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WhatIsMoney

Possible Definitions

Modified from http://en.wikipedia.org/wiki/Money and http://en.wikipedia.org/wiki/Fiat_money

Money is any good or token used by a society as a medium of exchange, store of value and unit of account.

Trade without money may happen as:

Direct barter: Inefficient because it requires a coincidence of wants between traders.
Indirect barter: Maybe this is Commons Based Peer Production?

Money is considered to be any token that is useless to the common citizen:

Precious metal coins: What could you use this for on an island?
Paper money: Obviously, though maybe kindling.
Disturbances on Magnetic or Optical media: This is how electronic funds are stored.

But precious metals are valuable in industry and are finite. For these reasons, money that is “minted from” or “backed by” them is considered a ‘Commodity’ money.

Commodity money was the first form of money to emerge. Under a commodity money system, the object used as money has inherent value. It is usually adopted to simplify transactions in a barter economy; thus it functions first as a medium of exchange. It quickly begins functioning as a store of value, since holders of perishable goods can easily convert them into durable money. In modern economies, commodity money has also been used as a unit of account. Gold-backed currency notes are a common form of commodity money.

Fiat money purchasing power derives from a declaratory fiat of the government issuing it. It is often associated with paper money unbacked by fixed assets, issued without the promise of redemption in some other form, and accepted by tradition or social convention. Fiat money is called fiduciary money in many languages.

Acceptance of fiat money is most frequently enhanced by the central authority mandating the money’s acceptance under penalty of law and demanding this money in payment of taxes or tribute.

Patrick Anderson's Contributions

These are some links contributed by PatrickAnderson:

Discussions

Collaboration is one of the fundamental Objectives of most wiki communities. Within each such community, various discussions seem to reach a point where participants try to establish an effective understanding of their respective Objectives. This frequently includes striving to understand one another’s Values. The fact that societies use Money or Currency as a way of enumerating Value, leads to the questions of “WhatIsMoney”, especially given emerging Technologies and Open Source deliberations.

This page currently …

"People are in dangerous economic situations."

HansWobbe was ‘provoked’ into working on this page by LionKimbro’s question… :)

Hans, I have a question for you.

Do you think that “talking about money” being a taboo in our culture is part of the reason why people are poor?

I’m interested in your perspective on this.

My theory is that most people are in deep denial, and try to sweep finances under the rug, because it’s not a pleasant situation for them. It’s unpleasant because they don’t have much money. When you don’t have much money, (perhaps not enough to pay the bills,) then it evokes visceral emotion, anger, fear, worry, etc., etc., etc.,.

But because they don’t think about them, things that could get better turn worse. At some point, people have to do something to correct things, but once they’re done, they get worse again.

My theory is that people have, not just individually, but collectively, performed this sweeping on the rug. Hence the whole: “If everybody else is spending, why can’t I?”

I’ve been thinking that: If we could wave a magic wand somehow, alleviate those fears, and make talking about saving, about responsible spending, about “where you’re at, and where you want to go” a little more publicly visible, in a way that respected everyone’s humanity, then people’s situation would be better.

Do you think this kind of thinking is on the right track? Or is this just nonsense, and there’s something that’s really important, that I’m not taking any account of, that you believe I should stare at instead?

The problem I’m thinking about is: “People are in dangerous economic situations.”


In general, I have not encountered a “talking about money” taboo, except in a few situations such as when people are trying to arrange themselves in some kind of ‘pecking order’. When this type of “mine is bigger than yours” mindset is active, then money is one of the metrics that is frequently considered.

Let’s start with the Observation that…

“People are in dangerous economic situations.”

While this may well be true (and I think it is more often true than not)…

I do not think that the lack of “talking about money”, as a result of some perceived taboo, resulting from “visceral emotion, anger, fear, worry, etc., etc., etc.,.” is, in itself, a significant factor.


CategoryEconomics?


I guess what I noticed was:

  • People are happy to talk about what they spent their money on.
  • What their financial situation is like, though, is very closed book.
  • But not at coops, communes, etc.,. And those coops, communes, are very financially healthy.

At every coop or commune that I’ve visited, I’ve been surprised by the frequency and openness with which they talk, just casually, about their finances, financial goals, etc., etc.,. It’s just something they seem to talk about openly between themselves, even before visitors. And their situation is usually good.

