What Is Money?

[Tiberius]

Capitalism FTW.

http://www.youtube.com/watch?v=EtF_zbI5j7M

[Violet]

Ugh... time to form a ton of rebuttals... (Edit: It should be noted that he was VERY open-ended with his arguments, and that they can be interpreted in a number of ways. As such, i may have misinterpreted what he meant on occasion... and i dearly hope for him that I did. I think he's entirely missed the point of what money is by confusing it with how we use it... and even that is often not necessarily true or blatantly wrong).

Actually, the Amazing Atheist is correct in that value is made by people. Paper money is exactly that: an paper item granted value by a general society (though not necessarily all) for the purpose of trading it.

Money is one thing only: a thing which has value to a certain person, which then serves as payment for another thing valued. The milkman doesn't want any more milk, he has little value in your milk. The needy man on the street desperately wants your milk. He holds much value to it. Value is entirely subjective... if one person thinks a fair exchange is 100 good-sized, already-filleted Sockeye Salmon for Mass Effect 2: then they do. If a person finds a single rock to be more valuable than a large restaurant chain... then they do. One must remember that money is not coin-currency alone (henceforth simplified to 'currency').

A standardized currency needs be one thing only: standardized. It may be the most bizarre system worked up (eg, trading buildings or their services for other buildings or other services)... or it could be entirely digitalized (Bah! Republic credits count for nothing out here.)... or it could be a sleek single currency system (Please sir, can I have 10,000 pennies?)... or it may be done in strata (100 A for a B, 100 B for a C, 100 C for a D)... or it may be done in a way entirely unlisted (Like you get things free if you have ____ rank).

1a, Transportable: A thing of value DOES NOT need to be transportable. Example being buildings. So far as standardized currency goes, systems can easily work where one receives vouchers from others for doing services for them, and these do not even necessarily have to be given to people. Even systems like our credit card system don't need transportable money... they just organize the money into a different group depending on what it was used for. I disagree entirely with the simplistic and narrow notion that standardized currency applies only to a coin/paper money system. So far as coin and paper money systems go, even they do not necessarily have to be transported. It all depends on which system is in place as to wether transportation is required or not.

1b, Divisible: Not at all necessary. A standardized currency in no way states that the trades will be fair.

1c, High Market Value: Entirely subjective, as noted before. Invalid, and like 1b: unnecessary in it's being a standardized currency.

1d, Recognizable: Not necessarily. A foreigner or blind man or hermit may have absolutely no fucking clue what it is they're looking at (so to speak)... that doesn't stop it from having value. "What is that fucking thing!?", says the islander of the chicken. He may pay for it purely out of interest and/or of what you've told him about it. Recognizability certainly does help in most cases though. But again it isn't vital for all systems to work, however efficient.

1e, Resistant to Counterfeiting: Sure it helps... but this is (again) rather unnecessary so far as the functioning of the system goes. That some may want to capitalize on how easily reproducible the money is... is just capitalism. After the market fucks itself and everyone aboard, it should be a decent system (albeit one with many fuckings over of itself). With some forms of money (say chickens)... the counterfeits would likely be just as valuable as the real things themselves... so what point there would be in doing so is completely unknown to me. It isn't essential to many systems that they be uncounterfeitable... however much being so may help the market

2, unit of account: Describes a specific type of standardized currency. This type of currency is rather unstable over time, with inflation being one of the most fundamental problems with it. It can often become utterly meaningless (so far as 'value' is concerned). This is what he serves up that you defend as 'ftw'? Fuck that much? Anyway, onto this particular currency.

2a, Divisible: No actually... it does not need to be divisible. Single-coin currencies work perhaps just as well in this system under some iterations (credits) as they do in multi-coin currencies (such as America's penny-nickel-dime-quarter-dollar-5$-10$-etc). So again, it does not need to be divisible.

2b, Fungible: I agree 100% with him here... this particular system absolutely requires the currency be fungible.

2c, Countable: Also true. I don't know how Unit of Account could would without being countable... considering that accounting is pretty much mostly just counting in the first place

3, store of value: Only things with a 'POV' can create value... rocks don't create value, gold doesn't, fantasy dragons don't, not even my strawberry poptarts do. Should 'money' be any different in this respect? Again, we give things value. I'd think most of us value money, even if only in relation to other money. The starving man given 1000$ will soon not be starving... he probably values those coins like they are an obsession, hoarding them, keeping his hands close to them, resting unwell. The billionaire given the same thing might say "keep your money" or "oooookie????" or in many other ways be unimpressed by the paltry sum. I'd say money (paper, coin, credit, etc. things that you normally think of with 'money') creates value in the same ways a sword, cow, or spacefaring vessel create value... and that is all in our heads! They don't create the value... we do in reaction to our subjective interpretation of what they are.

