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That money is debt. In a very fundamental, literal and practical sense, debt or credit (i.e. someone owing somebody something valuable) is what money is. The tr

That money is debt. In a very fundamental, literal and practical sense, debt or credit (i.e. someone owing somebody something valuable) is what money is. The traditional definition of means of unit of measure, means of payment and unit of value describe how money is used, not what it is. Like, knife is a sharp edged tool used to cut things vs knife actually is steel. (This also being my main reason objecting cryptocurrencies. Idea of current cryptocurrencies being money is to me very much cargo cultish until there is a proper way to manage credit within the cryptocurrency system.)

deleted 7y ago
[deleted]
grecy 7y ago
I'm not sure I understand you. Are you saying that all money is borrowed from someone? What if a friend has $100,000 in the bank of his own money, and he pays me $1,000 to fix his car? He's not in debt, and neither am I. I'm confused
- esotericn 7y ago
  Society owes him, otherwise his money would be worthless. You fixing his car is an example of repaying part of that debt.
- heurisko 7y ago
  The bank is in debt, by $100,000 to your friend, the creditor. Your friend called in $1,000 of that debt to pay you.
- beefield 7y ago
  First, the "own money" in the bank is not technically his money in the bank, but money the bank has borrowed from your friend. So the bank is in debt to your friend. Now, in order for the bank to be able to be able to pay its debt to your friend one day, bank has assets. I.e. someone has borrowed money from the bank (e.g. mortgage), and those assets can be used/solde to pay your friend if your friend really wants the bank to settle its debts to him. It kind of is turtles all the way down. Someone needs to be in debt for there to exist any money. Money is a really weird kind of bearer note. It just means that if you have money, you are owed some valuable goods by other people. And you are pretty free to choose who pays that debt to you from them who is willing to take that bearer note from you as a payment. Note that debt is also how money is born. Technically everything a bank does when it adds for whatever reason money to your bank account is that it increases your balance in the database and boom, we have new money. Of course, usually banks are not stupid, and in order for them to increase their debt to you, they want something from you in exchange. Typically a promise to pay back a bit more some later day. (As a disclaimer, money is really tricky to think through. So I give no guarantees my thinking is correct, but so far thinking money as a debt has been most useful way for me to understand it.)
  - grecy 7y ago
    I guess I don't see it like that at all. I see it as the olden days where banks (or countries) actually had gold reserves for the amount of money that exists. (I know it doesn't work like that anymore) I also don't really agree that the bank owes my friend that $100k. They're just holding it for him. If you store your car at my house I'm not in debt to you. Your car is just sitting at my house for a while and you can come and get it whenever you want. It's no skin off my nose, and it doesn't impact me financially, because I'm not in debt to you. In the same way when I put money in my bank account the bank is just agreeing to store my money for a while. They are not in debt to me.
    - schindlabua 7y ago
      Sure, you owe him a car for the duration, the fact that he can get it whenever he wants doesn't change much. If the car you stored goes missing (and you set up a contract) you'll find you now owe him money. Another interesting thing is that you (a bank) will typically store not one but a hundred cars, and you will lend 90% of those to other people at any given point, in exchange for money. So everyone thinks their car is stored in a garage and they can get it whenever but they probably can't. The system only works because people don't need their cars that much.
      - anticensor 7y ago
        Fractional reserve car pooling is one of the best business models for self-driving cars besides car soldierity, that I have read about.
    - pge 7y ago
      The bank doesn’t store your money, it turns around and lends it to someone else, hoping that the interest it receives on that debt (eg. a mortgage) is greater than the interest it pays you. While I don’t agree with the overall ‘money is debt’ statement, it is definitely true that you lend your money to the bank. You don’t park it like a car. This is why there can be times that you ask for your money and they don’t have it (the reason for FDIC insurance).
    - 7y ago
- krkoch 7y ago
  But the bank now owes you $1000 and your fried $99000.
Geee 7y ago
No, that's not true. Money can be either debt-based or non-debt-based. The current government issued money is based on debt. It means that in order to create new money, someone has to be in debt for that amount. I.e. someone has to promise to create value in the future. When more promises are made, the monetary base inflates and money loses value. Money is created at the central bank (public/national debt) and in commercial banks (private debt). The alternative is money that is based on value that was created in the past. The distinction is that the work already happened and there's no promise to be held. Such money can be anything that requires work to obtain, and can't be created in any other way. Examples of such money are gold and bitcoin.
- beefield 7y ago
  > No, that's not true. Money can be either debt-based or non-debt-based. Well, you are right in that money _can_ in theory be non debt based. However, currently it is not, and I am quite confident that if you tried to come up with money that is non debt based, first, it would work horribly badly and second, there would emerge almost immediately a debt based money. You see, it is practically impossible to forbid a debt based money. If I have three friends that trust me, I can write on a paper that "if you give this paper to beefield, he will give you five apples". Now that paper is literally money between my friends. And there is very little you can do to stop that. You see that also in crypto world. Crypto people are vehemently against fractional reserve banking and anybody being able to generate money. Obviously there are now instruments that are newly created money supply for all practical and theoretical purposes (e.g. tether and exchange deposits), but somehow the cognitive dissonance seems to be too strong to admit that.
  - Geee 7y ago
    Debt and credit are useful and necessary tools, I'm not against them. Tether and exchange deposits are obviously not cryptocurrency and I think lots of people understand that. They require trust, which has been breached many times already. There's a saying: 'not your keys, not your coins'. Cryptocurrency makes it possible to actually own your money when you hold the keys, and it's impossible to take it away from you.
hnick 7y ago
Have you read Debt: The First 5000 Years? That's the core concept from that book and I found it really interesting. It tears down the common school example of barter based economies preceding money. In most societies people kept an informal ledger of favours owed in their heads and had a rough idea of commensurate value over time. Direct barter was relatively rare.

