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What is money?

Dittohead not!

Dittohead not!

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What got me started thinking about that question was a little mathematical exercise about that 20 trillion national debt:

A hundred dollar bill weighs in at one gram (just a factoid I got from the internet.)
Therefore, a thousand hundreds weighs a kilogram, and is worth a hundred thousand.
So, a thousand kilograms would be a hundred million in hundreds, and weigh one metric ton.
Therefore, ten tons of hundreds would be worth a billion, and ten thousand tons would be a trillion dollars.
So, that 20 trillion would represent 200 thousand tons of hundred dollar bills.

But, that 200 thousand tons doesn't exist, not anywhere, neither as a deficit nor as a credit (it has to be owed to someone, after all.) It's just a number generated by ... what a computer?

On the micro economic scale, I put nearly all my expenses on a credit card. The bank pays me to do this, so why not? Nothing tangible changes hands when I make a purchase.

Now, I'm a proud freeloader, one who doesn't pay credit card interest. When the bill comes due, I go to my computer and authorize a withdrawal from the bank to pay the bill. Again, nothing tangible changes hands. I don't believe the bank sends cash to the credit card company, does it?

Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
 
Money is just a way to keep score.
 
Winchester said:
It's like religion, as long as people accept it and believe in it, it exists.
Click to expand...

I wonder what would happen if people quit believing in money they way they've quit believing in religion? I suppose when the Great Scorekeeper declared they couldn't buy food any more, they'd start to believe.
 
Rexedgar said:
Money is just a way to keep score.
Click to expand...

Exactly. As a mechanism to effect trade it's a hell of a lot easier to carry around a pocket of coins and bills than it is to carry around 4 cows and a chicken.
 
Dittohead not! said:
What got me started thinking about that question was a little mathematical exercise about that 20 trillion national debt:

A hundred dollar bill weighs in at one gram (just a factoid I got from the internet.)
Therefore, a thousand hundreds weighs a kilogram, and is worth a hundred thousand.
So, a thousand kilograms would be a hundred million in hundreds, and weigh one metric ton.
Therefore, ten tons of hundreds would be worth a billion, and ten thousand tons would be a trillion dollars.
So, that 20 trillion would represent 200 thousand tons of hundred dollar bills.

But, that 200 thousand tons doesn't exist, not anywhere, neither as a deficit nor as a credit (it has to be owed to someone, after all.) It's just a number generated by ... what a computer?

On the micro economic scale, I put nearly all my expenses on a credit card. The bank pays me to do this, so why not? Nothing tangible changes hands when I make a purchase.

Now, I'm a proud freeloader, one who doesn't pay credit card interest. When the bill comes due, I go to my computer and authorize a withdrawal from the bank to pay the bill. Again, nothing tangible changes hands. I don't believe the bank sends cash to the credit card company, does it?

Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
Click to expand...

It's a bit like time. You need a theory and a set of formulae to describe it, but trying to ignore it ignores reality. ;)
 
Dittohead not! said:
Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
Click to expand...
Then again, what is gold without an "arrangement of electrons" to hold it all together?
 
Dittohead not! said:
What got me started thinking about that question was a little mathematical exercise about that 20 trillion national debt:

A hundred dollar bill weighs in at one gram (just a factoid I got from the internet.)
Therefore, a thousand hundreds weighs a kilogram, and is worth a hundred thousand.
So, a thousand kilograms would be a hundred million in hundreds, and weigh one metric ton.
Therefore, ten tons of hundreds would be worth a billion, and ten thousand tons would be a trillion dollars.
So, that 20 trillion would represent 200 thousand tons of hundred dollar bills.

But, that 200 thousand tons doesn't exist, not anywhere, neither as a deficit nor as a credit (it has to be owed to someone, after all.) It's just a number generated by ... what a computer?

On the micro economic scale, I put nearly all my expenses on a credit card. The bank pays me to do this, so why not? Nothing tangible changes hands when I make a purchase.

Now, I'm a proud freeloader, one who doesn't pay credit card interest. When the bill comes due, I go to my computer and authorize a withdrawal from the bank to pay the bill. Again, nothing tangible changes hands. I don't believe the bank sends cash to the credit card company, does it?

Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
Click to expand...

IMO, money is simply promissory. So, if we pay a bill with a credit card, it's really nothing more than a way to transfer our word, promises we make, to pay that debt, bill whatever. Likewise, our "money in the bank," is just other promises, but made to us, that we rely on to pay that bill. Banks sort of ensure that those promises are real. That would be best seen when we are waiting for the check to clear.

