Topic: Inflation and Deflation of Price and Money Supply - page 48. (Read 1456818 times)

Money, real money, is a commodity. A good like others. Not debt. Even bitcoins are a commodity, just a different type of commodity from gold or salt.
What made gold and silver a better form of money than salt or furs is a set of specific intrinsic properties (not value): divisibility, fungibility, high value/weight value/volume ratio, durability, etc.
Currencies are SUBSTITUTES of real money. Currencies are debt, because they are created linked to a fixed/specific debt: 1 $ bill is convertible at any time for 1 $ gold coin.
Then, when the convertibility was eliminated (defaulting on the previous obligations), bills started to be created creating new debts: I give you some collateral valued X and you give me X bills and I give you back X+interests some time later. But the privilege of creating money is monopolized by a single entity called Central Bank. Any other entity doing the same is called forger.

The value of the bills is strictly linked to the restrain the Central bank have in printing new bills (and preventing other forgers from printing imitations).
In this way, the Central Bank is able to move wealth around giving the news debt/credit to selected friendly entities (other banks and governments) at low cost where the others can only obtain credit at high cost or can not at all.

Bitcoin is not credit or debt, when you exchange bitcoin for goods or services, you receive the bitcoins and the other party receive the goods or services. The exchange end there. There are no other obligations for both of you or other third parties. The expectation of the other party to be able, in the future, to exchange his bitcoins for other goods and services he want is not a debt or a credit of anyone. A motor car industry can have expectation to sell his goods in the future in exchange for a specific sum of $, but the public is not bound by this expectation.

You mix what you think money should be or what Austrians believed money is with what money now and today really is.

Money is debt and even BTC economy that will be well different from economy of today will be based on debt and BTC or any other and better cryptocurrency will be the monetary base (which is probably for you the only real money). From the monetary base will be issued money through debt, like it was in 19th centrury when PRIVATE banks were issuing the money through debt directly (not indirectly lie today after central bank emission).

Absolutely.  Menger was, I think, the  first to realize this, and a precursor to von Mises.

However, I'd like to point out that whether real estate, gold and silver are money or not is depending on the time scale you're looking.  real estate is liquid on the multi-year scale.  Gold and silver are liquid on, say, a week's scale.

In fact, Menger described money and the adoption of a commodity as money, as the commodity with the higher level of resellability, not purchasing power stability.
When people acquire money they do desire purchasing power stability, but implicitly they expect maximum resellability. When you spend money to acquire something, there no delay in people accepting it, like there could be with people selling homes, gold, silver (they were de-monetized long ago)

 

Perfectly well spoken. The reason that folks think that money is a promise, may be the following: When you trade, and want to delay till tomorrow to decide what you want goods or service you want to consume, you choose something that many others want, and that stuff becomes money. You have money, and know they are useful for just about anything. That is the liquidity of the money. High liquidity is not a promise however, the value of the money has to be discovered in the next trade.

The point you make there is extremely important, and illustrates why money is exactly NOT debt.  I tried to illustrate it in several ways, but in fact you hit the key point: money is exactly so that you are by definition not guaranteed to get back something in equal value.

The reason for that is that (dynamical) markets exist, and that prices change constantly.

Now, debt being the "second part of a contract, of an agreement", it is not only a liability from which de debtor cannot escape (unless he's broke), it is also a well-defined agreement, of a known value to the creditor.

In the example you used, the agreement is "I do the dishes today, and you do the dishes tomorrow".  Not only is the second part of the agreement ("you do the dishes tomorrow") a liability to which the debtor is held liable, it is also a very well defined debt "doing the dishes tomorrow".  There is no "price fluctuation" possible here, because the two parts of the agreement were clear.

Money has exactly the opposite meaning.  The whole idea of money is that it is an intermediate asset, of which you haven't yet decided how to spend it, when to spend it.  In other words, when you accept money in return for something you do or give now, you have no idea what you are going to be wanting in return for it, or when you want it.  This is a very important aspect of indirect trade: not having to decide yet today for tomorrow.