Moving on: 3a, savable: The money does not have to be savable. If money in a system is food, then it really only has to be edible. And edible things don't do well on the whole "saving" thing, unless they are Red Bull, which is disgusting!

3b, storable: Depends... is holding the weapon in your hands 'storing' it there? If it is, then I agree that things must be storable (fuck, everything is). If it was meant more along the lines of "stash the sword in a safe, and when the demons come, run over and get it out of the safe (while you're getting butt-raped by satan)": no, it isn't necessary. Is is a common, efficient, and fairly simply way for the system to work? Yes. Does it have to be done this way? No, note the above 'holding it in hands', 'spend it fast' kinda thing.

3c, retrievable: Not necessarily. They could simply be credits, with the cost of your purchase linked to the bank, which then moves that amount to the person you purchased from. Unless you call that 'retrieving', then no, it isn't a vital part of this.

3d, Valuable Upon Retrieval. Banking crisis familiar to you? No/yes? How about inflation? Yes? Good good. So you should already understand why this 'point' is stupid. Like... fucking stupid.

4: Ugh... evidently he isn't aware that it isn't just paper that can be traded for services. He says "finally" on this one, and there's another 6 minutes and 30 seconds left of this? I'm calling it. I've got enough of a response already. Awaiting your rebuttal, Adrian. Please tell me you'll give better argument (or at least less 'open-ended' ones) that this guy.

[Tiberius]

Actually, the Amazing Atheist is correct in that value is made by people. Paper money is exactly that: an paper item granted value by a general society (though not necessarily all) for the purpose of trading it.

This argument simply doesn't stand up to scrutiny. If the banks suddenly all disappeared, paper money wouldn't be usable anymore (since if you can't ultimately exchange it at a bank, it has no representable value). The whole point of paper money is to be a representation of your actual wealth, which is stored at the bank (historically in the form of gold). This is why on Bank of England notes, it says "Bank of England. I promise to pay the bearer on demand the sum of X pounds", where X is the value the money represents. If you take the note to the bank, you can demand that they pay you £X worth of gold, by their promise.

If there are no banks, there cannot be this exchange, and so paper money ceases to be a tradable item. There is no value in a promise from a bank that doesn't exist anymore. The perhaps more obvious reason why money doesn't have a value is because it is cheap to make (paper money especially). Paper + ink doesn't amount to much worth, yet you are arguing that you can increase the worth of something just by using that paper and ink to print money? Why then, doesn't the country simply print large amounts of paper money and give them to the population? By your argument, this would increase the wealth of everyone in the country, since money is given value by society; yet when this happens, we meet inflation. If the government printed out billions of dollars and gave them to the population such that everyone had at least $1,000,000 each, what would happen if everyone suddenly decided to get the amount of gold the $1,000,000 was worth from the bank? Well, the bank wouldn't be able to pay up, since that amount of gold doesn't exist. What you have is essentially a worthless promise.

Money is one thing only: a thing which has value to a certain person, which then serves as payment for another thing valued. The milkman doesn't want any more milk, he has little value in your milk. The needy man on the street desperately wants your milk. He holds much value to it. Value is entirely subjective... if one person thinks a fair exchange is 100 good-sized, already-filleted Sockeye Salmon for Mass Effect 2: then they do. If a person finds a single rock to be more valuable than a large restaurant chain... then they do. One must remember that money is not coin-currency alone (henceforth simplified to 'currency').

No, money is not a thing which has a value to a certain person. Money has no intrinsic value, it has a value attributed to it by the government and the banks. What you are talking about in your example is bartering, and I agree, this is an entirely subjective exercise. However, this is the only exercise where one can truthfully put a value on something, because it is a service or product that has a worth to someone. Bartering occurs when the consumer wants something the producer has, and the producer wants something of equal (or better) value in return. One person might find a rock more valuable than a restaurant chain, but if the owner of the restaurant doesn't value the rock at that much, then no transfer will take place.

Money isn't currency alone, I know. It is also demand deposits held by the bank (historically in the form of gold). However, these two things are the only representable forms of money. To suggest there are any others (of that bank notes have any intrinsic value) is ridiculous. A bank note is a promise, given to you by the bank. By using it to pay for something, you are transferring the promise to another party. It's a bit like someone writing you a promise to cut your lawn, which you then transfer to someone else in return for an item. The original person who promised to cut your lawn now has to cut theirs instead (unless the transfer is made again).

A standardized currency needs be one thing only: standardized. It may be the most bizarre system worked up (eg, trading buildings or their services for other buildings or other services)... or it could be entirely digitalized (Bah! Republic credits count for nothing out here.)... or it could be a sleek single currency system (Please sir, can I have 10,000 pennies?)... or it may be done in strata (100 A for a B, 100 B for a C, 100 C for a D)... or it may be done in a way entirely unlisted (Like you get things free if you have ____ rank).