And, I was thinking that perhaps the health and the openness were connected, by some sort of mutual accountability thing.

Perhaps what you noticed on the Co-op & Commune scenes results a bit from an effective ‘self-selection’ process.

From what little I know of such organizations, enduring membership requires a much higher level of Trust than is evident among the general population’s dealings within their respective societies. I don’t mean that a higher level of Trust is a prerequisite for joining, but rather that individuals who are even remotely likely to join such an organization are, by nature, more trusting of, and open with, each other. Such ‘trust’ and ‘openness’ is generally the antithesis of the need for ‘privacy’ that many people espouse, especially when they feel they have something to hide. Not surprisingly, I have found individuals with this type of mindset are also much more likely to be interested in personal ‘property’ and ‘ownership’ rights than I would expect a member of a commune to be.

I think these types of characteristics are much more likely to be the dominant forces that explain a propensity to talk openly about financial matters, than an inhibiting “taboo” theory is.

That being said, would you like to return to the root hypothesis you posed of “People are in dangerous economic situations.”?

Oh, please do; Sorry for interrupting..!

  • Nothing to be sorry about. Interruptions are encouraged, especially since they may cause a different, new, emphasis to emerge. – Hans

http://janus.datafix.com/hwo/images/lifePhase.jpg

Some related thoughts …

  • I think it’s important to note that “dangerous … situations” are a relative judgment.
    • I know several people that think they are in imminent “danger” of a “loss of employment”. Of these, one has financial “reserves” (savings) that are more than adequate live out the reasonable life expectancy, without having to work again. Yet, the fear of having to get by with a bit less is almost debilitating. Another of these acquaintances has not bothered to acquire any “retained earnings”, what so ever; in fact, perpetually spending more and struggling to make it to the next ‘raise’. I am absolutely certain that both of these individuals are still very much in the center one of the three preceding phases, and neither of them has any concept of the ‘danger’ of finding oneself in the left most cell of the table, where being deprived of any one of the four components really does constitute a “dangerous … situation”.
    • To balance this out, I do know some people at the other extreme of “prudence”, who believe that they need to have two years of expenses as liquid “spending money”.
  • In short, I have come to the Conclusion that the comfort zone (in which there is no apparent threat or “danger”) is a very wide range.

Perhaps this quote sheds some light…

  • Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness.
  • Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. – David Copperfield

Finally, it’s interesting to note that lenders (Banks, in particular) have for many decades measured lending risks and expressed them in TDSR & GDSR (Total & Gross Debt Service Ratios - the percentage of ones income that is spent servicing debt costs). These metrics are an effective default guideline, in the absence of more specific Reward / Risk ratios.

All of this assumes that no unusual “catastrophic” events occur; something that is actually quite likely in an average person’s life span.

pageSegment development plans

Lion: …

WhatIsMoney” is an interesting thing in it’s own right. Hans & I might want to separate our conversation into: “EconomicSituation?.”

(yes?)

Hans:

Perhaps DangerousEconomicSituation?(s) since it is more descriptive of your original question?


This pageSegment …

Page development plans


Also: AlternativeCurrency


Discussions

Thoughts: How is backing money with a precious metal different that fiat money?

In Felix the Cat: The Goose That Laid the Golden Egg Felix works at the “RELIEF BUREAU” handing out coins sliced from the eggs “Goldie” produces.

While the apparently poor people line up for a handout, Captain Kid steals the bird and sings:

We takes what we wants, and we wants what we takes, for we’re pirates out looking for treasure.

If we see any gold, we steal it away, robbing widows and orphans of pleasure.

Money is pleasurable only after it resolves to either a good or a service.

Felix chases Kid and recovers Goldie, then showers the city with coins from cannons.

The resolving power of each coin decreases as number of coins increases.

So if every household had “at cost” access to gold-egg laying geese (or counterfeiting machines), the ‘value’ of gold (or money) would tend to zero, and able workers would still starve.

But if every household had “at cost” access to real-egg laying geese (or Land and Capital), the ‘cost’ of eggs (or goods and services) would tend to zero, and able workers would become the only important humans.

