For a while now, I’ve had a hypothesis that money does have a real, tangible underlying asset attached to it, in the exact same way as it used to be backed by gold or oil.
The underlying asset is human capital and the value is derived from human labour.
The reason for my belief is because private banks actually create 80% of the money in circulation. They create this money when they issue loans.
How do we determine the amount of loan we can take? The amount of money we earn. We earn money either via our own labour or someone else’s. Ergo, money is created at the value human labour you own, like how we used to do so with gold and oil.
Money here acting as both an iou and as a labour token, in the same way a British Bank note was both an iou for gold and affected gold prices, we have been buried under a labour debt our great grandkids would come close to paying off. Printing of future Labour ious also depresses wages for everyone who works for their money.
Every currency’s value is “potential to convince others to do labor for you”, that doesn’t make fiat different, it would be a chicken and egg problem otherwise.
The value of a currency is “what makes people want to accept this currency?”. The answer is taxes. You live in a state. That state requires you to pay taxes in a currency (or set of currencies). Doesn’t matter how much gold you have, if you want to keep your house in country X, you have to pay it for property taxes in a currency that that state accepts, otherwise that state’s police will revoke your ownership of the property.
States have a monopoly of violence, therefore currencies have value because it’s the only way to preserve your ownership of property via taxes.
The difference being, like in the roman times you’re referring to, the coins at least had some other kind of underlying value.
I agree that was heavily inflated and, eventually, the value of the coins became more than the value of the metals the coins ended up as after clipping etc.
However, now there isn’t even that pretence. Human labour is the underlying asset here imo.
It’s not that I dont know how money works. Its that I think about it differently. To me, it makes a lot more sense than just that we believe in it really hard, with extra steps. Its that now, the rich get to keep hold of the gold too.
A way to think about the idea is the financial crash. “Sub prime mortgages” means “fraudulent loans to people who didn’t exist” (money creation). The money created by those loans was spent a thousand times over, all due back to bigger banks who leant them money, with new loans and made with them as collateral and all packed into toxic financial instruments. When it was found out that those people didn’t exist, the money literally disappeared. Thats how “companies balance sheets just vanished.” Thats whys Governments had to print money: because the money had vanished and there was a gapping money void due to it.
There was no one to work off the value of the money that had been created and, just like if you found out thr bank didn’t have any gold (back in the gold standard days), the IOUs (money) would be worthless.
To me, it point to seeing the world as a human labour farm and the currency is human labour IOUs, in the same way cotton, sugar and steel nails and their IOUs in Virginia, the Caribbean and the North East of England respectfully were also used currency or were the equivalent of currency.
Well yeah. If you trace it backwards, before fiat, what was commodity backed currency? What inherent value is there to gold and silver? Back then there was little industrial use, it was just useful as something to trade for other things.
So going back further, at it’s core, currency is just a middle man to bartering. Instead of trading the grain you labored to grow for shoes from the cobbler, when you don’t need shoes right now, you take gold/shells/beads knowing you can use them to trade for repairs to your plow from the blacksmith. Currency has always been a social construct, not inherent to the commodity.
This is actually one argument against the hoarding behavior of the ultra wealthy. It disrupts the natural economy and creates unhealthy power dynamics. The rich person can distort labor away from productive things healthy for future development of the society, say by using their vast wealth to pay a ton of farmers to build statues of the rich guy, until suddenly there’s famine because no one is growing food.
So going back further, at it’s core, currency is just a middle man to bartering. Instead of trading the grain you labored to grow for shoes from the cobbler, when you don’t need shoes right now, you take gold/shells/beads knowing you can use them to trade for repairs to your plow from the blacksmith. Currency has always been a social construct, not inherent to the commodity.
This is what David Graeber calls “The Myth of Barter” and has no basis in history or anthropology. Trade was happening for thousands of years before the first currency was invented in the 6th Century BC. There are other ways to arrange trade that don’t require currency as an exchange of value.
For example, if I were a barley farmer in ancient Mesopotamia and I wanted to get drunk before harvest, I could write an IOU for part of my barley harvest to the bar owner. Then, if he needed to buy something he could take my IOU and trade that for whatever it was. This IOU would go round and round the economy, but it also made them pretty unstable if the barley crop didn’t meet expectations.
If this is interesting to you I highly recommend the book Debt: The First 5,000 Years which goes into a lot of detail about many different economic systems that have existed.
Think the point is that alternative strategies were in play when the biggest, most overwhelming cities in the world were maybe 100k people, the world population was 1% of what it was today, and economic activity was relatively limited in what sorts of goods and services were for trade.
Currency came about because as the indirect bartering relationships became overly complex and the number of participants exploded.
Though the currency situation did set up a sort of ‘meta’ of gaming the numbers for sake of the numbers themselves, which grew out of control until breaking the gold standard. Of course it’s still out of control, but what we see is nothing compared to the instability of a gold standard currency trying to tackle current day human activity.
