Bitcoin, Magical Thinking, and Political Ideology (Alex Payne)
Time for a little Bitcoin discussion (Digitopoly)
In gold we trust? (MacroMania)
What's interesting to me is that you've got so many different ideas about money all floating around at the same time. I don't think that's a coincidence. I think what it indicates is a profound unease with the complexity and volatility of the system of finance that we are now all yoked to whether we want to be or not.
And what's doubly-interesting is that all of these ideas seem to be joined to certain political philosophies. That is, your preferred "alternative" to money depends on your political views.
So you've got Bitcoin embraced by the libertarian/techno-utopian set that believes that we would all just be better off if centralized governments disappeared from the earth and we built a computer-centric utopia ("all watched over by machines of loving grace"). Then, you've got the Goldbugs, who tend to be the Calvinist/Doomer set who see the nineteenth century as an idealized golden age (no pun intended) that we should return back to. Both of these groups are obsessed with "debasement" as the cause for the collapse of society. Then you've got the more pro-social policies of "community currencies" that allow people to print enough money for various enterprises at the local level without having to sell bonds or deal with the Federal Reserve or any of that stuff (i.e. Monopoly money). This is embraced by the anti-government "local solutions" crowd who believe we can build a parallel society as the old one comes apart. You've also got people recommending "demurrage" currencies, that is, currencies that are specifically designed to lose their value so that people go out and spend them instead of hoarding them (a negative interest rate is based on a similar idea). This means that people will flee from whatever currency you're proposing to use, choosing instead to hold onto other types.
The common theme here is distrust of government. Any attempt at reforming the currency we actually do use every single day - the U.S. Dollar (or whatever you use in your country of origin), is off the table. People believe that their national currencies are under control of the bankers and the bureaucrats for their own benefit and everyone else is screwed. It's sad really. All of this has gotten enough attention to be worthy of a Paul Krugman column:
Bits and Barbarism (New York Times)
[Adam] Smith is often treated as a conservative patron saint, and he did indeed make the original case for free markets. It’s less often mentioned, however, that he also argued strongly for bank regulation — and that he offered a classic paean to the virtues of paper currency. Money, he understood, was a way to facilitate commerce, not a source of national prosperity — and paper money, he argued, allowed commerce to proceed without tying up much of a nation’s wealth in a “dead stock” of silver and gold.Here's an alternative view, but it doesn't really contradict the above. There are some good comments too. This one I found especially interesting, in that you can think of money as a stand-in for time:
So why are we tearing up the highlands of Papua New Guinea to add to our dead stock of gold and, even more bizarrely, running powerful computers 24/7 to add to a dead stock of digits?
The value of any object or commodity is a function of its usefulness and rarity. Gold, diamonds, trade routes, waterfront, atomic bombs, dollars, cyberspace are examples of high value to different segments. Amazingly most people resist acknowledging the most truly valuable and finite commodity is time. Money is simply a method of exchanging time.And I like this statement:
For example, I can take the time to grow a carrot (2.5 months) or I can go to a grocer and purchase a carrot (10 minutes). I could walk to the East Coast (>100 days) or I can buy an airline ticket saving 99.75 days. Money allows me to control how I spent my time of Earth.
With a finite limit of time available to everyone; how much money is appropriate or even healthy to accumulate? Obviously, that answer will elicit a bell curve of responses. Ask anyone that has suffered a debilitating or life threatening illness; they’ll tell you time healthy is vastly more valuable than any object on Earth. People that accumulate vast stores of objects such as newspapers or cats, are diagnosed as suffering from a hoarding disorder When does the accumulation of wealth tip over from mild obsession to a compulsive illness, $50 million, $100 million, $1 billion, $10 billion, 50 billion?
The dysfunctional performance of our governing bodies, the lack of infrastructure investment to support our future and the massive accumulation of wealth in the hands of so few appears crazy to many of us, maybe it really is.
"An economy is an imaginary construct. It is whatever we believe it to be. At this point in America, we are convinced that it is a winner take all game - based on survival of the fittest. And most Americans accept this definition, provided to us by the richest segment of our populace."I've expressed a lot of skepticism about all of these alternative currency ideas. In the past, I've recommended the ideas expressed by Chartalism (also called MMT or Functional Finance). I've also recommended a system of public banking. To me, these are the closest we can get under the current system to a resource-based economy as opposed to the clearly dysfunctional system we have now. The unfortunate thing is that for these ideas to grain traction, they need to be applied at the federal level (since only the federal government can issue currency), and the federal government is completely captured by big-money interests. These ideas might work if the United States breaks apart into smaller nations, which might be the best thing overall. But I don't see that happening anytime soon.
Personally, I think the fundamental problem with money is that the rich have too much and the rest of us not enough. People are not getting paid the value of their economic output, and the wealthy are hoarding money which just leads to expenditure cascades and rising prices for everything else in society. All of these alternative money proposals are simply reactions to that. But I don't think any one of them are going to fix that fundamental problem.