The root constraints of human action alone are not enough to generate the cooperation needed to realize the general form of the second scenario.

In other words, the laws of physics + the laws of the land do not constrain (innocent) owners from hoarding for profit, so the ‘cost’ of most everything (especially land) is much higher than needed to otherwise fully compensate all workers (in fact wages would be higher).

Well, if it’s confusing to you: think about it for a while.

Don’t pay attention to the gold, pay attention to the system.

It’s not that it’s “gold” or anything else. It’s that it’s a rare thing. It’s intentionally rare.

And if you’re brain’s going: “Therefore, it’s the man, trying to STOMP DOWN on the little guy!..”

…think again: Because 10 people living on an island may well do the same thing. It’s just a system for keeping accounts.

It’s a materialization of the system of accounting that people do: “I’ll do a favor for you if you do a favor for me.” “Oh, John’s done a lot of favors for us, so we probably owe him some favors, too.”

It’s just counting happening in the head, at the level of favors, and “ReputationCurrency?,” right?

So what civilization did is say: “Let’s get this out of our heads, and now we can keep fairness (the root cause of the tally in our heads) on the scale of 1,000+ people.”

I grant that there are problems with how things are. But we should be real clear on our foundations here.

If every house has an egg-laying goose, you’ve got an over-abundance of eggs. People will be sick of eggs, day in, day out. And you’ve got to distribute those geese, and you’ve got to distribute the food for those geese, and you’ve got to build their cages, and you’ve got to get those houses built ,too.

If every house has an egg-laying goose, you’ve got an over-abundance of eggs. People will be sick of eggs, day in, day out. And you’ve got to distribute those geese, and you’ve got to distribute the food for those geese, and you’ve got to build their cages, and you’ve got to get those houses built ,too.

I sincerely want to discuss these things, but am worried it would be taken as offensive or sarcastic.

It’s not that it’s “gold” or anything else. It’s that it’s a rare thing. It’s intentionally rare.

Yes, these are like a point system.

And if you’re brain’s going: “Therefore, it’s the man, trying to STOMP DOWN on the little guy!..”

I no longer think economic troubles are about STOMPING, but there is a list of salient features in this reality that must be explored “to the bitter end” if we are to discover the ultimate causes and solutions to poverty. This list is not generally explored for reasons I don’t understand.

I’m not sure what you mean by “root constraints of human action,” but I may be able to help out a little with the money thing:

  • Imagine that you meet somebody, your equal.
  • The person does you a favor.
  • You now feel inclined to return a favor. Because it is fair, because it is beautiful, because it is good. You like the person, and want to “even the score,” as they say. It’s just natural.
  • The person does you another favor.
  • Now you owe the person two favors..!
  • You do three favors.
  • Now they owe you one.

Now let’s say you want to scale this concept to 1,000 people.

But it’s not possible to keep the tally in our heads, in a reliable way. We can’t memorize all the transactions and tallies of who owes whom for what when how. And there are all these differences in what people need and want, and it’s hard to quantify it all.

So we make “money,” which is just an external object that represents that “favor.”

Problems:

  • Counterfeiting.

It’s basically like someone who wants to make you feel like you owe them a favor, but you don’t, really. Because they never did you a favor in the first place.

So what do you do?

You make your “favor” token something very hard to counterfeit.

In the past, they used gold, because it was so rare, easy to distinguish, hard to fake. (Note that gold mining actually disrupts this, and works against the use of gold as a currency.)

Gold is not intrinsically valuable. If pine cones were hard to counterfeit, and there were no pine trees, then we could just as well use pine cones.

As it is, we use highly stylized papers. Australia now uses some special form of plastic, I understand.

Our money system seems to have some problems, though.

The basic trust- that money represents a balance of favors- is in many ways, disintegrating. And we’re feeling bolder as we find concepts that can replace it: AlternativeCurrency. Keeping our own tallys, a concept called “private currencies.”

The tax guys have a big job ahead of them..! I think the legal standard is presently: “MUST be pegged to the US dollar.” But that’s completely unrealistic, unworkable, and I don’t think it’s going to stand. And I think they know that.

So when things are feeling fuzzy or unclear about the inability to copy currency, just remember: Do you want people to be able to copy your sense of obligation to them?

