5 ms·

Why there’s no money: the imaginary part of financial systems

46 points by ph0rque 14y ago

neave 14y ago
Great article. Also recommended is Positive Money http://www.positivemoney.org/ http://www.positivemoney.org/ who aim to highlight this and change the banking system.
dgreensp 14y ago
I was prepared to be moved to some novel point of view on the nature of money, but the article doesn't ring true. We do get to choose how to spend our money, and rich Americans who accrue millions or billions of dollars of personal wealth especially do. What do people choose to do with their money? * Often they invest it, so that their net worth goes up rather than down, while perhaps supporting a company or cause they believe in. It's true that when you put your money into something, it's no longer liquid. If you inherit a few million dollars and immediately buy a few houses as an investment, you don't have the money, you just have the houses. * They set up philanthropic foundations. This involves allocating money to ongoing aid. Yes, the money is earmarked, because you (the foundation) earmarked it. * If you want more money going to innovation, that's great, but it is not an axiom that money, where it exists, should be used to fund particular innovative projects that will transform society. For one thing, people disagree on how important it is to spend money on innovation versus other things. If you want to see a manned mission to Jupiter, say, you can either fund it yourself or convince other people it's a good idea and work out where the money will come from. You can't just complain it's not happening, despite all the money everywhere. * When wealthy individuals decide how to spend/blow/invest/donate a million dollars (say), I don't think they are ruled by social pressure, their hands tied by the ever-present danger of being shamed into oblivion -- so they decide it is safer to just buy a yacht. This sounds like an externalization of the feeling of self-consciousness some people may have. Now, one thing I'll say is that money is not necessarily being spent on big projects in a way that reflects what people want to see. Kickstarter is helping change this (see http://www.kickstarter.com/projects/559914737/the-veronica-mars-movie-project http://www.kickstarter.com/projects/559914737/the-veronica-m...) -- by tapping into discretionary money!
- julespitt 14y ago
  Often they invest it, so that their net worth goes up rather than down, while perhaps supporting a company or cause they believe in. It's true that when you put your money into something, it's no longer liquid. Your wealth is no longer liquid - but of course, someone now has that money instead, and it's liquid for them. This seemingly minor confusion happens in the article as well: But we live in a situation where very nearly all the wealth in the world seems to be tied up in destructive forms. If the money is fluid, why is it not able to simply flow from destructive forms to creative ones? He just switched from "wealth being tied up" - wealth is often quite illiquid - to money in the second sentence. Money is by definition (we all hope!) liquid. There are a lot of interesting issues raised in this article and the subsequent discussion, but it's all very muddled to me that I don't really know where to begin to respond.
  - olefoo 14y ago
    A big part of the semantic confusion is that we have been subjected to a concerted campaign going on for at least a century now; that is specifically designed to render some thoughts unsayable, if not literally unthinkable.. If you want an amusing parlor game, ask a group of people to write down the definitions of the words 'capital' or 'free market'; and then compare them.
- bitwize 14y ago
  We do get to choose how to spend our money, and rich Americans who accrue millions or billions of dollars of personal wealth especially do. No. Capital is power[0]. Not just power to choose, but power to shape the choices of others (through marketing, propaganda, laws, etc.). Not power for the greater good, but power merely for its own sake -- because those in power fear losing their power. So they tend to use the power (capital, money) they have in order to consolidate and amplify their power base, which includes reforming the choices of others (meaning you and me) to their own advantage. In this way society is "creordered" to serve and benefit those at the top of the power pyramid. 0. http://dissidentvoice.org/2010/05/capital-as-power/ http://dissidentvoice.org/2010/05/capital-as-power/
  - 14y ago
javajosh 14y ago
As a piece of rhetoric, it's not bad. I'm certainly sympathetic to the author's viewpoint. As a piece that gives any insight into the nature of money, it leaves a lot to be desired. It is true that money is inextricably intertwined (gotta love that phrase, heh) with the political, social, and legal constructs that support it. And the notion that money is somehow encoded in a "web of obligation" rings true. But I guess I'm not really appalled by this, just like I'm not appalled by the fact that gravity doesn't let me fly, and certainly the idea that millionaires' wealth is not fluid because of peer pressure sounds like pure hogwash. A discussion I'd like to see on HN revolves around a simple scenario. You live in a village, people only barter with each other. The village grows, and someone comes up with the idea that money would make it possible to avoid complex and difficult trades involving real goods. Money is essentially a convenience. But how do you do it? Even assuming that you have a completely trustworthy producer of currency, how, exactly, do you introduce money into the system? It is my belief that a great deal of ignorance is laid bare when you start thinking through the problems of rolling out a new currency like this. Indeed, if and when we can see through this problem, we can evolve our little society further and faster, and understand how the various types of institutions we have evolved. Think of it as "economic embryology" - and just like real embryology yields some incredible insights into the adult organism, I think the economic embryology gedanken experiment can generate real insights into a mature economy.
- scarmig 14y ago
  That's largely ahistorical, though: no historian or anthropologist thinks this is how money arose. You sometimes see shadow currencies evolve out of the breakdown of liberal capitalist societies--in prisons, times of famine, mass inflation, etc.--to make barter more fluid. The picture history paints, however, is one where money is typically invented by a ruling elite to use as a unit of account and as a way to extract taxes from the peasantry to fund military ventures.
  - javajosh 14y ago
    Thought experiments are ahistorical and arealistic. Yet they are still important tools for understanding things. Go figure.
holograham 14y ago
while it is true we have come up with ingenious ways to "obligate" money, these constructs have arisen from a want from consumers...a person in the US chooses to sign up for a 30 year mortgage because he/she values owning a home. Venture Capitalists choose to obligate their money in risky startups in order to breath life into fringe ideas that may strike it big. Remembering that money is a proxy for wealth measurement the reality is that money simply is a median of exchanging wealth which people are choosing to use.
nnq 14y ago
Developing OP's points to their natural conclusions and ignoring the awful math analogy: the point would be to liquify / unfreeze as much of the available wealth as possible, to have it flow to things that could make the world a better place or solve the "big problems", right? So a strong middle class with lots of well spread discretionary income, capable to crowd-fund tons of interesting work would be the solution. Evrika! But NO... there is no reason for the liquified money to flow in the "right" directions, maybe they's all be spend on entertainment and we'll have a "brave new world" type dystopia instead, so maybe it's better to have it "frozen", because at least this way there is some control over it. ...a more interesting problem imho would be to see how money actually relates to power/control and to have an information theoretical way to quantify this power/control - this could really bring new ways to look at economy, instead of this silly economic mythology with fluid/solid money, (anti)fragile entities, enigmatic black swans floating around and other mystical creatures and forces that our analogy loving minds keep creating.
Tycho 14y ago
Most of the money is made, at root, in one of two ways: oppressing other people, or destroying the natural world. The political, legal and social frameworks which enable these acts to be performed are then encoded into the structures which govern the wealth so-created, and that wealth can no more flow to constructive ends than water can flow up hill.
deleted 14y ago
[deleted]
leashless 14y ago
Hm. Wish I'd seen this when it went by, I'm the original author. I think Graeber's Debt is probably pretty important in grounding any discussion about money at this point - given how much of our "money" is complex chains of debt, rather than cash!

