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"how we learned to stop worrying and embrace the abstraction"
December 16, 2012 6:43 AM   Subscribe

A Brief History Of Money

Philip Pilkington: Debt And Decay And The Myth Of Liberal Individualism
Money, for example, is a mythic or fetish object and most people know that it is ultimately just bits of old paper and metal. But in our day-to-day intercourse we treat money as a sacred object with mythic properties – we defend it, hoard it, accumulate it. And yet, at some level we know that it is ultimately just bits of old paper and metal. In this very real sense we repress the reality of money – we render it unconscious – in order to allow it assume its mythic and social function. If we did not do this, and instead simply treated it as scraps of paper and lumps of useless metal, the entire social economy would collapse.
Escape From Minus World
By fixing some daily element of human relations into a tradable thing banks made it plausible to imagine one day being freed from those relationships. The central storehouse became both a crude symbol of security — grain insured by gods and masonry — and its general currency an icon of hope for people who might someday free themselves from the dead weight of their neighbors.
The Impact Of Money On An African Subsistence Economy (PDF)
posted by the man of twists and turns (53 comments total) 40 users marked this as a favorite

 
¢
posted by Fizz at 7:07 AM on December 16, 2012 [1 favorite]


Money, money, money, money....MONEY! : The O'jays
posted by Renoroc at 7:18 AM on December 16, 2012 [2 favorites]


The last link has won my heartfelt admiration and appreciation. Grazi.
posted by infini at 7:30 AM on December 16, 2012 [1 favorite]


cheese and cheddar in the tags. that's thorough.

I read "Escape From Minus World", and I have a tale to share: A local nonprofit I'm familiar with is, on an accrual basis, consistently in the black—that is, they have enough money coming in, when you include promised grant money, to cover all their expenses. But the vast majority of grants are on a reimbursement basis—you have to spend the money, then apply for reimbursement. As a result, the organization can find itself near the edge on a cash basis. And, like the author of Minus World, sometimes the reimbursements are late, short, or both… It's nerve wracking to hear stories like this.
posted by jepler at 7:36 AM on December 16, 2012 [1 favorite]


The Android Sisters explain the true nature of money... and reality.
posted by LastOfHisKind at 7:40 AM on December 16, 2012 [1 favorite]


Irregular income streams from a variety of sources pose their own challenges but offer flexibility in business models in the informal economies where this pattern tends to be much more prevalent.

Flexibility is key, as well as the ability to negotiate on "time" - frequency, periodicity, duration and "money" - amount. This works in the highly personalized transactions negotiated in most of the "developing" world but the challenge arises when those dependent on volatile cash flows meet "the system", which cannot be negotiated with.

Between time and money in the equation of the underlying principle of flexiblity is the "trusted network" or human beings. Facetime and financial flexibility have proportionate relationship to the success of a business model in such an environment.
posted by infini at 7:43 AM on December 16, 2012


Can we please add C.R.E.A.M., scrilla, and ducats to the tags?
posted by Saxon Kane at 8:06 AM on December 16, 2012 [1 favorite]


A mark, a yen, a buck or a pound
Is all that makes the world go around
That clinking, clanking sound...
Can make the world go 'round

posted by growabrain at 8:20 AM on December 16, 2012 [2 favorites]


The Money Program
posted by philip-random at 8:23 AM on December 16, 2012


The IEEE seems like a weird forum to publish something like this. What's up with that?
posted by indubitable at 8:35 AM on December 16, 2012


Money, for example, is a mythic or fetish object and most people know that it is ultimately just bits of old paper and metal

Which leads to a recurring psychedelic scene. Young person gets high on acid for the first or fifth time and suddenly they're lighting a twenty dollar bill on fire, because it's worthless, it's just paper, you can't eat paper, you can't solder a pipe with it ... it's illusory, the emperor's new clothes. A twenty dollar bill is worth less than a penny. At least there's copper in a penny!

