Coins and Paper Money

So what does that mean today? For Rome burned and Nero fiddled – Aztecs have come and gone, same with ancient Greece, Persia, Egypt and England Once highly developed societies that had money and have come and gone as “rulers of the world”, what does this all mean to ME In America Today ?

Money is just a way to trade our effort (WHE.- Work Hour Equivalents ) for what we need or want. Barter is just not realistic for our complicated lives. So what is a good object to trade? Fish, beads, salt maybe? But as soon as some wiseguy finds a pile of one of these, he will be rich and not done any work and he will not be the last to do it. Valuation goes in the tank.(counterfeiting)

So how about a coin? Made of metal especially precious metal because it is hard to make or find more of it or counterfeit to dilute it’s value. But who makes this “Money”? If a independent business does, each merchant must trust the weight or weigh each piece, so transactions would be very local. Who knows if the private mint of “Far Away Land” is trustworthy?

How many people need to transact further away from “Local”? I don’t know this but just a thought?

On the other hand if a government mints the coinage or “money” it can legislate that it must be accepted, and in truth most citizens want to believe that the government will be honest and fair. But someone must play for this effort.

As Long as the merchants and citizens have faith or trust the value of the money it has value.

So….. why not get rid of the burden of coinage and use paper money????

Well, it still has to have the faith of the merchants and citizens. When I trade my WHE for a coin or paper money I want a fair trade. So when I trade for what I want or need, I want to know my WHE inside of that “money” are well spent. So "Money" is just a storage device for WHE’s, therefore it can be of anything agreed upon. Who would agree upon age device that reduces my WHE’s once it goes into the device? Still the device does not matter as long as it does the job.

But can you use lemons? I say not - yield on a lemon tree has zero correlation to WHE’s and if it was to be made so; everyone would have a lemon tree and some would find a way to have a huge harvest.

What about a promise from your local community bank they are nice people right? They can store the correct WHE’s and then debit the account upon a purchase or spending . If our story ends here, Yes! That would work. So private “money” issuance or banking still works; if the government will allow it.

If “money” gains value over time, very few people would spend it, because it would be worth more tomorrow. On the other hand in it looses value over time, you want to spend it yesterday; because it will be worth less tomorrow. In Nirvanastan (the idyllic kingdom) “money” is neutral in value and does not change, So you can store your WHE’s or spend them, depending on your values not the increase or decrease of the trading medium.

Currently in the good old USA, our money is loosing value, due to reasons addressed later. Therefore it makes the most sense is to spend that money NOW, here we have a simple reason for our consumption driven economy.

Just to buck the “conventional wisdom”, what if we spend our WHE’s right away, but not on consumables but on a investment or move that “money” back through our world, without owning it?

But can we continue to spend as our “Money” looses value? Is there an end to this road? Can changing what is used as “money” change this or have any effect at all?

So How does Money Work?

So with the ground work laid that the math is fine but it doesn’t account for human action and individual choices the Austrian school will need to be used for understand how we get from mathematical model to mathematical model.

So How does money work?

Well money is usually regarded as the metal and paper in your pocket with dead presidents on it. But hold on there Partner that’s a jump. In days of old there was no “money” so humans bartered. But, how many fish does it take in trade for a toga, or a mule? Or a vegetable to go with the fish? What if you trade a fish or grain or fresh produce for a chair or cart? One will be useless in a week and the other will just start to be useful? If our WHE (work hour equivalents) are stored up rather than traded daily we can “save” for that cool new chariot.

So we needed a neutral way to exchanges durable and non durable goods and services skip to the chase -- we used metal coinage; Gold being best, limited. valuable enough so a small amount was of high value (un like iron) a Roman solider with a ounce of it could buy a nice toga, good leather belt and fine leather footwear (still hold true today – a ounce of gold will buy a nice suit a good leather belt and fine footwear) Problem cured.

But Caesar being gluttonous with his spending (sound like any other governing body you may be familiar with) wanted to spend more than was being taken in (not that it was not a big number)

Boing! Bright Idea - Rather than increase the onerous taxes in place. Just take the coins and shave some metal off each one just a little to make more coins, (ie more coins, no more gold- oh yeah the new coins were supposed to be of the same value as the old ones Whoops)

Problem - when the next payday came around and the Centurion skips into the market to buy a fish for dinner and drops a coin. The merchant is shrewd and noticed that it was lighter in weight that every other coin he has received so he demands 2 light weight coins; Then quickly says “Have I gotta bargain for you, 3 coins for 2 fish”. Welcome to inflation, higher prices are a effect not a cause of inflation.

Can you see why a math only approach will not work in this story but human behavior is SO important to account for?

Money, Econoimics and Truth - a starting point

Economics, Finance, Money - how do we analyze all of these? Who cares?

How do we know if we are being led down the proverbial primrose path, or we are actually advancing our values, lives and families?

How do we now what is truth ?

In order to not go crazy any belief system - MUST be used throughout every part of our entire lives (or we will be accused of being a hypocrite, and "they" will be right). If it does not work everywhere every time it needs to be reviewed.
If there is NO truth - then why do we breath in? why do we let go of our keys and expect them to fall to the desk? There must be some truths that are eternal.

The hard sciences use empirical data and hypothesis and look for the evidence to prove it. But what would happen if a sociologists or psychologist did the same? If a event does not repeat with enough predictability it must be a soft science. Can you prove you were born? Scientifically - do it again to prove it. Can someone else repeat the experiment? NO with your birth. Then how can you get "peer review" (don't start, yes it is self feeding and back slapping garbage, but it's scientific)
Deductive reason is how we look at obvious pieces of data and see the pattern. Sherlock holmes and Patrick Jane are wonderfully written and entertaining examples of deductive detective work.

If Economics is a deductive science- whoops maybe it's not a science, maybe it's just human behavior skewed through a lens of our values and how we live them out.

What are you talking about?

If we as humans have effort over a limited time on this earth to advance our values could it be that economics is the study of how individuals do that? As well as, how many of them gather together in a tribe or clan? We work to: eat, clothe, shelter and repopulate; after these Maslovian things are covered we move toward self actualization. So isn't our Years of Work traded for the things we spend that capital on and the things we give up to advance our careers and secure our families are less valuable than the pile of work hours we are trading and storing away in a "spendable " format. For it they were not less valuable then we would not show up to work or quite.
So what we spend our work hour equivalents (WHE) on, is in reality our Life's Work. So the study of our WHE is economics.
Spend it, hoard it, save it, give it away, leave it, enjoy it, sell it, multiply it - What , when , where, how and Why is the - study of economics. It can not be proved with a hypothesis, it can be deduced with reason and thought.