[U]nderstand there is nothing inherently valuable about money. The only reason "gold" or "paper dollars" have "value" is because they can be traded for something that DOES have genuine value. Food, gas, a desk, a computer, a video game, etc. etc.It's worth reading the whole thing.
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31 comments:
Neal Stephenson's Baroque Trilogy has a lot of interesting thoughts about money and commerce as well (hint-don't take any cowrie shells in trade)...
Matt
St Paul
Any currency is really only a placeholder for effort. If I'm a barber, I have nothing to barter with the bald farmer.
I wish there was a way to validate that the currency you are holding is actually YOUR work it represents. Then theft insofar as mugging / breaking in for cash would be a thing of the past.
However, that requires more unicorn dust than is currently available.
Tam, the one small factor he didn't state is that money is also simply a universally convenient and efficient way for people to barter the products of their time and efforts with someone else for their products. His money QotD for me came in a later paragraph.
"So all the wars, all the votes, all the progressive taxation is NOT about somebody else's "money," it is about getting other people to forfeit their time to pay for the stuff you want to consume while sacrificing none of your time at all. It's about making other people pay for your "stuff." It's simply just slavery."
He's found the words to express a sentiment that's always torked me off about a certain group of progressive taxation fans - the 'it's not your money, it's the government's money' crowd. The ones who don't see that what they want to do IS the modern day equivalent of slavery.
"I wish there was a way to validate that the currency you are holding is actually YOUR work it represents."
That would be nice. I think a pure electronic form would be the closest you could get - nothing physical to steal, yet it would also allow for gifts - but even that would still be vulnerable to fraud and theft.
Disregard my earlier small critique, his entire post is a keeper - one I hope to use to educate my own kids when we talk about the value of money and economics.
He's wrong in that gold actually *does* have intrinsic value because it is a sparse commodity, requires much labor to find, extract, and refine, and is useful for many purposes besides as a medium of exchange.
And that it requires man-hours of labor to find, extract, refine, and coin is what keeps people using it for money -- that and the fact that governments cannot easily inflate a gold-based monetary system, and when they try, it is like turning on the DECLINING EMPIRE HERE neon sign.
harqueb.us,
There is not enough gold on the planet to represent its wealth.
Plus, using a rare and valuable commodity like gold for poker chips is a silly as... well, using gold for poker chips.
After some mass Zimbabwae style inflation, I am content that post apocalyptic survivors will have plenty of toilet paper.
*shrug*
I agree with it all, but he's preaching to the choir. The way it's written, the people who need to hear it and understand it will be so put off by the way it's being said that they won't listen.
perlhaqr +1. That... abrasive nature of his writing is one of the main reasons he's not on my reading list or blogroll. Openly and repeatedly insulting what should be your target audience is both irritating and counterproductive.
He illustrates quite well the difference between persuasive writing and bloviating. There's a reason I haven't bothered looking at his book - much less paying for it - despite the fact that he has some very compelling theories.
That being said, after filtering out his self-righteousness and insults, he's pretty much exactly right.
Tam: You have to use something that is fungible.
Gold can be electronically subdivided as mush as is needed ... or any other commodity item, for that matter.
The important thing is to prevent government counterfeiting.
Robb Alan: The problem with using time as a commodity is that some folks time is far less valuable than others. One hour of Neurosurgery does not equal one hour of ditch digging.
Everything has intrinsic value. Gold is useful as a conductor. So is silver, to a greater degree even than copper, in some circumstances. Nickel for alloys, iron, steel, chromium. Greenbacks have intrinsic value as well, especially old, well used ones. To educated assholes, though, the pictures of Washington feel no different than the pictures of B Franklin. Wealth, though, as he says, is not measured in currency, nor posessions, for that matter.
Kristopher,
Tell that to the neurosurgeon who needs to hide a body. ;)
Kristopher said:
"You have to use something that is fungible."
Bingo.
A favorite econ prof of mine issued a syllabus which included a vocabulary for a basic course.
Proved to be an incredible time saver. The word which elicited the most discussion before we opened our textbooks for the first time?
Yep - fungible
Jake said: "He illustrates quite well the difference between persuasive writing and bloviating."
Bloviating? Really? I didn't find anything empty or pretentious about his discourse. Quite the opposite, in fact.
... Mr.O
A unit of work-product could be an ideal currency. It would reflect the difference in value contributed by an hour of neurosurgery compared to an hour of Joe Biden speaking.
