I guess with this I am mainly talking about Western values here, but I really want to understand the why of money
Why does money operate in the way it does today? Was it inevitable? What kind of people put work in so that the economy operates the way it does today?
What historical movements/thoughts led to the way the current economy works?
If we were to run the clock back, would the world turn out the same way?
What psychological conditions exist or existed that allowed this kind of system to arise and flourish?
What books/articles/sites can I read to get a better understanding?
Thank you friends
What can I read to better understand how money operates?
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Re: What can I read to better understand how money operates?
You'll want to look into the gold standardand FIAT money.
Gold standard is the old system, where money was literally backed by a certain amount of gold - whereas FIAT is the modern system which allows government to control the supply of money.
The downside of a gold standard is that it is inflexible - a FIAT currency allows the government to control the supply (and therefore value) of currency. This is important in the current climate where things like quantitive easing (literally making up money) are intended to mitigate the recession.
At a less technical level, money is simply a convenient way of exchanging labour. If I'm a farmer and you're a blacksmith, if you make me a cart I could give you food. It's a fair exchange - but it's much more flexible if I give you something ('money') you can exchange for food of your choice (or something else entirely.)
So money was inevitable but not necesserily in it's current form. The reason it exists in it's current form is because humans are incapable of creating a fair and equal society, so the money system has to be flexible to account for that.
Gold standard is the old system, where money was literally backed by a certain amount of gold - whereas FIAT is the modern system which allows government to control the supply of money.
The downside of a gold standard is that it is inflexible - a FIAT currency allows the government to control the supply (and therefore value) of currency. This is important in the current climate where things like quantitive easing (literally making up money) are intended to mitigate the recession.
At a less technical level, money is simply a convenient way of exchanging labour. If I'm a farmer and you're a blacksmith, if you make me a cart I could give you food. It's a fair exchange - but it's much more flexible if I give you something ('money') you can exchange for food of your choice (or something else entirely.)
So money was inevitable but not necesserily in it's current form. The reason it exists in it's current form is because humans are incapable of creating a fair and equal society, so the money system has to be flexible to account for that.
Re: What can I read to better understand how money operates?
Dave has already raised a few points mentioned here but it's still worth a read for a encapsulated history lesson. http://en.wikipedia.org/wiki/History_of_money
Growing old is inevitable.......Growing up is optional
Re: What can I read to better understand how money operates?
What about more specifically, what existed that allowed us to see coins as a proxy for items when we first moved from the bartering system? You don't see animals using coins or substitute items to trade, so how come we were able to develop that? And what allowed it to become a universal phenomenon rather than just staying in one area etc?
Re: What can I read to better understand how money operates?
Which is NOT a good thing at all.a FIAT currency allows the government to control the supply (and therefore value) of currency.
http://mises.org/daily/4684
http://mises.org/money/3s11.asp
http://mises.org/money/3s13.asp
Re: What can I read to better understand how money operates?
The issue with much economic theory is that a lot of people describe it as though it is the way the world works.
Now clearly, a lot of economists have different oppinions. Some were able to predict the 08 financial crisis, some were not. Some are able to predict stock prices during 'non-crisis' years, some are not.
The current economic system is tied to currency exchange and the stockmarkets at new york, hong kong and london, and even beholden to money controlled by other entities such as foreign nations, or the price of labor in other regions.
While understanding money itself isn't too complicated in terms of purchasing power, understanding it in world economic terms is incredibly hard, because there's a lot of players attempting to game the system, and their methods are invariably changing the system in weird ways (an example of this is high speed trading at the stock markets).
Finally, it can even be tricky to understand money in personal terms - it is very tricky to determine personal worth, even though having a good understanding of it will easily give you a quality of life that's financially much, much better, so that's probably the most important.
These debates on gold standard and fiat money...feh. Don't mind them. Don't make up your mind on what to believe on that untill you've gotten a much deeper understanding of the subject.
Now clearly, a lot of economists have different oppinions. Some were able to predict the 08 financial crisis, some were not. Some are able to predict stock prices during 'non-crisis' years, some are not.
The current economic system is tied to currency exchange and the stockmarkets at new york, hong kong and london, and even beholden to money controlled by other entities such as foreign nations, or the price of labor in other regions.
