What is money and where does it reside?

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7Wannabe5
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What is money and where does it reside?

Post by 7Wannabe5 » Sat Mar 19, 2016 7:36 am

If Zone 00 is within the boundary formed by your skin, and Zone 0 is the exterior walls of your shelter, and Zone 1 is the exterior habitat you physically frequent more than once a day, and Zone 2 consists of the realms you physically visit several times a week, and Zone 3 and further are less frequently visited and less rigorously managed realms, and Zone 5 is the wilderness, then where does your money reside and what form does it take? Is it something you stack up like cord wood or preserve like pickled peaches, or is it more like a vector that sweeps across the landscape like solar energy or the wind, or is it most sensibly conceived of as social contracts? I was thinking about this because I noticed that although I do check on or "visit" my money almost every day, it doesn't really live within walking distance of me.

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Sclass
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Re: What is money and where does it reside?

Post by Sclass » Sat Mar 19, 2016 8:33 am

7Wannabe5 wrote: or is it most sensibly conceived of as social contracts? .

I like to think of it this way. Not that I actually know. I never took economics. Money made more sense to me when I thought of it as IOUs or promissory notes.

Now I kind of think of it as a battery to store up work. I've come to this watching people lose their human capital by exchanging it for money then having it drained off in a variety of ways by clever people who add less value for what they can extract - I.e. Efficiency.

Just my random thoughts. I turned the corner financially when I started looking at things this way. Instead of always trying to build something of value I started focusing on taking something of value in a game of arbitrage. It worked a lot better for gathering up the promissory notes or charging my battery so to speak.

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BRUTE
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Re: What is money and where does it reside?

Post by BRUTE » Sat Mar 19, 2016 8:50 am

brute thinks of money as social contracts/IOUs, but really likes the vector-analogy.

many things can play a money-like role. cigarettes in prisons. frequent flyer miles. cash vs. money in 7wannabe5s account when she lost her card and wants to take a cab home at night. gold coins in her safe deposit box. goodwill she's built up with a network of friends by providing them with value or favors.

basically anything that 7wannabe5 can trade for stuff without directly offering another item/service. each of them has its own currency, and can usually be converted into the other ones via certain mechanisms.

so brute very much likes the idea of money-vectors point in and out of humans and organizations. there's a big vector of dollars from the bank to 7wannabe5, via ATMs. there's some vectors between her and her neighbors. there's a vector from her employer to her bank.

brute also thinks it's important to realize that the money is not the value. the money may reside in 7wannabe5s bank account or mattress, but the value resides in the minds of other humans. if tomorrow nobody will accept 7wannabe5s wire transfers, the money in the account is worthless despite still being there.

the biggest implication for brute is that no form of money is safe. the banks could have a bank run. anything under your mattress can be stolen. cash is still devalued by inflation. stocked food might spoil or rot. real estate can burn down.

the only decision a human can make with value is to choose which risks to expose it to, by choosing in which form of money to park it.

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Re: What is money and where does it reside?

Post by IlliniDave » Sat Mar 19, 2016 9:02 am

I look at money as a medium to facilitate exchange, and in a sense it is a social contract. I like Sclass's battery analogy too, as a form of stored energy, but that is more philosophical than practical. Seems like it would exist in any of zone 0 through 4 (although 00 and 5 are doable). At this stage, we are highly dependent on an intricate worldwide network. Money flows to me from every corner of the world (and vice versa), places where I've never set foot and likely never will, but to actually touch it I have to physically go to a bank or ATM, possibly after executing a number of electronic transactions (e.g., if I wanted to cash out some of my investment in emerging market corporations and feed quarters into poker machines or something).

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Re: What is money and where does it reside?

Post by jacob » Sat Mar 19, 2016 9:53 am

Money is a social contract but unlike a lot of the laws we have ("No eating hotdogs on Fridays"), money is closer to obeying laws of nature.---This is because money is used to transact real objects with real consequences. For the same reason money also obeys certain mathematical laws.

Sometimes humans try to bend these laws with either disastrous or unintended consequences, see e.g. Zimbabwe or QE.

It's also worth keeping in mind that money is only a CLAIM on goods IN THE PRESENT(*). Money is not a claim on stuff in the future, thus you can't hold cash for the next 20 years and expect that money to buy stuff 20 years from now. This is for the same reason you can jump out of an airplane and expect a parachute to magically materialize if you write a check. It seems that the economics profession is rather prone to forgetting this little detail, namely that money as a claim on stuff is not the same as the stuff itself.