Reducing the UWP to an agreed-on numerical value presents some administrative problems. :)
Discussions of wealth often concentrate on physical "stuff" and pay too little attention to the other thing it buys -- freedom. The ability to take an extra day off without missing a meal, to simply wander and think. I might enjoy a five-buck latte or a Countess Mara tie, but nothing compares to the joy of knowing you can tell painlessly tell the boss to take a lustful flight at a rolling donut.
Any form of wealth must also be a reliable store of value -- worth about the same today as it was when you earned it, normal market forces excepted; currency tinkering by the politicians not excepted.
"I didn't find anything empty or pretentious about his discourse."
Empty? I'll concede that it's not, in and of itself empty. But his attitude and condescension work very hard to make the whole thing worthless (thus, empty in one sense), despite its actual accuracy.
Pretentious is not what I have seen in any definition of bloviate, though some dictionaries will vary. The word usually used is "pompous", which I will stand by, given his denigration of those who would disagree with him.
While I will freely concede that "bloviation" may not be the best word, I do think it still captures the essence. Either way, if he's trying to persuade and/or educate people, he's going about it in absolutely the wrong way.
Perlhaqr/Jake-
Thanks for capturing my thoughts.
Comes off as a bit more of a prick, right as they may be.
I read Aaron frequently and don't at all enjoy the ego and extreme self confidence that's all through his writing.
However, the content and substance are usually consistent with the truth as I know it, and are often supported with good links. He provokes thought even when arrogantly espousing something that seems entirely wrong to me.
It's all about content and those seeking thought stimulating concepts ought to be mature enough to look past the ugly wrapper and irritating presentation to grasp what is pretty much good stuff.
If you don't like it, don't read it; it's your loss.
He's wrong in that gold actually *does* have intrinsic value because it is a sparse commodity, requires much labor to find, extract, and refine, and is useful for many purposes besides as a medium of exchange.
This is why the theorists prefer "use-value" to "intrinsic value" of this variety; it's less confusing and doesn't lead one to imagine that the value is in the gold rather than in man's desire for its utility.
Those uses are use-value, and their capacity is intrinsic to the material ... but their valuation is purely on the part of man, and is not intrinsic to the gold.
(Also note that while rarity of something in demand causes it to have increased value, this is also not "intrinsic" in the philosophical sense.
The big bonus of gold from one point of view is that it is so hard to mine, not because that makes it "more valuable because it's rare", but because it prevents inflationary policy.)
Tam:
closed-mouthed amateur gravediggers time > Neurosurgeon time.
While what he says is in fact true. It doesn't really solve the problem, does it?
I prefer to invest my debt-bond backed inflation paper, into hard currency. Hard currency recognized the world over from dealing with the Akan, to the Inca, to the Zuni. Brass-copper-lead based projectile delivery systems.
Because as long as there are humans, there will be a desire for an efficient and express means of dispatching one's pesky neighbor or pesky pest as the case may be.
-Rob
Tam sez: There is not enough gold on the planet to represent its wealth.
Sure there is: take the value of everything and divide by the number of ounces of gold. BAM, easy conversion rate.
But you don't want to do that, because the market value of things change, as does the quantity of gold in circulation. And gold can be supplemented with less rare commodities, such as silver and nickle and copper.
And in a manner seemingly backwards to what we're used to, the price of goods decreases as your rare metals increases in worth, which means you're rewarded for saving as your mattress stash of gold represents an every greater share of the world's wealth.
And I agree with Sigivald's four paragraphs explaining what I tried to say in one.
There is not enough gold on the planet to represent its wealth.
There's no limit or "enough" to a ratio. That's all that supply and demand is, and that's what determines the "price" of things in an uncorrupted (free) market.
Plus, using a rare and valuable commodity like gold for poker chips is a silly as... well, using gold for poker chips.
Funny, the usual argument I hear against gold is that it's overvalued -- it's shiny and has minor uses in electronics, but beyond that it's just a yellow rock.
CC's "no value other than what you can trade it for" argument only applies to fiat currency anyhow, not any actual economic "good" such as a commodity.
At a very basic level, all the currencies men have chosen to use were goods that already had some basic utility to them to start them off, something you could use it for even if nobody wanted it in trade. Wood, for example, will always burn and provide shelter no matter how cheaply the market values it; "wood will never go to zero". Air is "free" but you're still dead in five minutes without it.