Maybe tomorrow you would like her to do the dishes, but maybe you will want to save that for something else, and maybe you want her to make an apple pie.  You cannot fix into a contract today what you haven't decided yet for tomorrow. 

The counterpart of that, is that the prices of things in money are not fixed either.  It depends on people's wishes tomorrow, what they want to offer, and what they want to get.  One of the things that people will wish tomorrow is to keep money or to spend it (the aggregate demand for storage of value).  These things change over time.  People make different decisions tomorrow than today.  Offer and demand (also of money) changes tomorrow from today in an unpredictable way.  You have the freedom to only decide tomorrow what to do with your money and other assets, and so do other people.  As such, prices change.  The value of money changes.  It is an important part of money, that its value changes over time, and that prices change over time, because they are exactly the consequences of the changes in wishes of people, also concerning money.

So money is exactly not what debt is: a fixed, wel-defined unescapable liability.  It is a flexible exchange and nobody is forced to accept it.

No, that's a debt.

Money is the following: One day you wash the plates against her coat.  You keep the coat, and you expect that the next day, she'll want her coat back.  Then you negociate that she does the dishes for it.  It might very well be that she's not interested.  Too bad for you.

The difference is that in the first case, there was a promise, a contract.  It was an exchange: ".I do the dishes today, and you do them tomorrow, agree ?".  When you did the dishes, you did your part of the contract, and now she's supposed to do her part of the contract.

With the coat, there is no contract for her doing the dishes.  It might be cold the next day, and you could negociate that she gets her coat back if she does the dishes for two weeks in a row.  Or it might be hot and she doesn't care about her coat.

No contract is broken.  The coat was money.

The promise was a debt.

Money is always debt. Or a promise that the receiver of the currency will give back something in equal value.

Imagine you live in money-free economy. For simplifikation - just two people: you and your girl. One day you wash the plates from dinner for exchange and promise that next day she washes the plates. The promise/debt is the money, even when there is nonexistent money. In small economy money do not always exist, because there is big trust and everyone has the "blockchain" in their head. But in the bigger economies the money, that are pure symbol in small economy, but have some proxy that is hard to falsified, can be divided, traded, is rare etc.

BTC has future, because it is best as this proxy, if the algo is really impossible to break. Fiat money is otherwise great, but it can be and is falsified by states. Commodity money is hardr to falsify, but the transaction costs with currency as gold or cows or cigarettes is too high even for less developed economies than ours.

Any conversation about money must start with understanding that money is debt by definition and it will never be something else.

Yes.  Of course, we agree here.  It is a speculative asset, which means exactly that.  It is something you are willing to do something for to obtain it, not for its use as a consumption good (bread), or for use as a capital good (a production machine), but with the main or sole idea to trade it later for something you do value as a consumption good or as a capital good (or service).


Then, again, what is *your* definition of debt, and in what respect is it then different from ownership ?  It is nice to talk about "the bigger picture" but as long as you don't use clearly defined terms, and logical deductions linking them to clearly stated starting hypotheses, there's no picture at all !


Absolutely.  But dollars are not collectibles.  They are assets that are produced and destroyed by privileged economic actors. 

A ledger can also treat non-collectables, but then it is a ledger with sources and sinks ("created asset" and "destroyed asset").   After all, a ledger is nothing else but a centralized database where ownership of assets is written down ; ownership which can also be distributed by simply owning the asset physically. 

The only reason why bitcoin has a public centralized ledger is that the asset is a piece of data, and that one WANTS them to be collectables.  Now, contrary to physical assets, data can very very easily be copied, and then these data are not collectables anymore.  To turn data assets into collectables, one needs a ledger.  Now, banks use "leaky" ledgers with sources and sinks, but bitcoin uses a non-leaky ledger.

The point is: ledgers are just other ways to describe PROPERTY.

