Saturday, June 9, 2012

So what do we carry in our pocket? or on our credit card?

The money that everyone thinks as money are just the contracts printed on something. Now it is paper, albeit quite expensive paper.

They used to be printed on silver, on gold, on cowrie shells, on knots in pieces of string. In closer times, the futures contracts are printed on expensive paper, with expensive inks. And lately they exist on the encrypted computers sitting behind our credit cards.

The fact that silver and gold are good metals which make nice jewelry, somehow we came to think that the printing support has some value in itself. Well, it does not - as the Spanish have discovered when returning with too many galleons loaded with gold from the New World. Inflation still bit them!

All this was also analysed in a very good way and with better words than mine by A. Mitchell Innes here:

A. Mitchell Innes is a genius, way above the other money philosophers. Albeit he did not make the mental jump from money to contracts in the above paper, he remains one of the best.

Does it matter what the contract is printed on? Well, as with any contract, not really...

Did money exist before they were printed on something? Well, yes - verbal contracts are still contracts - but they were valid in small communities only. And if you were owed some future work by a few of your neighbours, and the tribe over the mountain came and killed your neighbours, your (verbal) money was gone...

Most people think that barter preceded money.  Lately, a few started to see that the so-called "gift economies" preceded money. Barter was just a way to trade, was not money - maybe through a roundabout way. And the "gift economy" is just the "verbal" stage of contract printing.

People equate the birth of money with the birth of solid support for the contracts.

The metals were indeed good as a device of contract recording, for their durability and relative resistance to forgery.

So commodity money? no, commodity money never existed - just money printed on commodity - gold etc.

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