Now, what does all that mean in real terms as it pertains to our national debt? :shrug: There are 20 trillion promises floating about?
 
calamity said:
IMO, money is simply promissory. So, if we pay a bill with a credit card, it's really nothing more than a way to transfer our word, promises we make, to pay that debt, bill whatever. Likewise, our "money in the bank," is just other promises, but made to us, that we rely on to pay that bill. Banks sort of ensure that those promises are real. That would be best seen when we are waiting for the check to clear.

Now, what does all that mean in real terms as it pertains to our national debt? :shrug: There are 20 trillion promises floating about?
Click to expand...

Hmmm... 20 trillion promises made by the government. Sounds about right. The real value of all those promises must be.. oh, I don't know, maybe zero?
 
Dittohead not! said:
Hmmm... 20 trillion promises made by the government. Sounds about right. The real value of all those promises must be.. oh, I don't know, maybe zero?
Click to expand...

:lol: Especially if Trump made them :)

My take on that is that the only reason anyone pays on those promises is because they want to have low interest rates continue on for when they make more promises. If not for the expectant need for future promises, no one would pay back past promises. When you are on your deathbed, you won't worry too much about missing your Credit Card payment.

Donald, with his multiple bankruptcies, was all out of promises. No legit bank was going to lend him a dime, not even at Junk-Bond rates. So, he had to sell his soul to the Russians to get money. But, that is a story for a different day.
 
Dittohead not! said:
What got me started thinking about that question was a little mathematical exercise about that 20 trillion national debt:

A hundred dollar bill weighs in at one gram (just a factoid I got from the internet.)
Therefore, a thousand hundreds weighs a kilogram, and is worth a hundred thousand.
So, a thousand kilograms would be a hundred million in hundreds, and weigh one metric ton.
Therefore, ten tons of hundreds would be worth a billion, and ten thousand tons would be a trillion dollars.
So, that 20 trillion would represent 200 thousand tons of hundred dollar bills.

But, that 200 thousand tons doesn't exist, not anywhere, neither as a deficit nor as a credit (it has to be owed to someone, after all.) It's just a number generated by ... what a computer?

On the micro economic scale, I put nearly all my expenses on a credit card. The bank pays me to do this, so why not? Nothing tangible changes hands when I make a purchase.

Now, I'm a proud freeloader, one who doesn't pay credit card interest. When the bill comes due, I go to my computer and authorize a withdrawal from the bank to pay the bill. Again, nothing tangible changes hands. I don't believe the bank sends cash to the credit card company, does it?

Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
Click to expand...

The concept of money came into existence at the same time rulers and government did. It gives them control of the economics.
 
Dittohead not! said:
So, is money even real?
Click to expand...

I recognise the use of the word “money” in today’s society is often incorrect or used as slang, but this interesting question of yours requires an understanding of the difference between “currency" and “money" in order to discuss the topic.


Without going into details, simply and crudely, “currency" is a medium of exchange, a unit of account, portable, durable, divisible, fungible, etc. Money is all that plus a store of value over a long period of time. Gold and silver are the best examples of money, whereas, paper Euros, Dollars, etc and the digitalised bank ledgers and transfers are examples of “fiat” currency which is in use today. In conclusion, Money is real and has value, whereas, Currency is based on confidence with no intrinsic value other than perhaps burning it for warmth.


Factoid: Of the thousands and thousands of fiat currencies created in the past, none of then survived.
 
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Dittohead not! said:
I wonder what would happen if people quit believing in money they way they've quit believing in religion?
Click to expand...

Currency would be rendered worthless if people no longer believed in it. Money, on the other hand, could take many forms, such as minerals, oil, lumber, etc which would and has retained its value over long periods of time.
 
Buck naked said:
Currency would be rendered worthless if people no longer believed in it. Money, on the other hand, could take many forms, such as minerals, oil, lumber, etc which would and has retained its value over long periods of time.
Click to expand...

Interesting concept. Should people lose faith in money, some new, currency would have to be used instead. Let's say, oil becomes the hard currency, replacing traditional gold. Then, a new and better form of energy is discovered and oil becomes worthless except as a currency. The entire economy could collapse. Or, on the other hand, oil could become scarcer and scarcer, as we burn it for fuel. The economy would then be subject to hyper deflation.

Let's just hope no one loses faith in electronic money. It's not perfect, but it's a lot more convenient than hard currency.
 
Money is it's self a form of debt.

You work, get paid in money, then take that promisary note to somebody else who gives you stuff for it and they use the money for financing their own business.

This idea of always making the books balance is a little silly for most of us. Mortgages are often not actually more costly than the origonal loan after you take into account inflation. The bank gave you that money and took back the same amount. Did not charge you rent on it.

The negative, counter intuitive, aspect of money is even more dramatic for governments where money works best when we all have very high confidence in it but not so high that we expect it to be worth even more next year. Inflation keeps the whole thing working and deflation is bad for us all. The world of work stops if nobody will buy anything today because it will be cheaper tomorrow.
 
