Topic: An Honest Introduction to Money - page 4. (Read 6584 times)

The point is that historically, the system that develops usually to avoid that coincidence of the wants, is a credit system, not a monetary system.  It most probably even lies at the invention of writing.  You can simply avoid the "coincidence of wants" by giving an IOU in exchange of what you need now.  You'll pay your debt later, whenever that other person needs something from you.  Or he can transmit that IOU from you to a third person if he wants something from that third person.  Very often, central trusted entities, such as temples or the like, wrote down those IOU.

When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the "coincidence of wants" problem. Money's most important usage is as a method for comparing the values of dissimilar objects.

The Biggest Scam In The History Of Mankind

https://www.youtube.com/watch?v=iFDe5kUUyT0



Money vs Currency - Hidden Secrets Of Money Ep 1 - Mike Maloney

https://www.youtube.com/watch?v=DyV0OfU3-FU

In fact, "unit of account" is independent of the money function.  It is funny that what people mostly define as "money", namely "unit of account" doesn't need to be money at all.  In fact, any commodity, any service, can be a "unit of account" without it being money at all.

If you want to express price in "oxen" or in "one hour's labor" or in "apples" doesn't really matter.  Any sufficiently well-known commodity or service can be socially decided upon to be the "unit of account" without even coming close to be an intermediate asset.

However, no medium of exchange can exist without at the same time not being a "store of value".  These two things go together of course.  The only difference between both is liquidity and a few practical issues.  Real estate is a store of value, but is not a very practical medium of exchange.

In fact, a medium of exchange is not really needed.  It is but ONE solution to the problem of indirect exchange.  There are other ways to solve that issue, and historically, not "medium of exchange", but "credit" was often first introduced as a means to solve the issue of indirect exchange.

Money is just a tool.

http://www.princeton.edu/~kiyotaki/papers/Evilistherootofallmoney.pdf

Yes, that's pretty much the economic profession's standard narrative.  IMO it reduces "store of value" to 1 among 3 major functions, while in reality people won't use it much as medium of exchange or unit of account if it loses store of value status.

Currency, money can be said, is used as a tool of medium of exchange, the stored value and accounting unit, is specialized in supplies special goods and services in the exchange act as equivalents.

The short answer is that the authorities probably won't try this strategy because of the low chances that the populace will end up putting much wealth in the FRNs.

The long answer is that financial repression alone, especially financial repression by law (e.g. legal monopoly) has rarely, if ever, been enough to support the modern monetary system in the West.  Even under the last paper-money regime in China, when all power was concentrated in the emporer, there was virtually no contact with foreign countries, and using anything other than the state paper money was punishable by death, eventually the state saw fit to go to silver.

To my thinking, modern money has always survived by distributing its weight among all of the following major devices of support, and not any one alone.  I think this distribution will be even more necessary in the future as trust in the elites continues to diminish and power will continue to shift from the US-Europe axis to the developing world.

Remember that the fundamental problem for mondern money is that the problematic incentives for the elites always end up creating more paper claims to wealth than real goods and services, and so the following support systems become necessary to keep the system alive:

1. Political repression
- Acquiring colonies and making them hold paper sterling as reserves, by Britain.
- Working with China and oil-rich dictatorships to support the dollar in exchange, effectively, for safeguarding the regimes' power.
- Encouraging poor countries to issue too much money and debt so the dollar becomes trusted and hoarded by individuals.
- Problems for the elites: international inequality, social instability in poor countries, terrorism and war.

2. Financial repression by law or market manipulation
- Banning of private gold ownership (US.)
- Legal caps on bank interest (US.)
- Capital controls (US and Europe under the Bretton Woods system.)
- Driving savings into bank assets by, effectively, taxpayer support for banks and loose bank regulation.
- Loose monetary policy.
- Suppression of gold and silver prices via derivative trading.
- Exporting economic instability and pain to developing countries via the "exorbitant privilgeg" process.
- Problems for the elites: market-developed evasion (e.g. money market funds and euro-dollars;) financial fragility (due to distortions of asset prices by policy) and instability; developing countries fighting back (Asian currency manipulation was a big part of the causes of the 2008 crisis.)

3. Acknowledgement of reality
- Price inflation over the long term.
- Devaluation of the dollar against gold during the Great Depression.
- Allowing gold price to go to $300 and then $1200 per ounce under the fiat system.
- Dollar devaluation against Deutsch Mark, euro, yen and yuan in recent decades.
- Monetary/fiscal tightening (e.g. early 1980s US, present day European periphery.)
- Problems for the elites: exposure of the system's weakness to the public.

(Note that, often, a device is a combination of the above categories.  E.g. Western equities and real estate are indirectly propped up by central bank policy (low interest) and enjoy long-term appreciation which reflects the weakness of paper money against "real" assets.  These are excellent devices from the elites' point of view as they naturally divide the weight of the system among multiple pillars.)

In short, the survival of the system depends as much, if not more, on "soft power" as on "hard power."  For example, the very reason that the world still trusts the dollar is that the US is perceived by many to have an open and free financial system.  The reason Americans and foreigners get into dollars and Treasuries is that they know they can get out.

This is not to say that creditors hold much power over debtors, or rich over poor.  The various repressions make clear the authorities' ability to punish savers of all types.  But any redistribution of wealth to the poor, especially under a complex and disguised system such as this, tends to reflect power grabs by the elites.  Genuine help to the under-privileged of the world, and especially allowing them room to help themselves, can really only come about when the economy acquires real wealth in a stable, sustainable and equal manner, and that can only happen when the world system is no longer destabilized by state-issued money.

