Historically, gold was used as "money"--the medium of exchange for pieces of gold. Then it was discovered that "fiat money"--pieces of paper that could be converted into gold--was far more convenient, and governments and cnetral banks issued this money. At first it was thought that there had to bee full backing--for every dollar of fiat money issued, the government or the central bank had to hold a dollar's worth of gold. Then it was discovered that this was not necessary; all that was required was confidence in the currency. Confidence meant that other individuals would be willing to accept the money in payment, and confidence could be achieved with only partial backing. At first, it was thought that confidence coiuld only be achieved by using gold as backing; then it was realized that the currency (or debt)of strong economies--initially Britain's sterling, and for much of the period after World War II the U.S. dollar--could be used.In short, we've reached a point at which money has no value except the value that people give it through consensus. This lets us do all sorts of fancy money-making things that would not have otherwise been possible, but the downside is that sometimes you, say, inflate the average prices of housing, do complex, incomprehensible things with the debt to finance the housing, make absurd profits off of the continual increase in housing prices (an increase that is nothing more than the idea that houses must get more expensive), and make increasingly risky loans to finance housing purchases that artificially inflate home values, increasing the profits that you earn, until the whole thing falls apart because it was built on the idea of money rather than a realistic estimation of worth tied to some, or many, concrete things.
With all the reading that I've been doing about economics/financial markets etc. lately, the most definite conclusion that I've reached is that the majority of the people who work in the money industry are pack animals who tend to follow trends, and who lack things like wisdom or a broader perspective to help them ensure that their actions make sense and are sustainable and beneficial over the long run.
I'm of the opinion that the role of government is to restrain the more ignoble impulses of its citizens for the good of all, and to the extent that this "Gold Rush in, panicked rush out" mentality so prevalent in the financial industry has the potential to destroy global or regional economies, it seems like this might be one of those instances in which increased regulation is appropriate.
The fact that money is imaginary has given us a lot of flexibility and broadened economic opportunities, but there should be a concerted effort to ensure that imaginary money doesn't flee to far from a grounding in the tangible, lest the profits turn out to be dust and moonbeams. And a man with moonbeams in his hand doesn't have much at all.
ALSO: I've started the considerable task of reading the Obamacare legislation, so you can expect future thoughts on that magnificent edifice of glutted legal writing.
I wouldn't consider money imaginary - the value created by our confidence in it is real enough.
ReplyDeleteIn fact many have argued that our current fiat-currency systems were largely inevitable, and vital in creating conditions for sustained economic growth. All value is subjective, previous gold-based or even barter systems were still dependent on the confidence placed in commodities by economic actors. What makes imaginary money so awesome is that it makes transactions more efficient and predictable, and thus more frequent and complex. Imagine having to work everything out with gold or barter, such limitations!
Thank god for progress.
- CanadianNooB
I guess you could make a case that money is a transcendent object, but because it's a constantly mutating thing I would argue that it, like infinity and eternity, doesn't meet the criteria for existence (as defined by Nishida). Which in no way negatively impacts its reality or usefulness.
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