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Thread: MONEY EXPLAINED

  1. #1 MONEY EXPLAINED 
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    MONEY EXPLAINED

    I know this might not sound like physics, but bear with me, because Time is Money, isn't it?

    Show me some money, I say. So you pull out a £10 note. We both know that’s money right?

    Wrong. Check the small print: “I promise to pay the bearer on demand the sum of ten pounds”.



    Your tenner isn’t really money. It’s what’s known in the trade as a promissary note. A mere promise to pay money. Basically it’s an IOU, but from the Bank of England. OK if you’re in the States or Oz maybe you don’t get the small print, but your buck or buckaroo is still a promissary note, a mere IOU, it’s not really money.





    OK you say. How about this here penny? You hand it to me. I turn it over in my hand. It’s coppery and shiny. New. Freshly minted. But what is it? It’s a piece of stamped metal. Nowadays it's copper plated steel, but there’s been all sort of variations involving copper tin and zinc, usually alloyed as a bronze.







    I could make them in my garage. But it isn’t worth it, especially “Since May 2006, all circulation Canadian pennies from 1942 to 1996 have an intrinsic value of over $0.02 USD based on the increasing spot price of copper in the commodity markets...” Anyhow, a penny is similar to the milk tokens I remember from when I was a kid. And those useless slot-machine tokens I brought home from Blackpool. That shiny new penny is just a glorified milk token, acceptable to more than just the milkman. And what notes and coins are is cash. Money tokens. They aren’t really money. We have to forget about cash.

    Where do you keep your money? I ask you. In the Bank you reply. Where in the Bank? I say. In the vault, you say. To which I say: But that’s not money, that's just cash. You change tack and tell me your money isn’t in the vault. It’s in your account. You’ve got your salary going into your bank account every month. Whoa. Where is this account? I say. In the bank, you say. Where in the bank? I say. On the computer, you say. I could say "Where on the computer?" but I won't. Because now we’re getting somewhere. Your money is just intangible information, maybe on a computer somewhere. Before they had computers your money was in a ledger. It was just a bit of inky writing in a big black book. With as much real existence as a bit and a byte and a bar tab. And every month your employer tells your bank to reduce his glorified bar tab and increase yours.

    Did you get that? Money is just a glorified bar tab. An agreement about IOUs. Nothing is moving into anywhere, or out of anywhere else. Ah, I can hear you saying, what about the gold standard? Shrug. Gold was only “money” because everybody agreed that this nice and shiny metal was worth having. So were pretty little sea shells once upon a time. Imagine a pirate landing on a deserted island, the native people wiped out by some pestilence. The pirate kicks amongs the ruins, hawking and spitting at finding only sea shells and no gold. Because there isn’t any money if people don’t agree that its money. Because money doesn’t exist. Not really. That’s why when you spend money it doesn’t disappear. It isn’t destroyed. You’ve got less of it, and the shop’s got more, but nobody’s really got more or less of anything. It’s just a bar tab. Do you know how money is created? Governments allow banks to lend money to people who build houses and cars and flatscreen TVs that everybody agrees are valuable. Then the money that was magicked out of nowhere really does exist. But it doesn’t really exist because it was never really created in the first place. But it does. And it doesn't. But it gets things done, and it makes the world go round, and everybody wants it.

    Doesn’t really exist. Doesn’t get created or destroyed. Makes the world go round. Everybody wants it.

    Does that remind you of anything?

    Does that remind you of Energy?


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  3. #2  
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    I used money as an illustration for energy, and then realised I'd talked too much about money. So I split it out. The point is that most people take money for granted, and never think about it, and don't realise it isn't what they think it is. A bit like energy, and time. That's why it's relevant to physics. I need to convince you about money money money before you'll believe me about time.


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  4. #3  
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    Nothing "really exists" to you does it. Hold on let me re-phrase, let's say everything does not really exist instead. It's better like that.
    :?
    If that is true then your argument doesn't exist, which means I shall ignore it since there is no way that I could possibly see it.
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    Not so. I'm being ontological. But suit yourself.
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  6. #5  
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    Anytime you swap some possession for another you are exchanging a form of currency, such as bananas for cabbages, money is merely the name we give to a commonly accepted intermediate medium.

    I think farsight is trying to say that money is like numbers, they do not exist are not a 'thing', just a concept to help something else 'work' - in this case, the exchange of goods and services.

    I just hope he's not trying to convince us all that it is nothing, and we should give it all to him..... :wink:
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  7. #6  
    Forum Freshman Kosta's Avatar
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    Interesting.

    Money= Labor and vise versa
    I think that farsight is correct in that many people do not think of it on that basic a level.

    John Locke's Two Treastise of Government speaks to the philosophy of labor and money in very very interesting terms.