Money takes on a whole new meaning in a socialist economy.  Since the government creates it at will and doesn't really allow it to drive supply and demand of goods and services (but instead quotas, regulations, and other uses of power are used to allocate scarce resources,) the economy is basically de-monetized.  If you *don't* have money, you definitely can't get what you want.  If you have money (and have the same amount everyone else seems to have,) then you're subject to the regular rationing.

Free market economics is renowned for its competition and the necessity of business to become evermore agile and adept in doing business because of that. However, the Federal Reserve has established a sort of horizontally and vertically integrated monopoly on money; it can "sell" (i.e., loan) any quality of money without any (domestic) threat of competition so long as (1) legal tender laws are enforced consistently and (2) it supplies the notes (be they FRN 1, FRN 2, FRN 3, etc.) itself.

In the modern world, at least in the developed world, people don't tolerate police and soldiers using their power to bully the public.  (Except racially charged instances, maybe.)

Unfortunately, bullying on the financial plane *is* tolerated.

And the state uses and nurtures the banks essentially in the same way as it did warriors, and for the same reasons.

If they devalue or abandon their FRN I, which amounts to: 1. acknowledging their previous note issue was a flawed system; 2. in effect reneging on their debt or at least most of it; 3. stiffing the very people who trusted them;  4. causing a crisis and mass spectacle that generates lots of commentary that exposes the system's fundamental weakness; 5. trying to get a new system going to maintain their power, that people will now trust, I think they will want to make absolutely sure the new system has enough strength to withstand all skepticism, at least initially.  We have to remember these people are pretty smart.

That is why if they peg dollars to gold, crypto, etc., it will be at a very low price for the dollar.  They'll need all the stability they can get, and then some, to allow them to push fiscal and monetary stimulus to get the economy going and pacify the population.  (Also, pegging existing dollars looks much better than starting a new dollar.)

(You missed the gist of my post.) What does that matter when any- and everyone may do so?

This goes to show (as my original post stated) that money is just a standard.  As long as people trust a money, it will have value.  Granted, modern state issued money is probably doomed long-term, it can last a while, as the totally fiat dollar has lasted 40+ years since Nixon shut the gold window.  And the standard's longevity will depend on how well it's managed by its issuer.

What the elites seem to want is to enjoy today while it lasts.

As for the "true nature" of money, there's the whole spectrum from people who believe only commodity money is "real", to chartalism that believes the state owns all the rights to money.  I believe you can't really take a scientific approach by stating the nature of money, and then proceeding to prescribe the system around it.  For better or worse, with 99% of the people willing to believe essentially what the authorities tell them, money is still basically a political subject.  The very statement of the nature of money is politically tainted, or perceived to be.  The discussion is much more fruitful and less prone to religious-war problems when we take an operational perspective.

When you create 1 dollar worth of money using 1 dollar worth of resource/labor, then there is no robbery involved, just fair trade. However, if you write some numbers on a paper and use it as 1 dollar, then that is not fair trade. But still, many people accept this paper and regard it as something with 1 dollar's value. So it involves some trust and time related tricks

In a communist country like North korean, if you don't use fiat money you will be executed. But in a western modern democracy country, the mass adoption of fiat money is purely voluntarily. Is it because everyone's income is received in the form of fiat money? Or people only trust the most powerful organizations like government?

Ensuring that barrels of oil are sold for USD (thus creating a merket therefor) effectively makes oil consumers (i.e., the world) a "slave" (i.e., they don't receive compensation specifically for their contribution) of the U.S. economy.

Besides the end of slavery and democracy, another modern sign of progress is the idea of territorial integrity.  This is what makes it impossible for the US to do what Britain did, i.e. acquire colonies around the world and force them to keep paper sterling as reserves.  The world simply won't allow it.  The US only dominates the world indirectly by stirring up trouble (consciously or not) among countries and peoples and taking the role of the "balance of power" (i.e. by becoming the deciding force by siding with one side or the other.)  This is not ideal, but it's progress.  Domination at least requires the nod from the local elites.

Couldn't the plutocracy merely have the U.S. Federal Reserve system accept and issue the Federal Reserve Note II (i.e., a new one) instead of the Federal Reserve Note?

I think the US is actively trying to keep China from taking the succession (if there is to be a next global power.)  Instead, it is trying to give it to India, if and when it's ready.  IMO the US is playing the role of Britain in late 19th century, China is playing Germany, and India is playing the US.  This also makes sense if you look at the political cultures of the countries.

Things might work out differently this time.  World War One was able to knock out Germany for good, but such a thing is unthinkable now.  China might not be able to step into the throne, but it can be a constant thorn on the side of the established order.

This in itself would be good for keeping each country (relatively) honest (ie in a monetary and financial sense) through rivalry and competition.  What we want to watch out for is collusion, of the kind during the 90s, when China was the world's biggest supporter of the dollar and cheap Chinese imports allowed US interest to stay low in the middle of the great buildup of the financial house of cards and the great movement of wealth to the elites.  (The cause for optimism is that even this lasted only 15 years before the elites shot themselves in the foot with the 2008 crisis.  The system really is doomed.)

 That maybe you dont know,i dont know who said that,propably Lenin
Money in hand of our enemy can be dangerous weapon
money in hands of our own people is the most dangerous enemy


My thoughts
Looks like that we all,living in diffrent countries,we are all living in totalitary system,and we are the the most dangerous enemys