And so on. Eventually, somebody puts on some Orb and everybody relaxes. The illusion keeps on spinning.
posted by philip-random at 8:40 AM on December 16, 2012 [4 favorites]


I recall reading that the first metal coins were quite tiny, and meant to be carried in one's cheek. This was not well known to historians because these coins were mostly lost or dissolved.
posted by StickyCarpet at 8:55 AM on December 16, 2012 [1 favorite]


A twenty dollar bill is worth less than a penny. At least there's copper in a penny!

I blame the lack of textile education in public schools.
posted by griphus at 8:55 AM on December 16, 2012 [3 favorites]


The IEEE seems like a weird forum to publish something like this. What's up with that?

Maybe this?

Are we seeing the start of a mobile payment bubble?

Technically... wouldn't mobile money be electronic cash?
posted by infini at 9:01 AM on December 16, 2012 [1 favorite]


And so on. Eventually, somebody puts on some Orb and everybody relaxes.

A few hours later he is out of beer and cigarettes.
posted by Meatbomb at 9:19 AM on December 16, 2012 [2 favorites]


Currently, money's most important function is the facilitation of world peace through the consentual trade of goods, if it's an illusion then it's certainly a desirable one.
posted by Shit Parade at 9:20 AM on December 16, 2012


A few hours later he is out of beer and cigarettes.

Their inherent scarcity making them a functional medium of exchange.
posted by philip-random at 9:27 AM on December 16, 2012 [5 favorites]


More IEEE: SPECIAL REPORT ON THE FUTURE OF MONEY - The Last Days of Cash; How E-Money Technology is Plugging Us into the Digital Economy
posted by the man of twists and turns at 9:28 AM on December 16, 2012 [1 favorite]


I sometimes like to do mental calculations when I hear the absurd amounts of money that wealthy people have. Basically, I work out the length of the average working life in hours (1 778 hours a year X 45 years = 81000), multiply it by the minimum wage (7.25 = 580072.5) and divide the crazy number by that (lets go with Sheldon Adelson - 21.8 billion). So that instead of abstract dollars I can consider something that money really could represent - human working lives ( in Sheldon's case he currently owns over 37,500 working lives).

Then I get really depressed because I don't even own my own working life.
posted by srboisvert at 9:43 AM on December 16, 2012 [8 favorites]


Previously: Debt, Slavery and Violence in History
posted by the man of twists and turns at 10:03 AM on December 16, 2012 [1 favorite]


Once even a small part of your economy is taken over by markets and money, they tend to colonize the rest of the economy, gradually forcing out barter, feudalism, and other economic arrangements. In part this is because money makes market transactions so much easier, and in part because using money seems to redefine what people value, pushing them to view things in economic, rather than social, terms.
Perhaps there's an interesting parallel here wrt to the development of "social currency" i.e. likes & retweets & favorites etc.
posted by deo rei at 10:20 AM on December 16, 2012


Money is the closest thing we have to a universal spiritualism.

If you ever want to commit heresy -- true heresy -- take a pile of $100 bills out in the backyard and burn them. Be careful who you tell about it though.
posted by Tell Me No Lies at 10:32 AM on December 16, 2012 [4 favorites]


Once even a small part of your economy is taken over by markets and money, they tend to colonize the rest of the economy, gradually forcing out barter, feudalism, and other economic arrangements. In part this is because money makes market transactions so much easier, and in part because using money seems to redefine what people value, pushing them to view things in economic, rather than social, terms.

This is definitely visible in the rural Philippines in communities where a high proportion of adults work as balik bayan... close knit ties and social cohesion transform into transactions.