That’s why currency issue is a big deal, and why most alternative currencies that aren’t 0-tally based (the sum of all bank accounts is zero) issue through charities and group issue and the like.

Hans, what do you think of the explanation I just gave?

I’d like to work it into the wiki somewhere; some page about how currency comes from the desire to keep track of favors, or something. Or maybe a “basic” version of this page, or something.

Apart from balancing favors within a local group of individuals - like a tribe - there is a mobility aspect of money. When I can rely on the fact that the next tribe, living six hours north of the river, accepts the same money, I can carry that instead of goods when making the long march up to visit them. Little non-corrosive metal-slices are much easier to carry a long way than loads of potatoes. Money-systems created an enormous amount of mobility.

I think the idea of money in this situation is very derived. Typically they might have taken a few rabbits with them or some other presents to make friends and getting shelter or food in an unbalanced exchange … to build personal relationships. There is little that is so useless as a gift as money. Even now, in our times, it is considered bad taste and something impersonal, to give money as a present.

I meant trade, not presents. Gold is a good as well, it turned “money” for its rarity and its transportability. OK, because it shines too.

Better transportability provides electronic money.

Patrick, I know your thoughts on money are a little different than most of ours. I want to hear you and see you here, but I don’t want your view to appear to be CollectiveSpeech. So, I’ve sectioned your text.

Is that okay with you?

Neither MoneyAsDebt? nor Executive Order 11110 were created by me, I only reported them because of their importance. Calling the section Patrick Anderson on Money is incorrect, since all of the text there was written by someone else.

I know most people dislike truth that is not upbeat, but how else are we to discover what must be changed?

Patrick…

  • (removed un-necessary question)

Having looked at this page for the first time in quite a while, I certainly feel that it could use quite a bit more refactoring. Perhaps, once you selected a section title, I may gain some insight into how to contribute further to its development.

  • I am forming the opinion that the original “EconomicSituations?” theme that caught me attention should be removed from this page since it is at most tangential to the WhatIsMoney topic.

I had placed MoneyAsDebt? in the = Possible Definitions = section, which I think is fitting, and glommed on the Executive Order 11110 as a kind of footnote only because I happened upon them at nearly the same time…

I would like to see MoneyAsDebt? as a Possible Definition, since it is an accurate description of how local banks generate Federal Reserve Notes through partial reserve banking - though it doesn’t capture the entire problem, of which “renting the right to issue” is (I think) much more devastating.

I understand Lion’s concern about CollectiveSpeech in some ways, but I’m not so sure it is necessarily true (Mattis has done some study here), and even if it were true, ObjectiveTruth is not the same as popularity.

I have moved the film to == Speculative Explanations == until we can determine whether it is valid or just opinion. I wonder how or if that can ever be accomplished - no matter the subject…

I’m not a stranger to these perspectives and arguments; For example, at a SaturdayHouse in the last month, the link to "Money As Debt" came up, and I watched the movie in its entirety at that point. Further, the conversation was held a few years before, while WikiVanning. And then, I’ve also seen the discussion on the Fork mailing list, where an agitator keeps pressing the issue. This is hardly something new; People have been arguing about this for a hundred years.

The problem here is that I think you’re trying to force CommunityWiki into being a staging ground for your perspective.

Supporters of your perspective, I think would include: TedErnst, MarkDilley, MattisManzel.

Detractors from your perspective, I think would include: AlexSchroeder, BayleShanks, BrandonCsSanders.

As for TedErnst, MarkDilley, BayleShanks, BrandonCsSanders, – I know their positions, because we had just this conversation while WikiVanning. It was one of the few low points of the ride.

What is clear here, is that we should not have links to your propaganda, at the top of the page, written as CollectiveSpeech.

I think we should just nuke this page; I don’t see how anything valuable is going to come of it. I start to fall asleep, just contemplating it here.

Would you say these points are true but taboo, or just simply false?

You can take a number of true facts, and arrange a picture that’s wrong.

The truth-hood of some facts isn’t what’s under question; Under question is the picture that’s being painted by arranging facts just so.

There are a very few conversational subjects that I consider truly “taboo.” However, there are a lot of conversational subjects that I consider simply “boring.”