While understanding money itself isn't too complicated in terms of purchasing power, understanding it in world economic terms is incredibly hard, because there's a lot of players attempting to game the system, and their methods are invariably changing the system in weird ways (an example of this is high speed trading at the stock markets).
Finally, it can even be tricky to understand money in personal terms - it is very tricky to determine personal worth, even though having a good understanding of it will easily give you a quality of life that's financially much, much better, so that's probably the most important.
These debates on gold standard and fiat money...feh. Don't mind them. Don't make up your mind on what to believe on that untill you've gotten a much deeper understanding of the subject.
Re: What can I read to better understand how money operates?
Are you trolling your own thread?Hashi wrote:What about more specifically, what existed that allowed us to see coins as a proxy for items when we first moved from the bartering system? You don't see animals using coins or substitute items to trade, so how come we were able to develop that? And what allowed it to become a universal phenomenon rather than just staying in one area etc?
Why would animals trade?
Trade routes opening up. It was more convenient than carrying a shitload of gold to all points of the compass. I think coins were originally substitutes for measurements of grain , salt, and perishable stuff. Paper money kinda started as a promissory note, probably of gold.And what allowed it to become a universal phenomenon rather than just staying in one area etc?
Growing old is inevitable.......Growing up is optional
Re: What can I read to better understand how money operates?
Animals DO trade, actually. Not in money, obviously, but in things like food and services.
The more obvious examples are in primates, where you'll have a monkey grooming another in exchange for reciprocal grooming, or some fruit, or yes, even sex.
But trading services for mutual benefit is a fairly prevalent evolutionary strategy, as it allows each party to specialise in one field while gaining the benefits of both.
Now combine this with development of language, and you can imagine it'd get more sophisticated: instead of "swapping X for Y" you can have "I'll give you one X for two Ys, because there are a shitload of Ys at the moment" and so on. So now you have a system where goods have quantified value, and this value can be discussed and agreed upon and subdivided.
It's a short leap from there to "IOUs", since say you have a pig, and a guy wants some bacon, and he pays you in wood NOW, but you're not going to kill the pig till later in the year, you can give him some sort of token to indicate that he's owed X amount of delicious, delicious bacon.
And from there you just start thinking "hey, why don't we just use these tokens for like..fucking everything? They're a hell of a lot easier to carry around..."
And from there you get your first forgeries, because we are cunning monkeys.
And from there you get your first tokens made of rare, difficult to fake substances (like gold).
And so on.
The more obvious examples are in primates, where you'll have a monkey grooming another in exchange for reciprocal grooming, or some fruit, or yes, even sex.
But trading services for mutual benefit is a fairly prevalent evolutionary strategy, as it allows each party to specialise in one field while gaining the benefits of both.
Now combine this with development of language, and you can imagine it'd get more sophisticated: instead of "swapping X for Y" you can have "I'll give you one X for two Ys, because there are a shitload of Ys at the moment" and so on. So now you have a system where goods have quantified value, and this value can be discussed and agreed upon and subdivided.
It's a short leap from there to "IOUs", since say you have a pig, and a guy wants some bacon, and he pays you in wood NOW, but you're not going to kill the pig till later in the year, you can give him some sort of token to indicate that he's owed X amount of delicious, delicious bacon.
And from there you just start thinking "hey, why don't we just use these tokens for like..fucking everything? They're a hell of a lot easier to carry around..."
And from there you get your first forgeries, because we are cunning monkeys.
And from there you get your first tokens made of rare, difficult to fake substances (like gold).
And so on.
Re: What can I read to better understand how money operates?
That's connected to their social structure though isn't it? Those same apes wouldn't trade a bunch of bananas for a hind quarter of Wildebeest from a lion.DDL wrote:Animals DO trade, actually. Not in money, obviously, but in things like food and services.
The more obvious examples are in primates, where you'll have a monkey grooming another in exchange for reciprocal grooming, or some fruit, or yes, even sex.
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shadowblade34
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Re: What can I read to better understand how money operates?
I don't like the western system of money. Prefer trading in gold and silver that have intrinsic value.
Also, there's too much usury.
Also, there's too much usury.
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Re: What can I read to better understand how money operates?
Well no, but then...neither would you. Unless it was a really, really tame lion with a penchant for bananas.bobby 55 wrote: That's connected to their social structure though isn't it? Those same apes wouldn't trade a bunch of bananas for a hind quarter of Wildebeest from a lion.
