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26 April 2007 @ 01:07 pm
 
This'll sound kind of weird, but... Does anybody here know a good book on what money is, philosophically? It seems like the kind of thing that people talking about gold-backed currencies would talk a lot about, but I don't know where I'd find what they wrote.
 
 
 
jamescarringtonjamescarrington on April 26th, 2007 08:44 pm (UTC)
I'd go look at The Economist book reviews, if such a thing exists, for sure they're reviewed it.

VanderVeckenxthread on April 26th, 2007 09:13 pm (UTC)
You might want to read Milton Friedman's A Monetary History of the United States, 1867-1960

It is, however, neither inexpensive or a light read.
VanderVeckenxthread on April 26th, 2007 09:13 pm (UTC)
Oh, and people who argue for gold-backed currencies are loons.
Noahangelbob on April 26th, 2007 09:51 pm (UTC)
Well, but people who argue either for or against them are presumably arguing about what money philosophically is. So loons or not, they'll be talking about what I'm curious about :-)
VanderVeckenxthread on April 26th, 2007 10:26 pm (UTC)
Only somewhat - the people who argue exclusively for hard money and the people who argue against it tend be coming at the question from completely unrelated philosophical bases. But best of luck!
astralagos on April 27th, 2007 01:08 pm (UTC)
I don't think so
The general objection to currency that goldbugs have has to do with what fractional reserve banking. Basically, I deposit $100 with you, and you agree to pay me $$ interest. You loan $50 to xthread, and charge him $5 interest. xthread uses that investment from you to bake some loaves and sells them for $60. He gives you $55, keeps $5, you make $3, I make $2. If I call in my markers before xthread makes his bread, then we have a financial collapse and all of us are living in Central Park getting eaten by Daleks.

Goldbugs generally begin from the thesis that fractional reserve banking (or "fiat money") is evil, and that the proper way to do things is through currency backed with a scarce resource. The major problem with their thesis is that their risk pool isn't managed: Keynes figured out most of the more horrible problems associated with fractional reserve. The gold types can be disrupted by whatever affects the impact of gold prices - a sudden upshot in tooth decay, or a new conductor technology.

Furthermore, since they're already a fringe group defined by a fringe philosophy, they tend to attract other wacky types. Most of the ones I've encountered believe that fiat currencies are explicitly evil due to biblical justifications or general loony survivalist business. Representative examples include Swiss America (although if you really want to know what the guy who founded that company believes, check out www.true-wealth.com), and e-gold.
r_transpose_pr_transpose_p on April 27th, 2007 04:27 am (UTC)
If you hadn't mentioned "gold-backed currencies", I would've thought you were looking for a book on "personal finance".

Were that the case, I would have to point out that Dave Barry has a book out on personal finance.
Noahangelbob on April 27th, 2007 01:58 pm (UTC)
Yeah. I'm not exactly looking for either one. I'm basically curious about thoughts on, well, what money *is*.

For instance, let's say I'm in possession of a single dollar bill, in cash, or more tenuously, the same thing in a bank account. Presumably that dollar is a promise, either from my bank (for the cash dollar) or from the United States Government. The thing is, it's not like the US Government has outlet stores in the mall selling survival goods for fixed prices -- the dollar isn't guaranteed to be, say, 1/50th of an MRE or 1/20th of a passable pair of pants or anything.

So it's not a guard against inflation. It's not a promise in terms of any actual material goods -- my dollar might not be able to buy food, clothing or luxuries. In some cases, *no* number of dollars may be enough for some luxury if the market breaks down in some way (enormous inflation, extreme scarcity, or I just can't communicate with the seller).

But then, what *is* my dollar? The US government has promised to accept it when it demands tax income, but that just means my dollar is defined in terms of other dollars -- how many I will have to give the United States yearly. It doesn't tell me what the dollar *is*. It only tells me that if I get too many in a year, the government will demand some of them. That doesn't seem like a very useful promise.

So what *is* a dollar?
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Noahangelbob on April 27th, 2007 04:07 pm (UTC)
So... That is certainly a reasonable explanation for why the government's promise should have force. The US government certainly has the ability to levy taxes (measured in dollars).

What I'm not seeing is what it is currently a promise *of*. A dollar of a gold-backed currency would be a promise for a dollar's worth of gold. A dollar as issued by Farmer Bob's Tomato Farm might be a promise of a single Future Tomato, and the currency's power would depend on how good a farmer you thought Bob was (this is approximately what a stock certificate is, viewed as currency). What confuses me is that at this point, it's not clear what a dollar is a promise *of*.
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Noahangelbob on April 27th, 2007 04:53 pm (UTC)
I see why bonds are a promise -- they're a promise that you'll get more dollars than you put into them, after a set period of time. No problem, makes sense.

Stock certificates are a promise of either continuing income (if the stock gives dividends) or the ability to get a share of the proceeds if the company is bought or otherwise liquidated (for stock that don't give dividends). In either case, it provides some voting rights in the company, and the right to basic information on how the company is doing, at least for a publicly-traded company.

If one sees the dollar as a share of the US government, or of its debt, then obviously the "share" isn't granting any dividends. Treasury bonds do, as you say, but a bond isn't the same as a dollar. So, no "dividends". A dollar doesn't grant additional voting rights in the operation of the US government, nor does a dollar-holder get access to different information about the government, so those "shareholder privileges" don't apply to dollars. That leaves only potential value in the case of sale or liquidation of the US government. I'm not quite sure how that would work, but I'll bet it wouldn't involve all current dollar-holders getting paid.

So I'm not seeing how a dollar *is* like a share of a company, or like a share in the government's debt. There is a such thing as a share in a government's debt -- as you say, a T-bill is pretty much exactly that. But then, what's a dollar?
Noahangelbob on April 27th, 2007 04:10 pm (UTC)
this is approximately what a stock certificate is, viewed as currency

Sorry, this came out wrong. Really that's more like a pork-belly future. Despite my incorrect analogy, it's still sort of like currency. Or at least, noticeably like a gold-backed currency.

I have *no* idea whether it's much like a current dollar. Because after sitting and thinking about it, I'm now pretty sure I don't know what a current dollar *is* :-)
Rathapapertygre on April 28th, 2007 06:08 am (UTC)
If you find the kind of book you're looking for, I'd be interested to know what it is.

Reading your other comments here though, I find myself confused about what kind of answer you are looking for. I think of money's meaning as functional, as opposed to conceptual. Like Wittgenstein's suggestion that the ultimate meaning of words is demonstrative -- i.e., many words/concepts build on other ones, but at the base of it there are words that can only be fulfilled by an action or demonstration. So a dollar *is* what you can do with it. Right?
Noahangelbob on April 29th, 2007 08:18 pm (UTC)
I guess that's true. But that's a bit like saying that a promise that will be broken is worth a bit of blustering -- that is, it ignores intent and potential and agreed-upon meaning.

Along the same lines, it means that currency that winds up not being honored (government falls, or the bill gets caught in a lawnmower) is simply paper and no more. Which makes a fine and fun sentiment, but it seems odd to define the five dollar bills in your wallet entirely differently depending on what they will eventually do. It also has the down-side that you have to wait until they get spent or caught in a lawnmower or whatever before you can define them :-)
Rathapapertygre on April 29th, 2007 09:43 pm (UTC)
Bruce Sterling says: "Money is a widely distributed machine whose purpose is to compute the value of goods and services."