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Old 03-29-2013, 03:20 PM
 
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It must be that a polar bear and a penguin meet at the equator where each is quite sure where to find the nearest snow. Of course given the arguments over it it must be like this.

I am going to assume two legitimate camps and I may identify possible villains.

The first camp is the "libertarian" self oriented and commodity in itself view of money in that the object is owned by its possessor, and they are free to do with as they will as an object. I would also include an immutable object, especially as a value to them.

The second camp merely wants a transaction medium to buy and sell, and care very little about a value store or object of it. As long as smoke signals or hand shakes work for smooth exchanges they do not care that the smoke will soon blow away. Money is a transient social object to them.

Two comparisons to this are gold, which is certainly on the object in it self commodity view, and the other would be akin to a ledger in the accounting of debts( no wonder the dollar cause so much trouble since it straddles between) . One rises as commodity as money all its own while another is money by agreement.


Say for example Mr Smith makes a fine canned pudding in a village. Suppose it is of such quality it is desired above all the others. It becomes as good as gold. It is used in most transactions. Now one person desires it so much they become motivated to work long hours to get it. However they do so well they are in a position to hoard a small store of it. His name is Mr Jones.


On the other side of town a transaction was made for a delivery of product with worth 10 cans of pudding, payable next year. The transaction is between Mr Johnson and Mr Adams. Mr Johnson who holds this debt finds it difficult to find the canned pudding to pay Mr Adams because the supply has changed ,and it seems the only place to get is is from Mr Smith and Mr Jones. Mr Jones will not give it up and Mr Smith just tries to keep up with demand. When the year arrives, the original debt has become too steep to pay. Mr Johnson pleads that he only meant to pay in kind at time what 10 cans was worth. Assume there are quite a view Adams-Johnson transaction problems like this say 20% of the town.

So the town decides that Mr Jones should give up his pudding. They wish to let Mrs Smith re-can the delicious pudding adulterated with water to allow Mr Johnson to pay his real debt. Mr Jones finds this outrageous and refuses.

Meanwhile in another area of town Mr Barnes had accumulated his own pudding knowing Mr Jones would make it short in supply. Mr Barns is the only one in town who does not eat the pudding and cares very little for it unlike anyone else. So he, speculatively, took the rest. He will sell them to Mr Johnson at triple the price. The town however finds that outrageous and insists that he must dilute his pudding. Then he joins with Mr Jones in his indignation at diluting the flavor of his pudding.


So how do we solves this mess, and if you were Mayor who would you like to see leave town?
What would you do a Mayor?
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Old 03-29-2013, 05:09 PM
 
Location: Warwick, RI
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Ok, I'll play. The simple solution is that the debtors need to find other products that they can exchange for the proper amount of pudding needed to pay off their debt. This may not be an easy task, but that needed to be properly considered BEFORE they entered into the debt agreement, not after. They may have to work harder to pay their debt off, maybe much harder than they imagined prior to borrowing their pudding, but again, they should have considered that prior to borrowing it. As for Mr Jones and Mr Barnes, rewards go to the wise, or put another way, the hardest working squirrell collects the most acorns and weathers the winter more comfortably than the rest. As for the rest of the town, they are not a party to either the borrowing or the buying transaction, and they have NO BUSINESS trying to tell Mr Jones and Mr Barnes what to do with their pudding, and certainly not without compensating them fair value for said pudding, which would be current market price. To do otherwise would violate Mr Jones and Mr Barnes constitutional rights to own private property. The moral of this story is to stop borrowing and start saving, or to stay consistent with this fun little story, stock up on pudding when it goes on sale, and store it in your pantry for a rainy day.

Very, very simple. Not easy, but simple.
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Old 03-29-2013, 06:42 PM
 
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My theory is it is a great motivational tool. Its value lies in what it can motivate someone to do. If you have lots of dollars they are only worth what they can get someone to do for you, such as rent you a room, provide you with food, or even treat your illness.
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Old 03-29-2013, 08:22 PM
 
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Quote:
Originally Posted by treasurekidd View Post
Ok, I'll play. The simple solution is that the debtors need to find other products that they can exchange for the proper amount of pudding needed to pay off their debt. This may not be an easy task, but that needed to be properly considered BEFORE they entered into the debt agreement, not after. They may have to work harder to pay their debt off, maybe much harder than they imagined prior to borrowing their pudding, but again, they should have considered that prior to borrowing it. As for Mr Jones and Mr Barnes, rewards go to the wise, or put another way, the hardest working squirrell collects the most acorns and weathers the winter more comfortably than the rest. As for the rest of the town, they are not a party to either the borrowing or the buying transaction, and they have NO BUSINESS trying to tell Mr Jones and Mr Barnes what to do with their pudding, and certainly not without compensating them fair value for said pudding, which would be current market price. To do otherwise would violate Mr Jones and Mr Barnes constitutional rights to own private property. The moral of this story is to stop borrowing and start saving, or to stay consistent with this fun little story, stock up on pudding when it goes on sale, and store it in your pantry for a rainy day.

Very, very simple. Not easy, but simple.
I think in the exercise it would be Mr Adams whose rights I would be the least sympathetic. I am not very sympathetic to Mr Barnes from a monetary stand point, but from a commodity standpoint more so since he does regulate supply and store real value in the commodity.

The biggest point for me is these two views of money make it very hard to reconcile the political differences, and I am not so sure the left, right, libertarians, what have you come to terms with these different views of money. There is not much point in having an argument about money supply until they agree on what money is and what it should be used for.


So I would be more curious to know your opinion. Is money a store of value and a rightful commodity that should be immutable in the hands of the possessor or should it be a tool of social exchange? For example ideally I think it would be most efficient to have perfect barter. However since we don't have that money is involved and may become an object in itself.