deleted 7y ago

[deleted]

grecy 7y ago

I'm not sure I understand you. Are you saying that all money is borrowed from someone? What if a friend has $100,000 in the bank of his own money, and he pays me $1,000 to fix his car? He's not in debt, and neither am I. I'm confused

esotericn 7y ago
Society owes him, otherwise his money would be worthless. You fixing his car is an example of repaying part of that debt.
heurisko 7y ago
The bank is in debt, by $100,000 to your friend, the creditor. Your friend called in $1,000 of that debt to pay you.
beefield 7y ago
First, the "own money" in the bank is not technically his money in the bank, but money the bank has borrowed from your friend. So the bank is in debt to your friend. Now, in order for the bank to be able to be able to pay its debt to your friend one day, bank has assets. I.e. someone has borrowed money from the bank (e.g. mortgage), and those assets can be used/solde to pay your friend if your friend really wants the bank to settle its debts to him. It kind of is turtles all the way down. Someone needs to be in debt for there to exist any money. Money is a really weird kind of bearer note. It just means that if you have money, you are owed some valuable goods by other people. And you are pretty free to choose who pays that debt to you from them who is willing to take that bearer note from you as a payment. Note that debt is also how money is born. Technically everything a bank does when it adds for whatever reason money to your bank account is that it increases your balance in the database and boom, we have new money. Of course, usually banks are not stupid, and in order for them to increase their debt to you, they want something from you in exchange. Typically a promise to pay back a bit more some later day. (As a disclaimer, money is really tricky to think through. So I give no guarantees my thinking is correct, but so far thinking money as a debt has been most useful way for me to understand it.)
- grecy 7y ago
  I guess I don't see it like that at all. I see it as the olden days where banks (or countries) actually had gold reserves for the amount of money that exists. (I know it doesn't work like that anymore) I also don't really agree that the bank owes my friend that $100k. They're just holding it for him. If you store your car at my house I'm not in debt to you. Your car is just sitting at my house for a while and you can come and get it whenever you want. It's no skin off my nose, and it doesn't impact me financially, because I'm not in debt to you. In the same way when I put money in my bank account the bank is just agreeing to store my money for a while. They are not in debt to me.
  - schindlabua 7y ago
    Sure, you owe him a car for the duration, the fact that he can get it whenever he wants doesn't change much. If the car you stored goes missing (and you set up a contract) you'll find you now owe him money. Another interesting thing is that you (a bank) will typically store not one but a hundred cars, and you will lend 90% of those to other people at any given point, in exchange for money. So everyone thinks their car is stored in a garage and they can get it whenever but they probably can't. The system only works because people don't need their cars that much.
    - anticensor 7y ago
      Fractional reserve car pooling is one of the best business models for self-driving cars besides car soldierity, that I have read about.
  - pge 7y ago
    The bank doesn’t store your money, it turns around and lends it to someone else, hoping that the interest it receives on that debt (eg. a mortgage) is greater than the interest it pays you. While I don’t agree with the overall ‘money is debt’ statement, it is definitely true that you lend your money to the bank. You don’t park it like a car. This is why there can be times that you ask for your money and they don’t have it (the reason for FDIC insurance).
  - 7y ago
krkoch 7y ago
But the bank now owes you $1000 and your fried $99000.

Geee 7y ago

No, that's not true. Money can be either debt-based or non-debt-based. The current government issued money is based on debt. It means that in order to create new money, someone has to be in debt for that amount. I.e. someone has to promise to create value in the future. When more promises are made, the monetary base inflates and money loses value. Money is created at the central bank (public/national debt) and in commercial banks (private debt). The alternative is money that is based on value that was created in the past. The distinction is that the work already happened and there's no promise to be held. Such money can be anything that requires work to obtain, and can't be created in any other way. Examples of such money are gold and bitcoin.

beefield 7y ago
> No, that's not true. Money can be either debt-based or non-debt-based. Well, you are right in that money _can_ in theory be non debt based. However, currently it is not, and I am quite confident that if you tried to come up with money that is non debt based, first, it would work horribly badly and second, there would emerge almost immediately a debt based money. You see, it is practically impossible to forbid a debt based money. If I have three friends that trust me, I can write on a paper that "if you give this paper to beefield, he will give you five apples". Now that paper is literally money between my friends. And there is very little you can do to stop that. You see that also in crypto world. Crypto people are vehemently against fractional reserve banking and anybody being able to generate money. Obviously there are now instruments that are newly created money supply for all practical and theoretical purposes (e.g. tether and exchange deposits), but somehow the cognitive dissonance seems to be too strong to admit that.
- Geee 7y ago
  Debt and credit are useful and necessary tools, I'm not against them. Tether and exchange deposits are obviously not cryptocurrency and I think lots of people understand that. They require trust, which has been breached many times already. There's a saying: 'not your keys, not your coins'. Cryptocurrency makes it possible to actually own your money when you hold the keys, and it's impossible to take it away from you.

hnick 7y ago

Have you read Debt: The First 5000 Years? That's the core concept from that book and I found it really interesting. It tears down the common school example of barter based economies preceding money. In most societies people kept an informal ledger of favours owed in their heads and had a rough idea of commensurate value over time. Direct barter was relatively rare.