    I strongly suggest this reading to everyone 8)

    I feel like LeVar Burton in Reading Rainbow.- "don't take my word for it"
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  8. #7  
    Forum Bachelors Degree The P-manator's Avatar
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    I agree with Farsight. Or at least par of what he says. I'd like to add that so much more money these days is coming from speculation. Take the example of a rich businessman (Bill Gates for example). Gates goes to the bank and gets a 2-billion dollar loan. He goes to Siberia and invests in oil. He makes 6-billion dollars of profit. He pays back the loan with 2-billion of the 6-billion. He ends up with 4-billion. Let me ask you, where did those 4-billion dollars come from? The bank conjured them up out of smoke, that's what.
    Pierre

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  9. #8  
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    Then the oil gets refined and sloshes around in your petrol tank for a while before it goes up in smoke. Meanwhile the money sloshes around in your bank accounts but doesn't go up in smoke until some twat sends you a tax bill. Then the government get it back and it does goes up in smoke. Funny stuff is money. And things like money supply. People like Gordon Brown know it isn't real, that's why they don't give a toss about taking it off you.
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  10. #9  
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    money=the ability to purchase goods and services
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  11. #10  
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    Quote Originally Posted by The P-manator
    Gates goes to the bank and gets a 2-billion dollar loan. He goes to Siberia and invests in oil. He makes 6-billion dollars of profit. He pays back the loan with 2-billion of the 6-billion. He ends up with 4-billion. Let me ask you, where did those 4-billion dollars come from? The bank conjured them up out of smoke, that's what.
    The 6 billion came from the pockets of the people who bought oil from the Siberian oil company.
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  12. #11 Re: MONEY EXPLAINED 
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    Quote Originally Posted by Farsight
    Your tenner isn’t really money. It’s what’s known in the trade as a promissary note. A mere promise to pay money. Basically it’s an IOU, but from the Bank of England. OK if you’re in the States or Oz maybe you don’t get the small print, but your buck or buckaroo is still a promissary note, a mere IOU, it’s not really money.
    It is both a promissory note AND it is money. “Money” is anything that people use as a measure of value, store of value, and means of exchange.
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  13. #12 Re: MONEY EXPLAINED 
    Forum Freshman Kosta's Avatar
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    Quote Originally Posted by Scifor Refugee
    Quote Originally Posted by Farsight
    Your tenner isn’t really money. It’s what’s known in the trade as a promissary note. A mere promise to pay money. Basically it’s an IOU, but from the Bank of England. OK if you’re in the States or Oz maybe you don’t get the small print, but your buck or buckaroo is still a promissary note, a mere IOU, it’s not really money.
    It is both a promissory note AND it is money. “Money” is anything that people use as a measure of value, store of value, and means of exchange.

    But even more basic than that, would you not say that Money ultimately equals LABOR?
    In order to make an apple pie from scratch, you must first create the Universe. - Carl Sagan
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  14. #13  
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    Quote Originally Posted by Scifor Refugee
    Quote Originally Posted by The P-manator
    Gates goes to the bank and gets a 2-billion dollar loan. He goes to Siberia and invests in oil. He makes 6-billion dollars of profit. He pays back the loan with 2-billion of the 6-billion. He ends up with 4-billion. Let me ask you, where did those 4-billion dollars come from? The bank conjured them up out of smoke, that's what.
    The 6 billion came from the pockets of the people who bought oil from the Siberian oil company.
    Think deeper. How did Gates make that 6-billion? Although physically they come from the people buying the gas, originally it came from the 2-billion that the bank conjured up. Therefore the 6-billion is really "fake money".
    Pierre

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  15. #14  
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    In a way all money is "fake money". It's just agreement between people. When all the people are gone all the money is gone too, and all that's left is paper blowing in the wind.
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  16. #15 Re: MONEY EXPLAINED 
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    Quote Originally Posted by Kosta
    But even more basic than that, would you not say that Money ultimately equals LABOR?
    No, because labor is not a store of value. You could perhaps use labor as a measure of value (you could measure cost in "man hours" or something similar) and you could even use it as a means of exchange (I'll work for you for 2 hours if you give me a shirt). But it can't be used as a store of value, so it fails to meet the definition of money that you find in most undergraduate economics textbooks.

    You could perhaps try to store labor value by collecting "I own the bearer of this note 1 hour of labor" bills or something, but then it's the bills that are the money, rather than the labor itself.
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  17. #16  
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    Quote Originally Posted by The P-manator
    Think deeper. How did Gates make that 6-billion? Although physically they come from the people buying the gas, originally it came from the 2-billion that the bank conjured up. Therefore the 6-billion is really "fake money".
    The bank did not "conjure up" the 2 million. It's money that was deposited by the bank's customers, which the bank is lending out because the customers won't all want access to their money at once.

    What do you mean when you say that the 6 million "came from" the bank's 2 million?

    I'm not quite sure what you're getting at, but I suspect you might be confusing demand deposits with money supply?
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  18. #17  
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    one of the best posts ever on sciforum...props!!

    at first i wasnt following you...but this is...brilliant...thank you thank thank you!!!

    im saving this.
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  19. #18  
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    Are you talking about me, or somebody else?

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  20. #19  
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    Bills are pieces of paper that are not actually worth the amount they represent. Even then, the 2-billion the bank has are no more than numbers on a computer, for the most part. Money has lost its value. It made much more sense when you could say "I have one gold piece and with it I can buy such and cuch". The gold the coin was made out of was actually worth the amount the coin represented. But now all that is gone and we have pieces of paper representing 10, 20, and even 50 and 100 dollars. It's just ridiculous. I believe that the only way to make money worth itself is to have no money. Go back to the trade and bartering system.
    Pierre

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  21. #20  
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    I know that a banknote is basically just an IOU. But I'm a little bemused about a bill. If you're in a restaurant and I'm a waiter, when I bring you the bill it's basically a "You Owe Me".

    So where does that leave a dollar bill?
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  22. #21  
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    Quote Originally Posted by Farsight
    Are you talking about me, or somebody else?

    I'd like to see your consciousness explained now please. If you wish. Or something else, god explained or something. :P
    Please do so. Would be interesting.
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  23. #22  
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    Sorry, I haven't written it yet. And I don't want to give any hints because there are people who've been struggling to explain it for years.
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