(*) Technically money is legally valid to settle debt. I don't have to take your money no matter how strongly you desire to have my wheelbarrow. However, if you owed me money, as far as I understand, I would have to take your money.

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BRUTE
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Re: What is money and where does it reside?

Post by BRUTE » Sat Mar 19, 2016 10:19 am

jacob wrote:see e.g. Zimbabwe or QE.
does it smell Austrian in here?
jacob wrote:(*) Technically money is usually legally valid to settle debt. I don't have to take your money no matter how strongly you desire to have my wheelbarrow. However, if you owed me money, as far as I understand, I would have to take your money.
brute would presume that this is detailed in the initial contract. if jacob lends brute $100 in cash, it's probably implicit that he would like the money back also in USD cash, not interesting shells or ammo or back rubs. certainly jacob could make a contract lending out $100, but detailing payment be made in anything he desires.

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Re: What is money and where does it reside?

Post by Toska2 » Sat Mar 19, 2016 11:49 am

I agree that it's a social contract to facilitate the exchange of human effort*. I say human effort because many resources are there to take. Granted some people forget that things like health and education only accept personal effort.

*location dependent, see geo arbitrage, governmental regulation and regional ethics.

7Wannabe5
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Re: What is money and where does it reside?

Post by 7Wannabe5 » Sat Mar 19, 2016 4:02 pm

Thanks. You guys helped me figure out what was confusing me. Money you earned and didn't spend in the past is stored in social contracts with time-stamped valuation, but in the present moment money flows along the vector of value perception. Or something like that?

I was thinking it was like a vector because of cash-flow diagrams being like wind-flow diagrams, and also because I read that "money naturally flows in your direction when you do the work that other people want you to do." Except I think it should be more like "money naturally flows in your direction when you exhibit behavior or state of being desired by other people who possess money and believe it to be an appropriate medium of exchange in that instance." For example, your grandmother might give you a quarter because you weeded her garden or just because she thinks you are cute, or she may believe that it would be more appropriate to give you a hug. My point being that it is not necessary to have formed prior contract in order to create value gradient in the moment. If you expend your energy on looking cute while weeding gardens in any kind of social setting, it is likely that either money or hugs will flow in your direction. OTOH, if you are a stinky pumpkin-smasher in the moment then money and hugs will not so much flow in your direction.

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Re: What is money and where does it reside?

Post by George the original one » Sat Mar 19, 2016 4:31 pm

Imagine what happens with the time-value of money were time travel possible!

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Re: What is money and where does it reside?

Post by Solvent » Sat Mar 19, 2016 5:16 pm

Money is a veil on the distribution of real resources?
I don't know, I'm an economist so my view on the matter is clouded by education. Money is a number of things, you can change your view of it depending on what sort of analysis you need.

Also, agree on Jacob's "money is a claim on goods in the present." This is important. This is something that bugs me about people getting freaked about inflation or negative interest rates. Your money is a claim on goods now. It's not a guarantee of your future wealth, although you may wish it was.

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Dragline
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Re: What is money and where does it reside?

Post by Dragline » Sat Mar 19, 2016 10:23 pm

From Sapiens by Yuval Harari:

"[M]oney isn’t a material reality – it is a psychological construct. It works by converting matter into mind. But why does it succeed? Why should anyone be willing to exchange a fertile rice paddy for a handful of useless cowry shells? Why are you willing to flip hamburgers, sell health insurance or babysit three obnoxious brats when all you get for your exertions is a few pieces of coloured paper? People are willing to do such things when they trust the figments of their collective imagination. Trust is the raw material from which all types of money are minted. When a wealthy farmer sold his possessions for a sack of cowry shells and travelled with them to another province, he trusted that upon reaching his destination other people would be willing to sell him rice, houses and fields in exchange for the shells. Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust ever devised."

On a very practical level, money in your locale is the thing you have to pay your taxes with. Any society can create money by demanding taxes in that form. Think how quickly the trees would be denuded if you could pay your taxes in leaves.

Money is outside any personal realm. It's only meaning is its value to other people.

IlliniDave
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Re: What is money and where does it reside?

Post by IlliniDave » Sun Mar 20, 2016 7:29 am

BRUTE wrote: ... if jacob lends brute $100 in cash, it's probably implicit that he would like the money back also in USD cash, not interesting shells or ammo or back rubs. certainly jacob could make a contract lending out $100, but detailing payment be made in anything he desires.
In that case the contract wouldn't be a loan, it'd be a purchase, and I also believe that even in that case, return of the money (along with commensurate interest perhaps) would suffice as settlement from legal perspective if, say, BRUTE became paralyzed and could not deliver a satisfactory back rub.