Because I'd been seeing oddities in the field, particularly among rural households, with regard to their attitude on money, I'd been hoping to find a history of money, especially for the Sub Saharan context where money as a concept was only introduced in the past 100 odd years. In East Africa, for eg, the rupee was the was first medium of exchange, introduced by the British as a means to convert the local cashless transactions of value into a cash needing economy, thus ensuring labour for the railways they were building. There's also no concept of interest on loans among people nor a historical role for a money lender, unlike cultures where cash money has been around for millenia such as in India and China.
posted by infini at 10:33 AM on December 16, 2012 [1 favorite]


A Brief History Of My Money: posted by mazola at 10:33 AM on December 16, 2012 [2 favorites]


The article in the first link does a good job of explaining something that has always confused me about the gold standard fanatics: there is no intrinsic reason why a piece of metal has more value than a piece of paper. Once you realize that money is like Santa Claus (you have to believe!) then the obsession with gold doesn't make sense.
posted by medusa at 10:39 AM on December 16, 2012 [4 favorites]


I am adding these links before reading the article because 1 they are fascinating although have probably been on mefi prev & 2 i have now been online 10 hours & w my OCD (must read every tab, must click every link, must etc) i can't do the right thing if i'm going to eat and dress before 9pm today. I feel i shd do that at least once a day.
http://www.goodreads.com/review/show/113209935
review which slags off Richard Seaford for pretending Marc Shell doesn't exist or did similar research i think you can find ms on google easily too
and the original article which has gone, where RS argued that money changed everything, because you can't want too much of anything that's bartered - extra food goes off, extra animals have to be fed, extra wives breed extra children, extra houses need repairing - there's a limit, of some sort, on any 'goods' - but money is always useful however much you have, there's no amount at which it becomes more of a burden than a help, and so wanting more and more and more started: and, that it's abstract. You want more holiday homes, wives and chocolate because that thing is what you want. But money - nobody wants money in itself, they just want. So this scopeless, unlimited wanting began. But in these articles that's well buried below other ideas and they're kind of boring:
http://www.economicprincipals.com/issues/2009.08.30/684.html
http://www.polsoz.fu-berlin.de/soziologie/moneyworkshop/participants/dateien/Seaford_The_Greek_Invention_of_Money.pdf (pdf)
posted by maiamaia at 10:50 AM on December 16, 2012 [3 favorites]


It's not that there's anything special about gold, medusa, it's that gold can't just be invented to suit political whims. Injecting cash into an economy stimulates it, but like a drug, it also impairs it... and the more cash injection is done, the more damage happens.

Money is the primary method by which an economy communicates scarcities and surpluses, through price. And a managed fiat money supply wrecks that fundamental signaling method. It induces false prosperity, and tempts actors all over the economy to go into much deeper debt than they should. It increases systemic risk, and the longer the money printing continues, the deeper the systemic risk becomes.

The Federal Reserve is on track to expand its holdings, which is a synonym for 'things it has printed money to buy', by a trillion dollars next year, expanding from $3TN of holdings to $4TN. They will be increasing the base of the money supply by somewhere around 25% in just one year.

This is insane behavior, and the consequences, a few years down the road, will be truly dire. Nobody should have that kind of power. Nobody should be able to fuck up an economy like Greenspan and Bernanke have. And that's what commodity money provides -- a check and balance against fundamentally bad economic ideas, like this idea that you can just expand the money supply forever without any link to the underlying reality of wealth, that you can take things out of the economy, and not put equivalent value back in without consequence.

You have to pay for what you use. You need to provide roughly comparable value to the rest of society to pay for what you're taking out, and this is true of every entity, from the smallest to the largest. Failing to do that has consequences. If the entity is large enough, those consequences can be severe.

There comes a point where an idea is just so demonstrably bad that it cannot be supported any longer. The problem with fiat money is that the unsoundness of economic ideas can be hidden for a long time, and gigantic damage can accumulate as a direct consequence. If we were using a true commodity currency, there is no way we could maintain the kind of trade and fiscal deficits we've been running in this country; Mr. Market should have slapped us HARD in about 2000, forcing us to come down from Greenspan's cash high that started in about 1992. We should be just about coming out of it now, scared and feeling broken as a country after the worst decade in living memory -- but healthy and strong and ready to compete on the global stage once again.