Dittohead not! said:
What got me started thinking about that question was a little mathematical exercise about that 20 trillion national debt:

A hundred dollar bill weighs in at one gram (just a factoid I got from the internet.)
Therefore, a thousand hundreds weighs a kilogram, and is worth a hundred thousand.
So, a thousand kilograms would be a hundred million in hundreds, and weigh one metric ton.
Therefore, ten tons of hundreds would be worth a billion, and ten thousand tons would be a trillion dollars.
So, that 20 trillion would represent 200 thousand tons of hundred dollar bills.

But, that 200 thousand tons doesn't exist, not anywhere, neither as a deficit nor as a credit (it has to be owed to someone, after all.) It's just a number generated by ... what a computer?

On the micro economic scale, I put nearly all my expenses on a credit card. The bank pays me to do this, so why not? Nothing tangible changes hands when I make a purchase.

Now, I'm a proud freeloader, one who doesn't pay credit card interest. When the bill comes due, I go to my computer and authorize a withdrawal from the bank to pay the bill. Again, nothing tangible changes hands. I don't believe the bank sends cash to the credit card company, does it?

Money, then, is nothing more than an arrangement of electrons. Whether it is 200,000 tons of hundred dollar bills (mind boggling!) or a couple of thousand in monthly expenses, there is nothing there, no gold, no silver, not even any paper.

So, is money even real?
Click to expand...

Money has three basic functions
  1. A store of value: Something of intrinsic value such as precious metals, gems, class beads, cigarettes that will maintain value over time. So if you produce a perishable good, converting it to something that will maintain value is more useful for the future.
  2. A medium of exchange: Because bartering requires coincidence of needs, it is more efficient to have a medium of exchange that can be commonly accepted and exchanged for other goods and services
  3. A unit of account: a way to "keep score" of relative value between different goods and services...a common standard of value.


Something that fulfills any one of those can be regarded as money.
In our early history, gold and silver coins served all three functions. Now our money is fiat currency, and is no longer a store of value. Checks, money orders and gift cards are also a form of money (although gift cards are of limited use).
As you point out, much of money today is only unit of account, unless you want to count computer code as a medium of exchange. I get paid by direct deposit and pay most of my bills electronically, so "money" is simply a unit of account to measure credit and debt.

And there can be combinations. For example in Moscow in the late 1990's, because of high domestic inflation many restaurants and bars (which relied heavily on imported goods) would list prices in Euros (unit of account) but could only accept payment in Rubles (medium of exchange).

Prison economies used to use cigarettes as money (store of value, medium of exchange, and unit of account) but due to no-smoking policies they've switched to other goods, such as cans of mackerel.
 
pinqy said:
Money has three basic functions
  1. A store of value: Something of intrinsic value such as precious metals, gems, class beads, cigarettes that will maintain value over time. So if you produce a perishable good, converting it to something that will maintain value is more useful for the future.
  2. A medium of exchange: Because bartering requires coincidence of needs, it is more efficient to have a medium of exchange that can be commonly accepted and exchanged for other goods and services
  3. A unit of account: a way to "keep score" of relative value between different goods and services...a common standard of value.


Something that fulfills any one of those can be regarded as money.
In our early history, gold and silver coins served all three functions. Now our money is fiat currency, and is no longer a store of value. Checks, money orders and gift cards are also a form of money (although gift cards are of limited use).
As you point out, much of money today is only unit of account, unless you want to count computer code as a medium of exchange. I get paid by direct deposit and pay most of my bills electronically, so "money" is simply a unit of account to measure credit and debt.

And there can be combinations. For example in Moscow in the late 1990's, because of high domestic inflation many restaurants and bars (which relied heavily on imported goods) would list prices in Euros (unit of account) but could only accept payment in Rubles (medium of exchange).

Prison economies used to use cigarettes as money (store of value, medium of exchange, and unit of account) but due to no-smoking policies they've switched to other goods, such as cans of mackerel.
Click to expand...
Well said, I would just like to point out that "checks, money orders and gift cards" are a form of currency(transfer of value), not money(a store of value).
 
Buck naked said:
Well said, I would just like to point out that "checks, money orders and gift cards" are a form of currency(transfer of value), not money(a store of value).
Click to expand...
Ummm currency is a type of money, and no, checks and money orders are not currency

How can you say "well said" by not get that one of my main points was that money is NOT just store of value.
 
pinqy said:
Ummm currency is a type of money, and no, checks and money orders are not currency

How can you say "well said" by not get that one of my main points was that money is NOT just store of value.
Click to expand...