Some other random thoughts:

I believe in the US according to law a debtor can always settle a debt with USD, as we can see the words, "This note is legal tender for all debts, public and private." on bills. It's origins probably go back to a time when people were leery of paper currency versus metal coins. Jacob is right, you can insist on two chickens and a garden hoe in exchange for your wheelbarrow if you want.

I understand that there's no absolute guarantee that your money will have value in the future, yet most everyone here piles it up to some extent, or purchases things to generate more of it, because we believe it will, and that belief is usually a valid one. I for one hope that the zombie apocalypse won't occur in the next 40 years as I enjoy the convenience of money as a way to make things happen.

But as a hedge I've purchased remote land, intend to purchase more remote land, and to lay in a supply of guns and ammo. :lol:

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Re: What is money and where does it reside?

Post by Dragline » Sun Mar 20, 2016 12:03 pm

IlliniDave wrote:
Some other random thoughts:

I believe in the US according to law a debtor can always settle a debt with USD, as we can see the words, "This note is legal tender for all debts, public and private." on bills. It's origins probably go back to a time when people were leery of paper currency versus metal coins. Jacob is right, you can insist on two chickens and a garden hoe in exchange for your wheelbarrow if you want.
Yes, as a legal matter, if someone reneges on a contract or otherwise damages you, your damages will be calculated in dollars and payable as such.

The exception is special cases where "specific performance" can be requested, particularly if an object is unique. But specific performance is a disfavored legal remedy and requires special proof -- money damages is the default.

There was a famous set of cases from the 1930s called "the Gold Clause cases" that dealt with claims payable in gold. The US Supreme Court decided that they were payable in dollars. You can read about them here: https://en.wikipedia.org/wiki/Gold_Clause_Cases

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BRUTE
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Re: What is money and where does it reside?

Post by BRUTE » Sun Mar 20, 2016 1:54 pm

IlliniDave wrote:I've purchased remote land, intend to purchase more remote land, and to lay in a supply of guns and ammo. :lol:
no back rubs for IlliniDave?

Regarding the future value of current money, brute likes Mises' explanation: money has value at t+1 because it had value at t, and humans' expectation didn't change that much. This seems usually true in modern times, except maybe in hyperinflationary environments, where humans' expectations change wildly and rapidly.

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Re: What is money and where does it reside?

Post by 7Wannabe5 » Sun Mar 20, 2016 5:00 pm

So, at a bare minimum, if you must pay taxes or are forced to settle an unfulfilled legal contract or pay legal damages, you will need some money. It is my understanding that in order for a social contract to be legal, it must involve clear exchange of value-able, legal goods or services. IOW, a one-sided promise is not a contract, and you can't make legal contract involving the exchange of home distilled vodka, "love and affection" (likely inclusive of back-rubs unless licensed professional) or mutual dare-you to eat 20 earthworms in most states.

Okay, so if we assume that a person has no current earned income, then it is possible that he would never need any money if he did not need to pay any taxes, and he did not enter into any legal contracts that could only be satisfied with money, and he fulfilled all his legal contracts that were to be otherwise satisfied, and he did not cause any others to suffer legally-collectable damages. Anything I missed?

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Re: What is money and where does it reside?

Post by jennypenny » Sun Mar 20, 2016 6:37 pm

Money is just an easy way to store time and/or labor. Unfortunately, it's also an easy way to spend it. Or waste it.

I agree that money only has present value and that the value can be reduced significantly or altogether in the future, rendering our savings worthless. OTOH, that's not much different than having your house burn down after laboring over it, having a relationship collapse after investing years into it, or having your health fail despite doing your best to stay healthy, and the collapse of money is statistically much less likely to happen.

Of course, the less you need, the easier it is to replace or find an alternative.

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Re: What is money and where does it reside?

Post by IlliniDave » Sun Mar 20, 2016 6:54 pm

7Wannabe5 wrote: Okay, so if we assume that a person has no current earned income, then it is possible that he would never need any money if he did not need to pay any taxes, and he did not enter into any legal contracts that could only be satisfied with money, and he fulfilled all his legal contracts that were to be otherwise satisfied, and he did not cause any others to suffer legally-collectable damages. Anything I missed?
If he wanted to acquire something the owner/seller/service provider wanted money for.

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Re: What is money and where does it reside?