Instead, we've now had two near-crashes, and have deployed massive resources to tell the economy to keep doing what got it in trouble in the first place. We're using money printing to tell everyone to keep digging the hole that tried to collapse on us! Eventually, no amount of money will be able to hide the fact that we owe more than we can possibly pay back, the hole will collapse, and millions and millions of Americans will be starving on the street. The eventual failure will be far worse than it would have been in 2000, because we haven't just avoided fixing things, we have actively worked at making them worse.

See also: Greece. The failure scenario here will play out differently, but it will be even more dire, because we're far more screwed up than they are. We just don't know it, because we're high as a freaking kite on the economic equivalent of methamphetamines.
posted by Malor at 11:05 AM on December 16, 2012 [6 favorites]


If you ever want to commit heresy -- true heresy -- take a pile of $100 bills out in the backyard and burn them.

Here in NYC a notable homeless lady was committed to a psychiatric hospital because she was seen burning money in midtown. It turned out that the only money she burnt were bills that were tossed to her, charitably, by passersby without any word or acknowledgement.
posted by StickyCarpet at 11:15 AM on December 16, 2012


Malor, I figure you're mostly right but I hope you're at least partly wrong.

As always, when I imagine the whole social fabric failing, dissolving into dust with zombie apocalypse the inevitable result, I am reminded to get to know my neighbors a bit better. Hard to eat a guy's brains when you know he too is a Hawkwind fan. Social currency beats the other kind every time.
posted by philip-random at 11:41 AM on December 16, 2012


Philip-random, I desperately hope I'm full of shit. Seriously.
posted by Malor at 11:51 AM on December 16, 2012


But I think your brains will taste good enough.
posted by infini at 12:26 PM on December 16, 2012 [2 favorites]


Greece is the new Zimbabwe!
posted by Justinian at 12:34 PM on December 16, 2012 [1 favorite]


Justinian, it's not normal for countries to be collapsing all over the place like that. It's just not.

Note that Zimbabwe's troubles stopped getting worse instantly, as soon as they stopped printing their currency. They immediately started getting better. All of the other things that were blamed for their predicament were still there, but as soon as they went to a currency they couldn't control (like a commodity currency would be for the US), they had to stop the worst of their abuses, and the economy immediately started improving.
posted by Malor at 12:40 PM on December 16, 2012


Note that even a straight gold currency can suffer the ravages of inflation; the Spanish looting of the New World brought a huge amount of new gold into their economy, causing a huge economic boom, and then a wipeout so epic that they were permanently relegated to the role of a third-rate power. That looked very, very much like money-printing would to a modern economy.

Commodity currencies are not perfect. They're leaky abstractions for wealth. They have many problems. But in going to a full fiat system, you end up with the government having almost unlimited power to engage in wishful thinking, to the severe, severe detriment of the society it's supposedly governing.

We can't trust governments to manage fish stocks, the simplest goddamn thing in the world. Why on earth do we think they should be trusted with fiat money and the ability to extract unlimited resources on demand from the economy, without truly paying for them? If they can't manage their extraction rates with fish, they sure as hell aren't going to be able to manage their confiscation rates from a complex economy.
posted by Malor at 12:46 PM on December 16, 2012


Philip-random, I desperately hope I'm full of shit. Seriously.

Well your track record of prediction suggests that you are! Seriously, how long have you been been saying hyperinflation is imminent? we've been waiting for this damned hyperinflation to kick in for years and years. Where the hell is it? Certainly not on the bond market's horizons, that's for sure.

And the commodity-money solution is as full-of-shit as it gets. Money can already be converted to gold. You're just suggesting that the price be fixed - by government fiat! Which means that the government still controls the money supply, because they control the convertibility rate, and can change it when they want to. It's a completely stupid non-solution to a non-problem.
posted by moorooka at 12:50 PM on December 16, 2012 [12 favorites]


We can't trust governments to manage fish stocks, the simplest goddamn thing in the world. Why on earth do we think they should be trusted with fiat money and the ability to extract unlimited resources on demand from the economy, without truly paying for them?