For a while now, I’ve had a hypothesis that money does have a real, tangible underlying asset attached to it, in the exact same way as it used to be backed by gold or oil.
The underlying asset is human capital and the value is derived from human labour.
The reason for my belief is because private banks actually create 80% of the money in circulation. They create this money when they issue loans.
How do we determine the amount of loan we can take? The amount of money we earn. We earn money either via our own labour or someone else’s. Ergo, money is created at the value human labour you own, like how we used to do so with gold and oil.
Money here acting as both an iou and as a labour token, in the same way a British Bank note was both an iou for gold and affected gold prices, we have been buried under a labour debt our great grandkids would come close to paying off. Printing of future Labour ious also depresses wages for everyone who works for their money.
Imo, its much worse than monopoly money.
Every currency’s value is “potential to convince others to do labor for you”, that doesn’t make fiat different, it would be a chicken and egg problem otherwise.
The value of a currency is “what makes people want to accept this currency?”. The answer is taxes. You live in a state. That state requires you to pay taxes in a currency (or set of currencies). Doesn’t matter how much gold you have, if you want to keep your house in country X, you have to pay it for property taxes in a currency that that state accepts, otherwise that state’s police will revoke your ownership of the property.
States have a monopoly of violence, therefore currencies have value because it’s the only way to preserve your ownership of property via taxes.
The difference being, like in the roman times you’re referring to, the coins at least had some other kind of underlying value.
I agree that was heavily inflated and, eventually, the value of the coins became more than the value of the metals the coins ended up as after clipping etc.
However, now there isn’t even that pretence. Human labour is the underlying asset here imo.
It’s not that I dont know how money works. Its that I think about it differently. To me, it makes a lot more sense than just that we believe in it really hard, with extra steps. Its that now, the rich get to keep hold of the gold too.
A way to think about the idea is the financial crash. “Sub prime mortgages” means “fraudulent loans to people who didn’t exist” (money creation). The money created by those loans was spent a thousand times over, all due back to bigger banks who leant them money, with new loans and made with them as collateral and all packed into toxic financial instruments. When it was found out that those people didn’t exist, the money literally disappeared. Thats how “companies balance sheets just vanished.” Thats whys Governments had to print money: because the money had vanished and there was a gapping money void due to it.
There was no one to work off the value of the money that had been created and, just like if you found out thr bank didn’t have any gold (back in the gold standard days), the IOUs (money) would be worthless.
To me, it point to seeing the world as a human labour farm and the currency is human labour IOUs, in the same way cotton, sugar and steel nails and their IOUs in Virginia, the Caribbean and the North East of England respectfully were also used currency or were the equivalent of currency.
Well yeah. If you trace it backwards, before fiat, what was commodity backed currency? What inherent value is there to gold and silver? Back then there was little industrial use, it was just useful as something to trade for other things.
So going back further, at it’s core, currency is just a middle man to bartering. Instead of trading the grain you labored to grow for shoes from the cobbler, when you don’t need shoes right now, you take gold/shells/beads knowing you can use them to trade for repairs to your plow from the blacksmith. Currency has always been a social construct, not inherent to the commodity.
This is actually one argument against the hoarding behavior of the ultra wealthy. It disrupts the natural economy and creates unhealthy power dynamics. The rich person can distort labor away from productive things healthy for future development of the society, say by using their vast wealth to pay a ton of farmers to build statues of the rich guy, until suddenly there’s famine because no one is growing food.
This is what David Graeber calls “The Myth of Barter” and has no basis in history or anthropology. Trade was happening for thousands of years before the first currency was invented in the 6th Century BC. There are other ways to arrange trade that don’t require currency as an exchange of value.
For example, if I were a barley farmer in ancient Mesopotamia and I wanted to get drunk before harvest, I could write an IOU for part of my barley harvest to the bar owner. Then, if he needed to buy something he could take my IOU and trade that for whatever it was. This IOU would go round and round the economy, but it also made them pretty unstable if the barley crop didn’t meet expectations.
If this is interesting to you I highly recommend the book Debt: The First 5,000 Years which goes into a lot of detail about many different economic systems that have existed.
Think the point is that alternative strategies were in play when the biggest, most overwhelming cities in the world were maybe 100k people, the world population was 1% of what it was today, and economic activity was relatively limited in what sorts of goods and services were for trade.
Currency came about because as the indirect bartering relationships became overly complex and the number of participants exploded.
Though the currency situation did set up a sort of ‘meta’ of gaming the numbers for sake of the numbers themselves, which grew out of control until breaking the gold standard. Of course it’s still out of control, but what we see is nothing compared to the instability of a gold standard currency trying to tackle current day human activity.
IIRC it had a lot more to do with exerting central control on trade. That’s why going back to their invention coins had pictures of rulers on them.