  • boring: young Earth creationism
  • taboo: ethics of underage sex

Lion, I’m sincerely trying to paint truth. What do you perceive as my intentions?

I think you’re an earnest truth-seeker, and that you’re trying to share with us, what you’ve found so far.

So let’s find out if the facts (when true) are arranged in a picture that’s wrong. I do not know and understand but if there is something basically unfair in the global monetary system ~ and yes, I have my suspicions on that ~ then it’s us, the open source software people worldwide who can essentially help to solve the problem by providing a transparent alternative system. Using it still is another thing than creating it. Todays monetary system is not transparent.

I agree that there’s something basically unfair in the global (and national) monetary system, and our economic systems as a whole.

And I think that making alternative systems is a good way to go.

I need to go right now, though…

…back.

Criticism #1: “Money is Debt! OMG panic!”

The purpose of money is to track expenditure, to make sure people aren’t getting something for nothing.

So it’s all about debt, and it’s always been about debt.

There is no difference between saying it’s “about value” (or “credit”) vs “about debt,” since they’re two sides of the same coin.

Look at the InternetExchange. All money there is simultaneously debt and credit. The value is in willingness to trade skills (which is economic) and assurance that you won’t be taken advantage of (which is fair.)

Without someone going into debt, and later getting out of debt, trade can’t happen. (Who is most advantaged by the system? The person who goes into debt, not credit!)

Criticism #2: “Fractional Reserve Banking! OMG panic!”

The story seems to be that, because of fractional reserve banking, combined with requirements for interest, that there is an ever growing monster debt that grows and grows and grows, requiring greater and greater growth, and thus continuously staving off a collapse.

This links two stories: “Fractional Reserve Banking is Bad,” with: “The Addiction to GDP Growth is Bad.”

I am sympathetic to the second, (must we grow perpetually?) but not to the first, and I think that the two stories are being irresponsibly tied together.

Questions:

  • Are fractional reserves really 10:1? I thought that it was far lower than that, somewhere between 50% - 150% (0.5:1 - 1.5:1.)
    • (I understand that currency trades can have, say, 100:1 leverage, but that’s because their values change so very slowly, making pull-out easy, should the value go down a smidgeon of a point.)
  • Aren’t there a ton of protections put in place, to make sure that you’re not re-re-re-fractionalizing the same dollar?
    • And if you were to choose a different bank to fraction your money in, and then go back and forth– isn’t that a pretty heavy duty fraud conviction?

My understanding is that these systems are far more complex & stabilized than the bank fear-mongers care to understand or investigate.

A lot of times, I’ve looked into things that they’ve said, and found, “Oh, wait, there’s a perfectly okay system there,” under the hood. They just took something wildly out of context. Most recently, this happened when I investigated the claims of someone, saying that there were 1:100 margins out there. It turned out to be currency margins, and I figured out why it was okay, on my own. I later confirmed my reasoning with others, and found that they confirmed me.

Thus, my trust of the anti-banking crowd is weakened.

Which is too bad, because our monetary systems are unfair, I believe, and there are perfectly good arguments against them, and perfectly good techniques for working around it, to support and to build on..!

Here’s an example:

  1. omg, 400:1 leverage!
  2. me, doubting
  3. me, explaining
  4. confirmed

My favorite quote:

All these big numbers sound very, very scary — but one thing I’ve learned over the last couple of years is that the whole global economy is a lot more robust and the financial institutions that support it a lot more risk-averse than you might think reading the pop press. That’s not to dismiss the Black Swan scenarios; but really a panicky populace losing faith in the consensual hallucination we call global economics is more dangerous than any imagined fragility of the web-of-dependent-value created by all this financial activity. Not everybody out there is a Mad Money Cramer playing with the global financial well-being. (And those that are — aren’t going to last long, and damage is sort of self-compartmentalizing. For the most part. ;-)” – JeffBone?

Define external redirect: MoneyAsDebt CategoryEconomics DangerousEconomicSituations EconomicSituation DangerousEconomicSituation JeffBone EconomicSituations ReputationCurrency MonetaryConsiderations

EditNearLinks: WikiVanning AboveTheFold PatrickAnderson

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