Post by 7Wannabe5 » Sun Mar 20, 2016 6:59 pm

@jennypenny: Or being made redundant after investing 30 years in your career, etc. etc. Of course, these aren't all really apples to apples. For instance, when marriage contracts are dissolved people are theoretically cashed out equitably and then set free to trade their resources on the dating market once again. Maybe all these examples just seem the same when our expectations don't match up to reality. IOW, negative interest rates are like a sex dead marriage or a mule you have to haul away with a tractor.

I guess I was just thinking about money in the same way I might think about how much asparagus vs. beets to plant.

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Re: What is money and where does it reside?

Post by jennypenny » Sun Mar 20, 2016 7:02 pm

IlliniDave wrote:
7Wannabe5 wrote: Okay, so if we assume that a person has no current earned income, then it is possible that he would never need any money if he did not need to pay any taxes, and he did not enter into any legal contracts that could only be satisfied with money, and he fulfilled all his legal contracts that were to be otherwise satisfied, and he did not cause any others to suffer legally-collectable damages. Anything I missed?
If he wanted to acquire something the owner/seller/service provider wanted money for.
I'd add that there are people I don't like who produce things I need, and I find money to be the best/fastest/least personal way of dealing with them.

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Re: What is money and where does it reside?

Post by 7Wannabe5 » Sun Mar 20, 2016 7:04 pm

IlliniDave: If he wanted to acquire something the owner/seller/service provider wanted money for.
True, but at the margin, that is still a want not a need, because he could maintain his freedom without spending that money. Even if he thought he might very well die if he didn't buy what that person was only willing to sell for money, he could choose to take the risk of trying to obtain it through other means.

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Re: What is money and where does it reside?

Post by IlliniDave » Sun Mar 20, 2016 8:24 pm

7Wannabe5 wrote:
IlliniDave: If he wanted to acquire something the owner/seller/service provider wanted money for.
True, but at the margin, that is still a want not a need, because he could maintain his freedom without spending that money. Even if he thought he might very well die if he didn't buy what that person was only willing to sell for money, he could choose to take the risk of trying to obtain it through other means.
Well, ok, sure, in theory one can just do without (which is freedom in a sense), or play some elaborate barter game (I wouldn't necessarily call that freedom), or steal, or accept charity. Each has it's own risks and its own impingement on "freedom". There's a show on TV about bush people in Alaska that often barter. It's pretty interesting what lengths they'll go to to get something.

There's probably a limit on the number of people that could exist per capita in this country in such a non-monetized niche, because ultimately it's money paying for stuff and services and infrastructure. Tough to build streets and sidewalks and bridges and bike paths with organic free-range chicken eggs and hand made hemp jewelry :)
Last edited by IlliniDave on Mon Mar 21, 2016 4:05 am, edited 1 time in total.

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Re: What is money and where does it reside?

Post by Dragline » Sun Mar 20, 2016 8:47 pm

Commerce without money is like cooking without knives and pots. Sure, its possible, but what's the point? Tools and personal philosophy are only tangentially related, just like personal morality and consumptive practices.

I would choose the honest money hoarder or smoker over the fraudulent barterer or vegan any day.

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Re: What is money and where does it reside?

Post by 7Wannabe5 » Mon Mar 21, 2016 6:50 am

IlliniDave said: There's probably a limit on the number of people that could exist per capita in this country in such a non-monetized niche, because ultimately it's money paying for stuff and services and infrastructure. Tough to build streets and sidewalks and bridges and bike paths with organic free-range chicken eggs and hand made hemp jewelry :)
Agree. I'm not doubting the usefulness of money. I am just considering the boundary. I mean, right now as I type this I can hear the furnace cranking on, so I am spending money within even the boundary of Zone 00 in order to keep my skin and innards comfortably warm. But, if I was some kind of old-fashioned country squire, maybe I would only have to generate or spend money along the lines of "Well, the snow has melted from the King's Road, hence his man shall likely soon come hither with demand of payment of tax for the cost in troops at the battle of the northern boundary forest. Tell John Son-of-Thomas to take 8 suckling hogs and 10 bushels of walnuts to the market before the next moon's waxing, and accept only the King's notes in payment."
Dragline said: I would choose the honest money hoarder or smoker over the fraudulent barterer or vegan any day.
How about a silly, shameless, cookie eater? For what purposes would you choose an honest, money-hoarding, smoker over a fraudulent vegan barterer, or a silly, shameless, cookie eater? It has been my observation and experience that a person can be extremely honest, but also very unkind and stupid. For instance, "I believe that it is in my self-interest to burn the virgin daughter of the witch upon a pile of discarded rubber tires, therefore I shall do so." could be uttered and carried out with thorough honesty. I believe that it is in alignment with my self-aware, self-interest to associate with people who are some combination of honest, kind, brave, not-stupid, creative and attractive. The word "hoarder" holds the negative connotation of "fearfulness" for me, and "smoker" might even be short-term attractive (if not performed within my Zone 0) but long-term unattractive (shuffle walk with oxygen tank, dark sputum, wrinkles around the lips, hole in neck etc.) I guess "barterer" would be associated with "clever" and "creative" for me, but not necessarily "honest", and "vegan" would be associated with short-term annoyance if my dinner guest on same evening as "paleo", but I grant some likelihood of long-term attractive and kindness applied to species other than human. The term "money" is neutral, therefore I would agree that I would likely prefer the company of an honest, money-steward over that of a fraudulent vegan barterer for most purposes.