Of course some assets are debt related.  But not all.  And what characterizes money, is not debt, but is what you wrote on top: it is a speculative asset you essentially only own because you speculate upon being able to trade it later for something useful.



With bitcoin, ownership is not a social concept anymore.  Ownership is only a social concept if you need social consensus to make your property rights work.  Ownership of a house is usually a social concept: if there is no social consensus that you own a house, then anybody can come into your house and live there.  You need social consensus to drive the others out (to appeal to the violence monopolist who is the state or its representative, the police).

But there always have been assets that do not need social consensus.  Usually physically small objects which you can hide don't need social consensus.  You just physically hold them, and you can hide them.  That's the way you can enforce your ownership of them without consensus.

With bitcoin, you don't need social consensus either (apart from the bitcoin protocol itself).  The "solution to the script" can normally only be found when you have the private key, and a private key is something you can hide.  Without that private key, no matter how much social consensus there is that those satoshis actually belong to someone else, nobody can find the solution to the script.  By definition, the owner is the one who has access to the private key.

If the private key is known to several people, then indeed, ownership is ill defined, and will turn out to be finally assigned to the first of those people using that key to solve the script.

Bitcoin doesn't use social consensus as means to enforce ownership, but cryptography.  A bit in a similar way as owners of physical objects can use a safe, locked doors, or hidden places to enforce their ownership, without social consensus.

If the protection fails, then ownership enforcement fails too.  That's the case when one breaks open your safe, or when one gets one's hands upon your private key.

But all this has nothing to do with your claim that money is debt.

You are looking at the trees, but you can't see the forest.

With a few pathological exceptions, if you ask people about money, they will tell you that they value it in terms of what they can get for it.  That is, for what useful goods and services they would have directly traded their goods and services for if money did not exist.

I get it that, to you, the medium is the only important part of this.  But there are times when viewing the exchange as the important part is more useful.  Additionally, I remain uninterested in accepting your strict definition of debt and your incomplete definition of money  Your arguments that grow from these roots show only your inability to see the bigger picture.

By the way, your notion of digital collectibles falls apart if you know how a bank works, particularly the checking system.  (Or, for that matter, Ripple.)  In the banking system, dollars are just entries in a database.  They are not finite, they are not immutable.  Paper dollars are just bearer checks used to facilitate adjusting those database records up and down.

Further, your understanding of bitcoin is weak.  Bitcoin has no such concept as "ownership", nor a concept of "exclusive".  Ownership is a social concept, but Bitcoins are traded by providing solutions to scripts.  Any valid solution will be accepted by the network, regardless of the wishes of "the owner".  These forums are full of stories from people who imagined themselves to be "owners" of bitcoins, but were wrong.  The bitcoin ledger is very abstract.

Ok, we're getting somewhere.  I think this is the fundamental misunderstanding then.  True, bitcoin works with a public ledger.  That ledger is centralized in a way, because it is the only way to have collectables with data, as data can be copied.  (it is centralized not in the sense that a single group of people commands it, but it is centralized in the sense that all the data are within one single ledger).  Collectables and ledgers are mathematically equivalent in a way: a finite and immutable number of tokens, assigned to different owners, with only one owner at a time.  In other words, the fact that bitcoin works with a centralized ledger (the blockchain), and that other collectables work with a distributed ledger of OWNERSHIP (by just possessing the tokens without it being written down in a ledger) are simply two different ways of describing OWNERSHIP.

But that is not what I was talking about.  I was talking about a "ledger of debt of society with respect to individuals".  Now, that would be a ledger in which is written down value, not tokens.  If I had done 8 hours of a certain type of work in that ledger, then society would "owe me" the equivalent of 8 hours of work of a certain type", which I could claim at any moment into something equivalent.  That is not what bitcoin, nor any other property of collectables, writes down in his ledger. 


I doubt that any model could explain all of the properties of money.  Money is just too damn big of a topic to reduce to a single analogy.