4 ms·
Money Interpreted as an IOU
- trjordan 11y agoThe hierarchy at the bottom is interesting, because going down the hierarchy doesn't get you a bunch. Why do I want gift cards? Or your shitty voucher? Mostly, I don't, though airline points are interesting because I can get them faster than money if I fly a lot. There's another way to go down that list, and it's risk for monetary instruments. Cash is always at the top, with government bonds lower than that. Bank deposits like CD are lower and a bit riskier. At the bottom, you have things like sketchy companies issuing bonds with 20% interest, or vague promises from a founder that "this 1% equity will be worth 1% of a billion dollars!". Sounds better than cash, but definitely risky. Anything that doesn't fit somewhere one that curve doesn't exist. Your IOU doesn't get me more money, and I incur a bunch more risk. Since nobody wants that, you don't see it unless it shows up on the price / risk curve somewhere sane.
- ap22213 11y agoDavid Graeber wrote about the origins of money as IOUs pretty extensively in his book "Debt: The first 5,000 years"
- dwarman 11y agoBritish money is - or was - explicitly an IOU. The notes bore the phrase "I promise to pay the bearer on demand the sum of (n) pounds ..." Used to be gold, not sure what you get these days. Other countries also, like India.
- altomami 11y agoEven the term "banknote" makes it explicit: a note (of credit) issued by the central bank. Coins are not formally IOU's, because historically they had intrinsic value.