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The gold coin would be gold first, coin later. What makes it a coin is that someone measured its purity, and stamped it with their mark to underwrite said puri

The gold coin would be gold first, coin later. What makes it a coin is that someone measured its purity, and stamped it with their mark to underwrite said purity. The IOU, if not attached to a specific name, is just as good and exchange medium as that coin. Even better perhaps because the value is not in the material itself, but in what it can be exchanged for. Frankly gold is nothing magical, it is just a material that is very corrosion resistant. Thus making weights out of gold would allow them to stay accurate longer while being transported around.

nickik 10y ago
Of course gold is not magical, I don't clam it is. The coin form is just for exchange, gold itself is the base money. > The IOU, if not attached to a specific name, is just as good and exchange medium as that coin. This is where you are wrong. Exchanging a IOU of a third party increases the trust relationship to a third party. That is useful to do, and that's why banking exists, but it is not inherent or required. > Even better perhaps because the value is not in the material itself, but in what it can be exchanged for. Yes. But again. It is still bound to the base money. Look into how historical note issuing banking system work, there are great resources on this. The banks exchange the gold when they get other notes. Then they further abstract and establish clearing houses that do multiparty exchange. Note here that the relationship always grow complex and more trust is involved, but it is all based on the soundness of the underlying base system. The IOUs, banking and all are simple not required for something to be money.
clock_tower 10y ago
The note's not going to be "as good as gold" unless it comes from a seriously reliable lender. You have to be confident that the lender exists, and that he'll pay out in good coin when you present the note; you also have to take into account the trouble of getting to the bank from where you are (which means, in practice, trading the note for a note from abroad drawn on a local bank), so paper from Venice is going to circulate below par in Hamburg and vice-versa. (It probably won't even be accepted in the countryside, where access to clearinghouses is almost nonexistent.) Paper from remote areas is basically worthless even in centers of civilization, likelier than not to be a scam; compare the later American "wildcat banks" (https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking). Fernand Braudel has some wonderful books on this subject -- the second and third volumes of Civilization and Capitalism (the storied Structures of Everyday Life is the first), plus his book on the Mediterranean in the age of Philip II.

nickik 10y ago

Of course gold is not magical, I don't clam it is. The coin form is just for exchange, gold itself is the base money. > The IOU, if not attached to a specific name, is just as good and exchange medium as that coin. This is where you are wrong. Exchanging a IOU of a third party increases the trust relationship to a third party. That is useful to do, and that's why banking exists, but it is not inherent or required. > Even better perhaps because the value is not in the material itself, but in what it can be exchanged for. Yes. But again. It is still bound to the base money. Look into how historical note issuing banking system work, there are great resources on this. The banks exchange the gold when they get other notes. Then they further abstract and establish clearing houses that do multiparty exchange. Note here that the relationship always grow complex and more trust is involved, but it is all based on the soundness of the underlying base system. The IOUs, banking and all are simple not required for something to be money.

clock_tower 10y ago

The note's not going to be "as good as gold" unless it comes from a seriously reliable lender. You have to be confident that the lender exists, and that he'll pay out in good coin when you present the note; you also have to take into account the trouble of getting to the bank from where you are (which means, in practice, trading the note for a note from abroad drawn on a local bank), so paper from Venice is going to circulate below par in Hamburg and vice-versa. (It probably won't even be accepted in the countryside, where access to clearinghouses is almost nonexistent.) Paper from remote areas is basically worthless even in centers of civilization, likelier than not to be a scam; compare the later American "wildcat banks" (https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking). Fernand Braudel has some wonderful books on this subject -- the second and third volumes of Civilization and Capitalism (the storied Structures of Everyday Life is the first), plus his book on the Mediterranean in the age of Philip II.