That may be a valid point, and is why we have central bank independence.
posted by moorooka at 12:54 PM on December 16, 2012 [2 favorites]


We can't trust governments to manage fish stocks, the simplest goddamn thing in the world.

Please elaborate.
posted by brennen at 1:08 PM on December 16, 2012 [1 favorite]


Seriously, how long have you been been saying hyperinflation is imminent?

I have never said that. What I have always consistently said is that the final outcome of the Ponzi scheme we're in must end in either hyperinflation or a deflationary crash. Neither outcome has to happen soon, but one or the other WILL happen.

The real problem is that there is too much debt in the world. And that debt has to be liquidated. It can be liquidated through deflation, if the economy crashes, or governments can attempt to liquidate it through inflation, and then eventually hyperinflation. This is much, much worse for the overall economy, but it looks less immediately painful, so of course that's what they will try to do. My belief is that the power of the printing press will overwhelm the power of defaulting debt, and that we will end up in hyperinflation, but that's not the only possible Trail of Tears we could follow.

I didn't know nearly as much back then, but I was warning about the Dow/Nasdaq crash in 1999 and 2000, well before they happened, and I was warning about the housing crash before it happened, largely based on reading the works of smarter people than I am.

What I didn't really count on was the degree to which the Fed was willing to play Calvinball, to throw away any rule that it found inconvenient. We just saw that again with the main government and HSBC, where suddenly laundering money for drug barons is okay, because otherwise, we might have financial problems.

Again, as I said upthread: the Fed is on track to increase the base of the money supply by 25% next year. As far as I know, that's absolutely unprecedented in the history of the United States.

Inflation and hyperinflation are fundamentally money issues, and when we're going into such extreme circumstances, such uncharted territory, shaking your finger at me would seem to show more ignorance than anything. If you really think I'm that wrong, I suspect you're just not paying very close attention to the banking system, and the Federal Reserve in particular.
posted by Malor at 2:01 PM on December 16, 2012


Fish stocks are really hard to manage because they require collaboration among various states, which is Really Friggin Hard, even when there is a clear common interest. See also: global warming.
posted by Monday, stony Monday at 2:07 PM on December 16, 2012 [1 favorite]


One thing I sometimes wonder about the advent of electronic currency is that it would make living with hyperinflation much easier. Imagine inflation at 10000% but all your cash is in an interest bearing account held in your mobile phone. While standing in queue at the supermarket all the prices in your basket might double, but as long as your savings keep pace everything will work out OK (well kinda, for a while.)
posted by Lanark at 2:14 PM on December 16, 2012


Inflation and hyperinflation are fundamentally money issues, and when we're going into such extreme circumstances, such uncharted territory, shaking your finger at me would seem to show more ignorance than anything. If you really think I'm that wrong, I suspect you're just not paying very close attention to the banking system, and the Federal Reserve in particular.

Heh. It's not just me who thinks you're wrong about the hyperinflation bogeyman, it's the whole international market for long-term bonds.

But maybe you're predicting all this will happen in the middle of the next century or something, who knows. Like the Jehovah's witnesses, putting a date on the end of the world is risky. So you're not really predicting jack-shit, you're just moralizing up a quasi-religious slather.

And I'm quite confused when you say that debt could otherwise be "liquidated" by deflation. Deflation just worsens debt, which is why deflation must be avoided when there's "too much debt", even if that means printing money. Or, if you're on a dumbass gold-standard, doing the same thing by changing the convertibility rate.
posted by moorooka at 2:38 PM on December 16, 2012 [11 favorites]


Isn't Gold also pretty vulnerable to extraction technology? I know they're putting new mines in exploitation that wouldn't be profitable if it weren't for the new robotic machines that can drill/blast huge amounts of rock pretty much by themselves. That could have a pretty big downward effect on the price of Au.
posted by Monday, stony Monday at 2:46 PM on December 16, 2012


*sigh*
Not to pile on, or ad-hom here, but the earliest mention I can find through the search-box is a Malor post from 2004, predicting imminent hyperinflation. Brad Delong does this thing he calls 'marking his beliefs to market', where he goes back to things he's said/believed about the world economic situation, examines how well they compared to the reality, and evaluates his performance. Wouldn't mind a bit of that here, perhaps it would keep me from having to scroll past the goldbuggery every time the concept of money appears in the blue. I mean, if your stopped clock hadn't been right in the last 8 years, wouldn't you consider repairing it?
posted by hap_hazard at 2:48 PM on December 16, 2012 [3 favorites]


it's not normal for countries to be collapsing all over the place like that.