46 points by ph0rque 14y ago

neave 14y ago

Great article. Also recommended is Positive Money http://www.positivemoney.org/ http://www.positivemoney.org/ who aim to highlight this and change the banking system.

dgreensp 14y ago

I was prepared to be moved to some novel point of view on the nature of money, but the article doesn't ring true. We do get to choose how to spend our money, and rich Americans who accrue millions or billions of dollars of personal wealth especially do. What do people choose to do with their money? * Often they invest it, so that their net worth goes up rather than down, while perhaps supporting a company or cause they believe in. It's true that when you put your money into something, it's no longer liquid. If you inherit a few million dollars and immediately buy a few houses as an investment, you don't have the money, you just have the houses. * They set up philanthropic foundations. This involves allocating money to ongoing aid. Yes, the money is earmarked, because you (the foundation) earmarked it. * If you want more money going to innovation, that's great, but it is not an axiom that money, where it exists, should be used to fund particular innovative projects that will transform society. For one thing, people disagree on how important it is to spend money on innovation versus other things. If you want to see a manned mission to Jupiter, say, you can either fund it yourself or convince other people it's a good idea and work out where the money will come from. You can't just complain it's not happening, despite all the money everywhere. * When wealthy individuals decide how to spend/blow/invest/donate a million dollars (say), I don't think they are ruled by social pressure, their hands tied by the ever-present danger of being shamed into oblivion -- so they decide it is safer to just buy a yacht. This sounds like an externalization of the feeling of self-consciousness some people may have. Now, one thing I'll say is that money is not necessarily being spent on big projects in a way that reflects what people want to see. Kickstarter is helping change this (see http://www.kickstarter.com/projects/559914737/the-veronica-mars-movie-project http://www.kickstarter.com/projects/559914737/the-veronica-m...) -- by tapping into discretionary money!