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Re: What is money and where does it reside?

Post by Ego » Mon Mar 21, 2016 8:24 am

7Wannabe5 wrote:
Dragline said: I would choose the honest money hoarder or smoker over the fraudulent barterer or vegan any day.
I believe that it is in alignment with my self-aware, self-interest to associate with people who are some combination of honest, kind, brave, not-stupid, creative and attractive. ......The term "money" is neutral, therefore I would agree that I would likely prefer the company of an honest, money-steward over that of a fraudulent vegan barterer for most purposes.
My left ear is itchy.

Some of the most honest people I know are illegal immigrants working illegally for illegal businesses selling products that they contractually agreed to export but rerouted back to the US.

While I agree that fair trade coffee and vegan coffee creamer can be more refined (in both senses of the word) versions of consumerism, there is a point where the way we spend our stored labor/time becomes unethical and immoral. Like Justice Stewart, I have trouble defining it but I know it when I see it.

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Re: What is money and where does it reside?

Post by Dragline » Mon Mar 21, 2016 8:34 am

7Wannabe5 wrote:
Dragline said: I would choose the honest money hoarder or smoker over the fraudulent barterer or vegan any day.
How about a silly, shameless, cookie eater? For what purposes would you choose an honest, money-hoarding, smoker over a fraudulent vegan barterer, or a silly, shameless, cookie eater? It has been my observation and experience that a person can be extremely honest, but also very unkind and stupid. For instance, "I believe that it is in my self-interest to burn the virgin daughter of the witch upon a pile of discarded rubber tires, therefore I shall do so." could be uttered and carried out with thorough honesty. I believe that it is in alignment with my self-aware, self-interest to associate with people who are some combination of honest, kind, brave, not-stupid, creative and attractive. The word "hoarder" holds the negative connotation of "fearfulness" for me, and "smoker" might even be short-term attractive (if not performed within my Zone 0) but long-term unattractive (shuffle walk with oxygen tank, dark sputum, wrinkles around the lips, hole in neck etc.) I guess "barterer" would be associated with "clever" and "creative" for me, but not necessarily "honest", and "vegan" would be associated with short-term annoyance if my dinner guest on same evening as "paleo", but I grant some likelihood of long-term attractive and kindness applied to species other than human. The term "money" is neutral, therefore I would agree that I would likely prefer the company of an honest, money-steward over that of a fraudulent vegan barterer for most purposes.
To interact with, whether as a friend, a co-worker or someone I regularly bought things from or sold things to.

My point was that money as a thing or idea is very neutral and is a mere tool like knives and pots. Using it (or not) is not very meaningful in the great scheme of things, but is more just a matter of convenience. Thus, it pales in significance when compared to how one treats/interacts with other people, or other living things in some circumstances.

I think we are on the same page/agreement here, as your example of someone being mean (unkind) to others ranks very high on the meaningful scale, because it entails personal interaction. I agree that kindness is more meaningful than honesty most of the time, but both are important. More importantly, both are orders of magnitude more important than using/not using knives, pots, money, cookies, edible plants or cigarettes, as those are mere preferences in consumptive behaviors.

Of the three individuals, I would prefer to interact socially with the cookie eater first, then the smoker, then the vegan, but in a business context with the smoker, then the cookie eater, then the vegan. I try to minimize interactions with people who exhibit negative interpersonal traits. The cookie eater as constructed in the example doesn't really have any plus or minus interpersonal traits, but would probably be more amusing than the others. I tend to like silly people, though, at least now and again, as I often resemble that remark myself.

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