These words are all completely meaningless. Yes, of course a standardised currency needs to be only standardised. This is the same thing as saying that a blue airplane needs to be blue only. Whilst it's true, you are ignoring the whole process behind it. What does it mean to be standardised? This is where you have to break down standardisation into different categories.

1a, Transportable: A thing of value DOES NOT need to be transportable. Example being buildings. So far as standardized currency goes, systems can easily work where one receives vouchers from others for doing services for them, and these do not even necessarily have to be given to people. Even systems like our credit card system don't need transportable money... they just organize the money into a different group depending on what it was used for. I disagree entirely with the simplistic and narrow notion that standardized currency applies only to a coin/paper money system. So far as coin and paper money systems go, even they do not necessarily have to be transported. It all depends on which system is in place as to wether transportation is required or not.

You miss the point entirely here. He isn't talking about items of value, he is talking about intermediary stages of bartering. In other words, instead of a long chain of bartering, you substitute money and make several short chains. So yes, money needs to be transportable. All the examples you give above are examples of transportable money by the way. From vouchers (transportable) to credit cards (money is transferred behind the scenes at banks you do realise...). Credit cards themselves are transportable! He isn't saying that standardised money applies only to coin / paper, but that a standardised monetary system must have transportable money in the first place.

1b, Divisible: Not at all necessary. A standardized currency in no way states that the trades will be fair.

It is necessary if you want a medium of exchange. If you only have one set amount (say $1) then everything must be traded under multitudes of that $1. Fair trade has nothing to do with it, since even under this system trade can be fair (i.e. if an item is valued at half a dollar, you can only buy them in multiples of two). The problem comes when someone doesn't want to buy multiple items; they only want one. Divisible mediums of exchange are necessary for a standardised system.

1c, High Market Value: Entirely subjective, as noted before. Invalid, and like 1b: unnecessary in it's being a standardized currency.

It isn't subjective if it is a standardised system though, that is the point. If it is a standardised system, two $1 bills are worth exactly the same.

1d, Recognizable: Not necessarily. A foreigner or blind man or hermit may have absolutely no fucking clue what it is they're looking at (so to speak)... that doesn't stop it from having value. "What is that fucking thing!?", says the islander of the chicken. He may pay for it purely out of interest and/or of what you've told him about it. Recognizability certainly does help in most cases though. But again it isn't vital for all systems to work, however efficient.

You are once again talking about items, not money. What he is talking about in the video is money!!! Money must be recognisable so that it can be used. If you can't recognise money, you could go up to a shopkeeper with a dead rat and say "Here is $10 for this purchase". With money being recognisable, the shopkeeper would kick you out the store. A $10 note looks exactly the same as another $10 note.

1e, Resistant to Counterfeiting: Sure it helps... but this is (again) rather unnecessary so far as the functioning of the system goes. That some may want to capitalize on how easily reproducible the money is... is just capitalism. After the market fucks itself and everyone aboard, it should be a decent system (albeit one with many fuckings over of itself). With some forms of money (say chickens)... the counterfeits would likely be just as valuable as the real things themselves... so what point there would be in doing so is completely unknown to me. It isn't essential to many systems that they be uncounterfeitable... however much being so may help the market

*sigh* Once again, you assume everything possible is a form of money, when it isn't. Money is separate from valuable items; it is a medium of exchange! It has to be resistent to counterfeiting otherwise I could simply print off a load of $100 bills and call myself rich. The promise on those bills needs to be real, or there is no value you can exchange them for.

2, unit of account: Describes a specific type of standardized currency. This type of currency is rather unstable over time, with inflation being one of the most fundamental problems with it. It can often become utterly meaningless (so far as 'value' is concerned). This is what he serves up that you defend as 'ftw'? Fuck that much? Anyway, onto this particular currency.

No, it describes standardised money, not currency. Money always has to have a unit of account, otherwise what is the point in using it. Inflation occurs when more money is produced than currently in valuable forms at banks (in the forms of precious metals, etc). It doesn't happen because the system is unstable.

2a, Divisible: No actually... it does not need to be divisible. Single-coin currencies work perhaps just as well in this system under some iterations (credits) as they do in multi-coin currencies (such as America's penny-nickel-dime-quarter-dollar-5$-10$-etc). So again, it does not need to be divisible.

I've gone over before why it doesn't work just as well. It ends up with people being forced into buying more than what they need, and at the other end of the spectrum (with a single-coin currency) it ends up with people having to carry a large amount of coins around.

