7.22.2020

MoneY is obvIOUs

It has come to my attention that there are people out there who believe currency couldn't exist EXCEPT as debt.  This strange fact has also made me aware of supposed "monetary theories" that purport that either money can only be debt (Modern monetary theory - credit theory of money), others that say money has to have intrinsic value or backing of intrinsic value (metallism) or that money has to be issued by a central state (Chartalism).

Really guys.  Really??  Do you honestly think that only one of these could be right or that other possibilities cannot be right either?  I mean the counterexamples are so strong (shell money, Rai Stones, bitcoin, greenbacks, continentals) that I really just don't know what to tell you if you think currency can only exist inside ONE of these monetary theories.

So I am going to help make this easier and describe SOME aspects of things that can make them valuable as a currency. If two or more people find something valuable and use it in exchanges, then it is currency regardless of any "theory" you have about it!

Scarcity - If something is rare people could attribute value to it regardless of any other factor!  Even pack-rats know that shiny things have value to them.  Being able to help guarantee the scarcity by making them impossible to reproduce or make (counterfeit protection) improves value.

Easily tradeable and storable - Something that stores well and is easy to carry around has intrinsic value as a tradeable item.  Couple these with scarcity or usefulness and you have something with value.

Standardization - A standardized definition of a thing makes it more fungible as a currency.  So the fact that every silver eagle is .9999%+ pure and exactly 1 oz makes it fungible, that every "silver eagle" is worth the same.  This fact adds value if you don't have to measure it every time to value it.

Convertability - Like all the factors listed here, this factor is not required to have a currency!  Having a business, person, government, or the like saying "for every bead you give me I will give you a product I make" will add value to a currency.  Another example of this is a sovereign government saying that they will accept the payment of taxes with the currency, this will also improve the currencies value.  Convertibility was the primary value producing factor in Greenbacks  and ContinentalsIOU's also work like this, can also be thought of as "positive debt".

Agreeable and standardized emission - If people agree with how the supply of the currency is regulated, this will improve the currencies value and acceptability.  If emission is too low people will not want to spend it, if too high people will not want to hold it.  A balance ensures that people will want to use it as currency (spend and recieve).

Usefulness - This is called "intrinsic value" by many.  If something has alternate uses (like melting it down, wearing as jewelry, etc) this improves it's value as a currency.

Debt - If an item is owed back to the issuer under threat of sanction or violence, and more than one person owe the thing, then that improves it's value to someone else who also owes the thing to the lender.  I will refer to this as "negative debt" as opposed to the "positive debt" that IOU's signify.  This is an entirely negative way to reinforce value.  This is a primary value producing factor in Federal Reserve Notes and other Central Bank issued money.

I will add more factors that can make objects or even ideas (like bitcoin) as money in the future, but this should give you a good start to see that as long as 2 or more people agree something has value it IS currency!  End of story!




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