Opinion

Opinion: Our Weird Relationship with Money

We all use money on a daily basis, but do you really understand how it works?

This article is a little bit different from the usual, as I will propose alternative ways of valuing money and looking at the economy as a whole. If you’ve been following my latest writings, you’ll understand my views on cryptocurrency adoption depend a lot on price and the role of technology Arguably, our own understanding of money will influence how cryptocurrency develops and that is exactly the subject of our discussion today. I’m definitely interested in reading your comments down below or on Twitter; Seriously, don’t be shy, if you have insights feel free to share!

Now, why are most economists ignoring the role of money in our society? They assume that it is centrally controlled by agents who make decisions on our behalf? Like allowing central banks to control interest rates by printing and selling more/less money to financial institutions? Even worse, today we endow private institutions the power to create currency: through debt.

How can we bestow our financial freedom to private agents whose interests rarely align with that of the common man?

Today I come bearing a different proposal.

What if money could be anything we desire?
Just like the separation of powers between the Church and State, I feel money should be controlled by no one. Much less by a few people who believe they have enough knowledge to make decisions about the cost of things, how much you’ll earn or how much your money will be worth in a few months.

I understand the purpose of government-issued currency but at the same time, I believe we are giving away too much power – and as you guys know, power easily corrupts people. Especially when we consider the lack of transparency in the banking system. I mean, it seems pretty easy to do whatever you want to do behind these curtains, protected by complex banking laws and extremely powerful lobbies.

If you still think the problem lies within the model, but not with some of its assumptions, then please consider the case of the oldest fiat-currency in existence; the good ol’ British pound (Sterling/GBP).

Did you actually know its original value in silver was about 340g (12 oz)? This is, 317 years ago £1 would purchase about 0.75 pounds of silver.

How much do you think its worth today? At current prices, you need around £118 to purchase 12 oz of silver.

Congratulations. That simply means the oldest fiat-currency in existence has lost about 93-95% of its original value.

The solution?

It’s up to all of us to stop being naïve and truly seeing money for what it is.

Pro-tip: no, money does not need to be a fiduciary currency in order to properly function as a stable medium of exchange. Having someone (or a restricted group of people) deliberately deciding the future of the money supply has been the root cause for most, if not all, recent economic crisis.

What is money after all?

Our means of survival
Classical economists define money as a combination of the below properties:

a store of value,
a unit of measurement and
a means of exchange.
All these definitions are, of course, attached to a pre-condition found in the Neoclassical School of Economics. This is, money is simply an attribute of the economy and not the economy itself. Is this definition as complete as it could be? Or is there something else to money?

I’m going to steal from the great David Orrell, and use his brilliant definition of money :

Money is a way of combining the properties of a number with the properties of an owned thing.

Money is our way to attribute value to things, in order to exchange with one another or to store value. Without it, it wouldn’t be possible to trade globally.

Andreas Antonopolous adds something else; a poetic complement to David’s definition. He states that money is nothing but a language.

By combining both definitions we get to a higher level of clarity: money can be defined, then, as a way to value to things so that we can communicate and trade among ourselves.