I'm afraid the history of the world disagrees with you on that point. Interestingly, even before economies were linked there is evidence that upheavals came in waves.
posted by Tell Me No Lies at 4:13 PM on December 16, 2012 [1 favorite]


What happened here? Did a engineer guy wander into the humanities department by accident and do a 1st year course of a finance where they revealed that money is just a medium of exchange to get around the coincidence of wants problem between the hatseller and the tomato farmer? And with that the obligatory link to Economics of a POW Camp
posted by Damienmce at 4:43 PM on December 16, 2012


Oh yeah the problem with gold, apart from the feral gummit stealing it from you in the black helicopter, is if you believe we're heading for an apocalyptic crash you should be buying guns and cabins because your gold will be stolen. Also how much is a beer in gold in Bartertown? If you believe theres just going to be inflation, buy stock in a company that makes toilet roll and reinvest the dividends. Buy an acre of land and farm potatoes. The only people who have business owning gold are central banks and jewellery makers.
posted by Damienmce at 4:53 PM on December 16, 2012 [2 favorites]


Somewhat related, one of my favorite This American Life episodes: The Invention of Money.
posted by selfmedicating at 4:56 PM on December 16, 2012


Because the USD is the world reserve currency and is the basis for international oil futures, we can export inflation to the rest of the world. Eventually, maybe in 10 or 20 years, we'll probably see a move to a currency basket for reserves. If the US wasn't on track for energy interdependence around the same time there might be more cause for worry. If the budget deal that's struck in either January or February manages to raise taxes and curtail mid-term spending and, ideally, tweak entitlements a bit, we'll probably, fiscally, be fine. We have plenty of other problems and fiat currency isn't the worst of them, by any stretch.
posted by Shit Parade at 7:36 PM on December 16, 2012 [1 favorite]


Philip Pilkington

Whatever you have to say about his article, he's certainly sharper than his brother, Karl.
posted by snottydick at 7:04 AM on December 17, 2012


There comes a point where an idea is just so demonstrably bad that it cannot be supported any longer.
Malor

You might want to think on this one, Malor. Those upthread are right: every time one of these threads come about you're here like clockwork spouting the same nonsense, and you've always been wrong. Always. You get demolished by other posters, and by reality itself not conforming to what you're saying.

At some point maybe you should just acknowledge that yeah, your Austrian gold nonsense just isn't right? It gets tiring seeing the same junk polluting every thread like this.
posted by Sangermaine at 1:32 PM on December 17, 2012 [2 favorites]


Just fyi, Dadara has done relevant art around these ideas about money.
posted by jeffburdges at 5:12 PM on December 17, 2012


I respect malor's opinion and in many ways he is right. one of the reasons we can fight forever wars is because we can continue to devalue our currency; this has a rich history of kings melting down the coin of the land and adding devalued metals. little wonder archimedes shouted eureka or ancient markets conjure up the image of scales
posted by Shit Parade at 6:12 PM on December 17, 2012 [1 favorite]


Malor: Instead, we've now had two near-crashes, and have deployed massive resources to tell the economy to keep doing what got it in trouble in the first place.
We're spending billions trying to get banks to make risky mortgage loans that are beyond the means of the people taking the loans? I must have missed that in the news... and in real life, where my friends buying real estate talk about how much harder it is to get a loan these days, even when they are (traditionally) good risk candidates.
posted by IAmBroom at 9:55 PM on December 21, 2012


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