3, store of value: Only things with a 'POV' can create value... rocks don't create value, gold doesn't, fantasy dragons don't, not even my strawberry poptarts do. Should 'money' be any different in this respect? Again, we give things value. I'd think most of us value money, even if only in relation to other money. The starving man given 1000$ will soon not be starving... he probably values those coins like they are an obsession, hoarding them, keeping his hands close to them, resting unwell. The billionaire given the same thing might say "keep your money" or "oooookie????" or in many other ways be unimpressed by the paltry sum. I'd say money (paper, coin, credit, etc. things that you normally think of with 'money') creates value in the same ways a sword, cow, or spacefaring vessel create value... and that is all in our heads! They don't create the value... we do in reaction to our subjective interpretation of what they are.

What different amounts are worth to different people is irrelevant. Money must have a store of value otherwise it doesn't represent a value. Yes, $1000 is worth more to a poor man than a rich man, but it is still worth $1000. If money creates value, why not print lots of it and let everyone be rich? I think you know why this is a bad idea...at least I hope you do.

Moving on: 3a, savable: The money does not have to be savable. If money in a system is food, then it really only has to be edible. And edible things don't do well on the whole "saving" thing, unless they are Red Bull, which is disgusting!

This is why food isn't money. Money has to be savable so it can be used later rather than immediately. Taking your example of food as money, what if you want to trade it for a service? You can do so, but you have a limited time to do it in (or the food will go bad). Money has to be savable so that you can earn it and then use it at a much later date.

3b, storable: Depends... is holding the weapon in your hands 'storing' it there? If it is, then I agree that things must be storable (fuck, everything is). If it was meant more along the lines of "stash the sword in a safe, and when the demons come, run over and get it out of the safe (while you're getting butt-raped by satan)": no, it isn't necessary. Is is a common, efficient, and fairly simply way for the system to work? Yes. Does it have to be done this way? No, note the above 'holding it in hands', 'spend it fast' kinda thing.

Again, if it isn't storable, you have to use it immediately. You say it's not necessary, and in the strict sense of the word that's true, but I wouldn't like to live in a society where all the money you earned had to be spent immediately. Everyone would be in constant flux of poor-rich-poor-rich as they received and then spent money instantly.

3c, retrievable: Not necessarily. They could simply be credits, with the cost of your purchase linked to the bank, which then moves that amount to the person you purchased from. Unless you call that 'retrieving', then no, it isn't a vital part of this.

That's still retrieving something, and the point of money is the be a representation. You should be able to go to a bank and ask for the gold equivalent of your money. You can't do this these days, but that's because the system has become retarded.

3d, Valuable Upon Retrieval. Banking crisis familiar to you? No/yes? How about inflation? Yes? Good good. So you should already understand why this 'point' is stupid. Like... fucking stupid.

Erm...no. If money isn't valuable upon retrieval, what is the point of it. Inflation isn't a failure of money standardisation, but of the economy itself. Money should be valuable upon retrieval.

[Rhizomorph13]

Adrian,

It seems that you think money is supported by some standard? Everywhere you mention money, you talk about it being linked to some real item like gold or precious metals. In the video you posted they mention fiat money which is not linked to any real object. This is the best way for money to operate. Money that is tied to a standard is rigid and will expand and contract based on the amount of that material that a country has as well as the market value of that material.

When the US was operating on the gold standard, other countries were able to liberate our country of gold when gold was of low value. They would then trade gold for dollars when gold was of high value. I'm sure you can see how devastating this could be over the long run.

There was a time when we were said to be on the gold standard but banks would NOT trade gold for dollars; they would only give dollars for gold because we were trying to increase our gold reserves. I would have been pissed, because what value is my money if I can't actually trade it for gold? The only recourse was to switch to fiat money which better represented how the money was operating anyway. Money can still purchase gold and gold will still get you money but at any point the government can simply refuse to sell gold and they are not violating any contract.

There was even a short amount of time when the world was on the US dollar standard (Even though the dollar was fiat) and all countries agreed to peg the value of the dollar regardless of economic factors. The reason for this was because of the rampant inflation around the world and countries wanted a place to store wealth.

The value of a countries money is determined by many political and economical factors but most heavily by the GDP of that nation. It is kinda the way companyies are valued on the stock exchange; a mixture of confidence in the company, assets the company holds, business volumn, and exchange activity.

The way that currency exchange is set is related to a theoretical "basket of goods" that a particular consumer of that country will probably purchase. The value of that basket is set through market forces and that signals other countries as to whether our economy is inflating or receding.

The reason for useing fiat money is because it is reactive to the needs of the economy. The government can print more money to inflate the economy and can shrink the amount of money through the use of t-bills and government bonds (Hopefully the economy grows before the government has to pay off those bonds or bills). Another action that governments can do is simply start over and de-value a specific print run of their money which is a terrible way to operate and will certainly make your country lose traction against other currencies (who wants to own Pesos when Mexico periodically declare their money worthless?). The problem with fiat money is that it is historically impossible to control and usually leads to rampant inflation but theoretically, if managed correctly, it is the best way to respond to market forces.

Rhizo