Last edited by gwynedd1; 03-29-2013 at 08:31 PM..
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Old 03-29-2013, 08:25 PM
 
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Originally Posted by pvande55 View Post
My theory is it is a great motivational tool. Its value lies in what it can motivate someone to do. If you have lots of dollars they are only worth what they can get someone to do for you, such as rent you a room, provide you with food, or even treat your illness.
What I was wondering though is what you think of these two very different views people seem to have about money. I am quite sure some of the bitter exchanges have something to do with just basic different views on this. I am not sure they even realize it.
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Old 03-29-2013, 10:10 PM
 
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Count me on the second camp. I want goods and services. My labor value cannot hold immutable value in a complex society. I need the flexibility of bartering my labor value to gain all the utility of goods and services I desire.

I need a liquid and fluid means of exchange. Inflation of course robs me of my labor value, but straight up bartering is too illiquid for me to live my life. If I had to wait on selling my car in order to put food on the table I'd be dead by the end of the week. Liquidity is king in my life. Unfortunately I get robbed by inflation. Of course if I get in the business of buying and selling the medium itself then I hedge my loss. But this distorts the basic value of the exchange medium. This is where the conflict lies. People messing with the medium. Human nature. Go figure.
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Old 03-30-2013, 09:26 AM
 
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Originally Posted by hindsight2020 View Post
Count me on the second camp. I want goods and services. My labor value cannot hold immutable value in a complex society. I need the flexibility of bartering my labor value to gain all the utility of goods and services I desire.

I need a liquid and fluid means of exchange. Inflation of course robs me of my labor value, but straight up bartering is too illiquid for me to live my life. If I had to wait on selling my car in order to put food on the table I'd be dead by the end of the week. Liquidity is king in my life. Unfortunately I get robbed by inflation. Of course if I get in the business of buying and selling the medium itself then I hedge my loss. But this distorts the basic value of the exchange medium. This is where the conflict lies. People messing with the medium. Human nature. Go figure.
If I were the head of a state I would certainly choose the latter system . To make it more personal say that you are head of a clan among rival clans. So in other words which money system would you choose verse having your eyes put out ? Would it be the same one you choose for libertarian freedom? In a society that I trust very little I would be less enthusiastic for social money. I see conflicts, even in myself...

As to an inflating currency, I like to point out Superbowl tickets. Tickets before the game can trade for thousands. Everyone knows they will become worthless after the game. I think you and I would find them a suitable payment in lieu of anything else if we have time to convert them. The trouble would begin after the game started when it would rapidly depreciate.

So I assert this law of money as to how the market treats it:

The future value of the currency is not relevant. It is the real time convertibility of the currency into things of value.
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Old 03-30-2013, 12:11 PM
 
Location: Victoria TX
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ln order to understand money, one only need contemplate a post-apocalyptic world in which the monetary systems have collapsed, but people are still producing goods and services. What would happen? Literally within days, the inhabitants of a local economic trading zone would form a system in which there is an agreed-upon portable medium of exchange that represents value. That is what money is.
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Old 03-30-2013, 12:55 PM
 
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Originally Posted by jtur88 View Post
ln order to understand money, one only need contemplate a post-apocalyptic world in which the monetary systems have collapsed, but people are still producing goods and services. What would happen? Literally within days, the inhabitants of a local economic trading zone would form a system in which there is an agreed-upon portable medium of exchange that represents value. That is what money is.
No it isn't what money is. That is the one version of what money is. You missed the point of the thread. I ask that you carefully look at these two conflicting perspectives. What you said is one account of what money is that conflicts with the other account of what money is. Commodity money comes from the objective basic human need category that dominates primitive states. Obviously after social break downs it dominates. However social and sovereign power conflicts with it even from a productivity standpoint. The reason is because store of value and liquidity are two mutually exclusive things, and they conflict at certain points. If the need for the commodity rises in a shock, it loses its benefit of liquidity. Its what we would call in chess a tactical vulnerability of the over burdened piece.

Here is an easy demonstration. Say gold is money. Say a discovery occurs in cold fusion but it needs lots of gold. In order for gold to be put to use, it must leave its duty of liquidity(the desire to eat the pudding). This already happened. Gold is not just liquid, its also a store of value. So as the demand for its store of value property rose ,its liquidity properties declined(The Depression). In fact that is the dollar problem. The dollar must lose value to be liquid. However to be liquid it must retain value. Chinese currency might have value, but its not liquid. China must run trade deficits for liquidity. Thus the problem is must have value while losing it. How for example will China have the new reserve currency when it goes back to China in a trade surplus?

When Gold fled the US during the civil war, this is exactly the situation that a powerful sovereign will not want hence the green backs. This was repeated again with Germany. Germany had no gold, but Hitler abandoned it and attacked Europe which dove all his rivals off gold standards too.

For the opposite problem. Say water is used as money in the desert. Say water is used as money. Then one day is rains buckets. The great benefit of the commodity just destroyed the desert financial system. That is the money dilemma.



Bottom line. In your example commodity money is better since there is a weak state. However in powerful states fiat money can by pass liquidity problems that states with commodity money have. Guess what happens when state using state money attack commodity money states? Fiat money states can be more economically productive. However they also lose freedom. States that wish to weaken their central governments for freedom cost themselves in material wealth and are vulnerable to other states.


Does anyone deny this dilemma?
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Old 03-30-2013, 03:26 PM
 
Location: The Lakes Region
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China, Russia, Turkey, Iran, India all agree to print money backed only by gold. They are amassing it in huge quantities right now. They pull in Germany and other "golden" Euro states to use only "golden" based currency.
The dollar loses almost all value while the rest of the world operates on the gold standard. The dollar is then forced to be
replaced by the USA which can no longer keep printing money that is not honored anywhere else in the world.
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