Fiat currency, on the other hand, has no basic utility. Zero is its natural free-market value, according to its cost of creation and (lack of) basic utility. Take away the legal tender laws, and see how long it lasts.
The big bonus of gold from one point of view is that it is so hard to mine, not because that makes it "more valuable because it's rare", but because it prevents inflationary policy.
That "bonus" applies to anything with basic utility. The laugh is that this "elasticity of supply" is the "bug" in fiat with interventionists tout as a "feature".
Fiat currencies are not inherently inflationary, however. New York taxi medallions are a sort of fiat currency, similarly having value only due to the economically artificial circumstances of legal force. The difference is that this "currency" is kept in a permanent state of restricted supply, a.k.a. deflation.
Some of the most interesting parts of "The Wealth of Nations" were the analysis of gold and silver currencies. Smith is a worthwhile read, or in my case a worthwhile listen via audiobook while driving. I would recomend anyone with an interest in economics read that relic of a time before most modern econ jargon and before wide use of paper fiat currencies.
Huh, guess it's not hard to understand why I've always been a useful tool instead of a politician or captain of industry.
Perhaps I need to preface with more honey or neck massage before clubbing someone over the head with his own stupidity.
There's a smug sense of satisfaction from being the only prick in the room blunt enough to say what most are thinking, but play-nice social animals like humans tend to frown on such public de-pantsing.
Oh well. "Diversity" promotions include misanthropes as a protected class, don't they?
"Empty? I'll concede that it's not, in and of itself empty. But his attitude and condescension work very hard to make the whole thing worthless (thus, empty in one sense), despite its actual accuracy."
Not aware that 'attitude and condescension' [despite actual accuracy] were able to alter fact.
"Pretentious is not what I have seen in any definition of bloviate, though some dictionaries will vary. The word usually used is "pompous", which I will stand by, given his denigration of those who would disagree with him."
I don't reckon that any strong assertion of an idea/opinion is likely to pass your muster unless it fits in the little box you've constructed. Just an opinion, by the way.
"While I will freely concede that "bloviation" may not be the best word, I do think it still captures the essence. Either way, if he's trying to persuade and/or educate people, he's going about it in absolutely the wrong way."
Perhaps he doesn't give a thought to whether his analyses/opinions are going to result in the proverbial butt-hurt of some readers. Rather, whether or not they are FACTUAL.
As to persuasion or education, isn't the onus on you to do your homework on the actual issue before you dismiss his effort?
Blanket condemnations based on emotional reactions are bad form.
... Mr.O
Tam, Seerak -
I'm confused as to why we would even need something to represent the wealth of the world.
Wealth is not finite, but but can be grown or distroyed.
Gold is just medium of exchange, one of many, and if you or any body else wants to use gold to buy something. Then both parties have to vaule it, if not you need to find something else they value.
Gold only represents or needs to represent gold and what we think it is worth.
Seekar you need to learn what inflation, expansion of the money supply, and deflation, contraction/shrinking of the money supply, means. I'm not sure how you came to think deflation was synonymous with scarcity.
Josh K. you need to learn a bit about glass houses.
If the money supply shrinks, that's deflation, yes. Well, what exactly does "shrink" of a supply of something mean, if not that the something is getting scarcer?
The dumbness of that bit renders fisking the rest of your incoherent comment unnecessary.
"The difference is that this "currency" is kept in a permanent state of restricted supply, a.k.a. deflation." - Seekar
Let's say there are 10,000 taxi medallions in NYC and next week there are 9,500 and the week after 9,000 that is deflation. Becoming scarcer.
If the market for can support 50,000 taxi madallions, but the issuing agency, keeps the number at 10,000 from week to week then there is no inflation or deflation in the supply of the taxi medalions. They might be scarce. This not deflation as there is no change in the number of medallions in circulation.
Now if the issuing agance can issue taxi medallions at will and doesn't care if those who all ready have time and effort invested in aquiring their taxi medallions are harmed. They could issue out the medallions, lets say to collect a fee to pay off past debts, in ever increasing numbers, inflation, eventualy making the medallions worthless.
Hmmm...
Ps. Seeker if you would of used the word deflated. Then your sentence would of been correct as you see the market for the Taxi Medallions. And that might be, now that I think about it, what you where trying to get at.
English second language?
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