One potato two potato

What is money?

It’s a proxy, a stand-in for exchanging value for value.

Does money have value? Should it? I think not.The entities being exchanged have value but money should never have intrinsic value. Money should be a temporary representation of value that is used in transactions between entities exchanging real things of value for other real things of value.

Something like the gold standard therefore is the wrong approach as this gives intrinsic value to a rare resource. Gold, silver, platinum are useful for various industrial and decorative purposes and their relative value might be representative of some worth. But because they are rare and permanent they can be hoarded and controlled. Money (value for value exchange) should never be allowed to be “cornered” or overtly controlled; rarity is not a system of value.

Say I grow corn. And you raise chickens. I’d like some of your chickens and you would like some of my corn. We could establish a system of value for value exchange, e.g. money or currency, by creating a temporary contract, 5 chickens = 1 bushel of corn. Currency is always a ratio: x of these equals y of those. If I plant corn in the spring but would like to acquire some of your chickens before the corn can be harvested, I could create a little promissory note, “NOTE WORTH ONE BUSHEL of CORN”. If you *trusted me* I could give you one of these and depending on how valuable you considered my corn, you would give me five of your chickens.

Now, here’s the part that fails with our current monetary system. Harvest comes and I have corn to spare. You come to me with that NOTE I gave you and exchange it for a bushel of corn. But what should happen to that NOTE now? Our contract is complete. I got chickens and you got corn. That NOTE I created as a promise should be destroyed. I no longer own you a bushel of corn. I have possession of this NOTE and it *should* no longer possess representational value.

Our current monetary system uses dollars. These dollars, these NOTES, have no intrinsic value. Nor have they been created as promises, as proxies or stand-ins for real value. That’s the rub. That’s the problem. Today’s money exists not as true proxies for value for value exchange, but as some fabricated, faked up promise created out of thin air. Money, the dollar, is magically created from nothing and somehow we accept it as representing value. And it gets worse. That dollar is not just magically created from thin air — a promise is made to banks to pay them a dollar — for nothing! We, government, society, goes into debt to create dollars owed to banks with which we then trade among ourselves, value for value.

We need a new monetary system.

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One response to “One potato two potato

  • Anony Mole

    This is a too simplistic post. More thought must be applied to the concept of what is money.

    Money = debt.
    Currency, however does not = debt.
    But somehow money = currency.
    Somehow we need to reconcile this.

    ~~~~~~~~~~~~

    If I promise you a bushel of corn, to be delivered next month, trading that promise for a brace of your fat chickens, that promise of mine is a debt. You could theoretically take that promise, an IOU, to Stan the gam-man for a bushel of sweet potatoes. Then, next month I would owe Stan the bushel of corn.

    Somehow that IOU, that debt, became a kind of currency.

    But it’s not a universal currency, it only works for me, you and Stan.

    But if we were to use something like a gold coin instead of that IOU debt, Stan could collect all the gold coins in circulation, hoard them essentially, and then we couldn’t conduct commerce anymore. (Stan became a miserly banker!)

    We can’t have this either.

    What to do?

    Somehow we need to create a currency that’s at the same time debt but not debt. That is portable, but cannot be hoarded or controlled.

    I *think* the old Native American concept of wampum might be useful here. Have to think on this some more…

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