Tuesday, April 19, 2016

A Video on Money

In so many areas of knowledge, it’s not what you know that makes the difference.  It’s what you think you know.  Nowhere does this seem to be more evident than when the subject is money.  Take, for example, this article on how Iceland plans to take money creation power away from commercial banks that are controlled by the private sector, and give it to the central bank, controlled by the government.

Revenge sounds sweet, but can destroy you.
Before we begin, stuff a little cotton (or, for fans of the Odyssey, beeswax) in your ears to dim the Siren Song of Getting Back At The Banksters.  If nothing else, any public policy that has been determined on the basis of revenge against any individual or group is probably a really bad policy — especially if what that individual or group was doing was perfectly legal when they did it.
Morality is another issue, but if you start prosecuting people for being immoral, you are opening one gigantic can of worms.  This is particularly so if the morality about which you’re enthusiastic happens to be your own idea or creation, and is based on your private definition of love or charity.
Or money, the love of which (according to St. Paul) is the root of all evil.
"LOVE of money, not money, is the root of all evil."
Notice that Paul didn’t say that money is the root of all evil, but love of money . . . to which we can add love of your personal theory of money, especially when it bears no resemblance to what money is.
And what is money?  Money is anything that can be accepted in settlement of a debt — all things transferred in commerce, as the legal dictionary says.
That means that all money is a contract, and (in a sense) all contracts are money.  To explain, we linked to a video that has subsequently been taken down (and had to change this posting to reflect that embarrassing fact). The video did a pretty good job of explaining money . . . with a few caveats, anyway:
The video was excellent, and came to the correct conclusion. The problem is that the history was bad (maybe that's why it was taken down) — it was exactly backwards. What it called “vouchers” didn’t evolve from coin, coin evolved from “vouchers” — to be accurate, “bills of exchange” and “mortgages.”
Most people today don’t realize that what they think of as “money” (actually “currency” — “current money”) was very rare until fairly recently in world history, i.e., the last 150 years or so. People mostly exchanged contracts — mortgages (representing existing wealth) and bills of exchange (representing future wealth), with the value depending in part on the inherent risk that issuer could not make good on the debt.
Contracts are money.
Most people never saw a coin for years. Some never saw a coin their entire lives. Even in the great medieval trade fairs very little coin was used. Most trade was carried out by means of contracts.
Archeology helps us here.  The vast bulk of documents from the ancient and medieval world are not works of literature, but commercial paper of some kind.
Thus, the video was good in that it helped people understand that “money” is not simply currency, but anything that can be accepted in settlement of a debt. It was bad if you want strict historical accuracy.

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