal. It used to be just limited to the plastic companies, but then good old fashioned banks got into it too and they're paying the price. I saw some loans made when I was working in real estate that seriously made me wonder why the mortgage collapse didn't happen five years sooner.

 

[protovack]

currency depends on you trusting that it will be valuable, which means living in a stable society in which thieves are arrested.

 

[neonads]

^ Or thwarted. Paper bills came about because merchants were being robbed left, right and centre throughout Northern Germany. So a consortium of wealthy traders formed the Hanseatic League and set up depository houses at the major cities where people could deposit their gold for a promissory note that could be refunded at any other branch, for a small fee. The notes were worthless to the bandits as they would be arrested should they try to withdraw from the League but this just paved the way for the Raubritter - Robber Barons who used their noble status to open accounts and launder money. Nothing lasts forever eh?

The only thing that scares me about cash is the concept of the Managed Float System as opposed to the Gold Standard. I don't really identify with the conspiracy nuts who say that Central Bankers are taking over the world, but I will at least state that I'm not sure I see how this system is better. I really need to do some reading on that.

The fiat system we have now is there because of the creation of the International Monetary Fund in 1944. Before this, countries would manipulate their own currency value through buy/sell orders for gold/silver to wage economic warfare against other nations such as what France did to Germany to cause the Weimar Republic's bank failure - a pivotal cause of the 1929 depression. The fund fixed the price of gold to prevent this type of manipulation and the US under Nixon found their money supply running out - there was not enough gold at those prices to back any more dollars even though the economy was strong.

Otherwise, cash scares me much less than the credit card industry. It basically says, "You could work and then trade that work for goods and services... or we could give you those goods and services now, and you can work 19% to 30% harder." I don't see how anyone thinks this is a good deal.

Well the upside of credit is that it's like the biological enzyme. Rather than wait for biochemical reactions to happen on their own, it became more efficient to spend some energy to make catalysts that speed things up. You need to be responsible with it though and it seems most people are not. Do we optimistically encourage people to better themselves and learn responsibility or simplify the world because we're too pessimistic?

 

[alasdairm]

currency is essential. can you imagine a practical alternative?

alasdair

 

[HoneyRoastedPeanut]

Hey all, first post, registered just to respond to this thread .

My problem with currency lies in the fundamental psychology behind it, most aptly put in the phrase "every man has his price". The concept of currency relies on the assumption that anything, no matter what, can be quanitifed and subsequently bought, sold, or otherwise manipulated or destroyed for a price. In doing this we strip every thing or action of its intrinsic, "sentimental" value, and reduce it to a number (preceded by dollar signs, pounds, etc.). While it may serve the use of connecting people to each other economically, what it really does at a general level is unify our states of mind. It is no coincidence that this unified state of mind tends to think of things only in terms of their benefit to humans. It at once gives something worth by defining it in terms of the limit of its value to us. How, then, can anything be defined otherwise and be taken seriously, when money is the "bottom line"?

Money, for example, is worthless for any practical function besides facilitating the wider system of currency or acting as a paperweight; it is worth a great deal only because it serves humans so well. A tree or mountain, on the other hand, is worth much less because it holds little value within this system. It all points to the shared idea that we as humans have the right to decide what lives and what dies, what is good and what is evil. The dollar is (one of) the physical representation(s) of this anthropocentric superiority complex.