First of all, if you have read my earlier posts you should have recognised I never said money was “not just a store of value”.


Secondly, fiat currency is not a type of money as its just a piece of paper, like checks, money orders and gift cards which contain no intrinsic value. These mediums serve only as a transfer of value.

If you disagree, please explain where is the intrinsic value of fiat currency, checks, money orders and gift cards? The only intrinsic value I can imagine is if you burn it for warmth or perhaps insulate yourself from the elements, otherwise its just paper.
 
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Buck naked said:
First of all, if you have read my earlier posts you should have recognised I never said money was “not just a store of value”.
Click to expand...
I know...it's what I said.


Secondly, fiat currency is not a type of money as its just a piece of paper, like checks, money orders and gift cards which contain no intrinsic value. These mediums serve only as a transfer of value.
Click to expand...
Medium of exchange is a function of money. As long as something meets AT LEAST ONE of the three functions, then it is money.

If you disagree, please explain where is the intrinsic value of fiat currency, checks, money orders and gift cards? The only intrinsic value I can imagine is if you burn it for warmth or perhaps insulate yourself from the elements, otherwise its just paper.
Click to expand...
I'm not saying they have intrinsic value, I'm saying the money does not have to have intrinsic value. Store of value is a function of money, but it is not a necessary function.
 
pinqy said:
Medium of exchange is a function of money. As long as something meets AT LEAST ONE of the three functions, then it is money.
Click to expand...

Money(not currency) must meet all three functions(and if we get more technical, more characteristics, such as acceptability, divisibility, fungibility, limited supply, etc are important), otherwise, under your critiria that a unit of account is all that is necessary to define money, dirt would be money too as it would easily satisfy the required function of just a unit of account.


pinqy said:
I'm not saying they have intrinsic value, I'm saying the money does not have to have intrinsic value. Store of value is a function of money, but it is not a necessary function.
Click to expand...

With all due respect, I think you’re confusing money(commodity defined) with fiat currency. Fiat currency doesn’t need to have intrinsic value as it acts as a transfer of value(promissory note), whereas, money(commodity defined) must have value, otherwise nobody would want it.
 
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Buck naked said:
Money(not currency) must meet all three functions(and if we get more technical, more characteristics, such as acceptability, divisibility, fungibility, limited supply, etc are important), otherwise, under your critiria that a unit of account is all that is necessary to define money, dirt would be money too as it would easily satisfy the required function of just a unit of account.
Click to expand...
No, it does not have to meet all three functions. If dirt were used as a unit of account (and I don't know why anyone would do that), then it would be money.
Our current currency is not a store of value as it has no intrinsic value. Electronic banking could be considered just unit of account since no physical medium of exchange is used (unless you want to count computer code).


With all due respect, I think you’re confusing money(commodity defined) with fiat currency. Fiat currency doesn’t need to have intrinsic value as it acts as a transfer of value(promissory note), whereas, money(commodity defined) must have value, otherwise nobody would want it.
Click to expand...
No, you're confusing money with commodity money. When measuring U.S. money stock, there are multiple types:
M0 is currency....dollar bills and coins officially issued by the U.S. government.
M1 is currency plus checking accounts and traveler's checks.
M2 is M1 plus personal savings accounts, small denomination (less than $100,000) certificates of deposit, and retail money market mutual funds.
M3 is a discontinued series and included M2 plus large denomination CDs, Eurodollars, and repurchase agreements.
 
pinqy said:
No, it does not have to meet all three functions. If dirt were used as a unit of account (and I don't know why anyone would do that), then it would be money.
Our current currency is not a store of value as it has no intrinsic value. Electronic banking could be considered just unit of account since no physical medium of exchange is used (unless you want to count computer code).



No, you're confusing money with commodity money. When measuring U.S. money stock, there are multiple types:
M0 is currency....dollar bills and coins officially issued by the U.S. government.
M1 is currency plus checking accounts and traveler's checks.
M2 is M1 plus personal savings accounts, small denomination (less than $100,000) certificates of deposit, and retail money market mutual funds.
M3 is a discontinued series and included M2 plus large denomination CDs, Eurodollars, and repurchase agreements.
Click to expand...



Before I reply, I would like to know what you think is the difference between currency and money from an economics function standpoint?
 
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Buck naked said:
Before I reply, I would like to know what you think is the difference between currency and money from an economics function standpoint?
Click to expand...

Money is anything that fulfills any of the three functions of money: Store of value, medium of exchange, unit of account.
Currency is any money that is in actual circulation as a medium of exchange.

$100 in your bank account is money, but not currency. $100 bill in your pocket is currency and money.
 
Money can and does kill babies as they choke on swallowed coins every day. Murders are committed for it every hour. So yes it is real.
 
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