julespitt 14y ago
Often they invest it, so that their net worth goes up rather than down, while perhaps supporting a company or cause they believe in. It's true that when you put your money into something, it's no longer liquid. Your wealth is no longer liquid - but of course, someone now has that money instead, and it's liquid for them. This seemingly minor confusion happens in the article as well: But we live in a situation where very nearly all the wealth in the world seems to be tied up in destructive forms. If the money is fluid, why is it not able to simply flow from destructive forms to creative ones? He just switched from "wealth being tied up" - wealth is often quite illiquid - to money in the second sentence. Money is by definition (we all hope!) liquid. There are a lot of interesting issues raised in this article and the subsequent discussion, but it's all very muddled to me that I don't really know where to begin to respond.
- olefoo 14y ago
  A big part of the semantic confusion is that we have been subjected to a concerted campaign going on for at least a century now; that is specifically designed to render some thoughts unsayable, if not literally unthinkable.. If you want an amusing parlor game, ask a group of people to write down the definitions of the words 'capital' or 'free market'; and then compare them.
bitwize 14y ago
We do get to choose how to spend our money, and rich Americans who accrue millions or billions of dollars of personal wealth especially do. No. Capital is power[0]. Not just power to choose, but power to shape the choices of others (through marketing, propaganda, laws, etc.). Not power for the greater good, but power merely for its own sake -- because those in power fear losing their power. So they tend to use the power (capital, money) they have in order to consolidate and amplify their power base, which includes reforming the choices of others (meaning you and me) to their own advantage. In this way society is "creordered" to serve and benefit those at the top of the power pyramid. 0. http://dissidentvoice.org/2010/05/capital-as-power/ http://dissidentvoice.org/2010/05/capital-as-power/
- 14y ago

javajosh 14y ago

As a piece of rhetoric, it's not bad. I'm certainly sympathetic to the author's viewpoint. As a piece that gives any insight into the nature of money, it leaves a lot to be desired. It is true that money is inextricably intertwined (gotta love that phrase, heh) with the political, social, and legal constructs that support it. And the notion that money is somehow encoded in a "web of obligation" rings true. But I guess I'm not really appalled by this, just like I'm not appalled by the fact that gravity doesn't let me fly, and certainly the idea that millionaires' wealth is not fluid because of peer pressure sounds like pure hogwash. A discussion I'd like to see on HN revolves around a simple scenario. You live in a village, people only barter with each other. The village grows, and someone comes up with the idea that money would make it possible to avoid complex and difficult trades involving real goods. Money is essentially a convenience. But how do you do it? Even assuming that you have a completely trustworthy producer of currency, how, exactly, do you introduce money into the system? It is my belief that a great deal of ignorance is laid bare when you start thinking through the problems of rolling out a new currency like this. Indeed, if and when we can see through this problem, we can evolve our little society further and faster, and understand how the various types of institutions we have evolved. Think of it as "economic embryology" - and just like real embryology yields some incredible insights into the adult organism, I think the economic embryology gedanken experiment can generate real insights into a mature economy.

scarmig 14y ago
That's largely ahistorical, though: no historian or anthropologist thinks this is how money arose. You sometimes see shadow currencies evolve out of the breakdown of liberal capitalist societies--in prisons, times of famine, mass inflation, etc.--to make barter more fluid. The picture history paints, however, is one where money is typically invented by a ruling elite to use as a unit of account and as a way to extract taxes from the peasantry to fund military ventures.
- javajosh 14y ago
  Thought experiments are ahistorical and arealistic. Yet they are still important tools for understanding things. Go figure.

holograham 14y ago

while it is true we have come up with ingenious ways to "obligate" money, these constructs have arisen from a want from consumers...a person in the US chooses to sign up for a 30 year mortgage because he/she values owning a home. Venture Capitalists choose to obligate their money in risky startups in order to breath life into fringe ideas that may strike it big. Remembering that money is a proxy for wealth measurement the reality is that money simply is a median of exchanging wealth which people are choosing to use.

nnq 14y ago

Developing OP's points to their natural conclusions and ignoring the awful math analogy: the point would be to liquify / unfreeze as much of the available wealth as possible, to have it flow to things that could make the world a better place or solve the "big problems", right? So a strong middle class with lots of well spread discretionary income, capable to crowd-fund tons of interesting work would be the solution. Evrika! But NO... there is no reason for the liquified money to flow in the "right" directions, maybe they's all be spend on entertainment and we'll have a "brave new world" type dystopia instead, so maybe it's better to have it "frozen", because at least this way there is some control over it. ...a more interesting problem imho would be to see how money actually relates to power/control and to have an information theoretical way to quantify this power/control - this could really bring new ways to look at economy, instead of this silly economic mythology with fluid/solid money, (anti)fragile entities, enigmatic black swans floating around and other mystical creatures and forces that our analogy loving minds keep creating.

Tycho 14y ago

Most of the money is made, at root, in one of two ways: oppressing other people, or destroying the natural world. The political, legal and social frameworks which enable these acts to be performed are then encoded into the structures which govern the wealth so-created, and that wealth can no more flow to constructive ends than water can flow up hill.

deleted 14y ago

[deleted]

leashless 14y ago

Hm. Wish I'd seen this when it went by, I'm the original author. I think Graeber's Debt is probably pretty important in grounding any discussion about money at this point - given how much of our "money" is complex chains of debt, rather than cash!