So yes, social structure is clearly a major part of trade, but then it's every bit also a major part of trade when considering humans. Cross-species trading is less easy to define as actual trade (its more..symbiosis. Admittedly so is trade in a sense, but it's a bit more..nebulous).
If you insist on cross-species exchanges, there are many to choose from of course.
Re: What can I read to better understand how money operates?
Shadowblade: gold and silver have value purely based on perception of rarity. There has never been anything actually honest to god physically useful about precious metals other than "pretty" and "rare"*. Their intrinsic value is based entirely on the fact we treat them as valuable. This is identical to the way the intrinsic value of money is based entirely on the fact we treat it as valuable. The only difference is that fiat currency can be printed on demand, whereas gold cannot (well, outside of particle accelerators).
It's still dependent on the entire system of financial security, and dependent on the entire perception of value, and if the system collapses to the point at which money becomes worthless, gold is going to be the least useful thing to own lots of. Shotguns and tinned goods? Much more useful.
And if the moneypocalypse never comes, then you're going to find that buying basic groceries is kinda difficult if all you have is gold, since most supermarkets tend to take cash or bank card payments only. Unless you convert gold back into fiat currency, you can't buy anything, and converting gold back into fiat currency is essentially admitting that you need fiat currency (which you do), and that fiat currency has inherent value (it buys you stuff).
Your argument then becomes "investing in gold gets me more cash because the value of gold increases", which is fine, but that's basic commodities trading and is in no way unique to gold. I could make the same argument about pork bellies (with the added advantage that if the moneypocalypse DOES hit, my basement is full of delicious delicous bacon, rather than inedible precious metal).
Basically, money is an abstract concept, and always will be. Money has no intrinsic value, any value it has is value we ascribe to it, whether it's a printed piece of paper, a number on a computer, or a lump of precious metal.
*gold is of course a rather nice semiconductor, but the usefulness of semiconductors rather requires extensive electronics industries, a fairly recent development, and which by and large is also based on an awful lot of fiat currency flying around.
It's still dependent on the entire system of financial security, and dependent on the entire perception of value, and if the system collapses to the point at which money becomes worthless, gold is going to be the least useful thing to own lots of. Shotguns and tinned goods? Much more useful.
And if the moneypocalypse never comes, then you're going to find that buying basic groceries is kinda difficult if all you have is gold, since most supermarkets tend to take cash or bank card payments only. Unless you convert gold back into fiat currency, you can't buy anything, and converting gold back into fiat currency is essentially admitting that you need fiat currency (which you do), and that fiat currency has inherent value (it buys you stuff).
Your argument then becomes "investing in gold gets me more cash because the value of gold increases", which is fine, but that's basic commodities trading and is in no way unique to gold. I could make the same argument about pork bellies (with the added advantage that if the moneypocalypse DOES hit, my basement is full of delicious delicous bacon, rather than inedible precious metal).
Basically, money is an abstract concept, and always will be. Money has no intrinsic value, any value it has is value we ascribe to it, whether it's a printed piece of paper, a number on a computer, or a lump of precious metal.
*gold is of course a rather nice semiconductor, but the usefulness of semiconductors rather requires extensive electronics industries, a fairly recent development, and which by and large is also based on an awful lot of fiat currency flying around.
Re: What can I read to better understand how money operates?
Okay, so this is pilot fish, those birds that eat ticks and lice of mammals etcetera? I guess that is trading so I'll concede your point.DDL wrote:bobby 55 wrote:
If you insist on cross-species exchanges, there are many to choose from of course.
Growing old is inevitable.......Growing up is optional
Re: What can I read to better understand how money operates?
Actually, you effectively can train a monkey to use money. You can teach a monkey that, for instance, certain colored chips represent certain types of things that they can trade for, in a fairly abstract way.DDL wrote:Animals DO trade, actually. Not in money, obviously, but in things like food and services.
And that's what money is: The abstraction of economic value. It's a way to treat value in a way that's totally fungible/can be spent on anything rather than just directly traded. I would argue that this trend has been happening for a long time, and isn't a bad thing; it doesn't really make a hell of a lot of inherent sense to tie your "money" to any one physical commodity.