What is Money?
Notes on the Nature of Money and its Future
“Money is an idea in Conscious Awareness the same as any other idea, form, thing.”
~ Alfred Aiken
What is money? We use it almost every day, but like the air we breathe, we take it for granted and don’t really think about it, or ponder it deeply. We hardly ever look into the real nature of money.
Money would seem to have many levels, layers or facets: the broad political and economic aspects, the patterns of exchange globally, the history of money and finance (not to mention the role in the unfolding of events), and moving inward, the social and psychological aspects. On the inward side, the spiritual level, we can look at the essence of the “energy” of money and how this is understood and expressed in one’s life a a spiritual being. On the objective side we have the practical, tool-like aspects of money, how it functions in the world.
In this article I am only looking at the last one mentioned: the nature of money as a functional tool, and try and reduce it to it’s essence, without the burden of emotion or other peripheral meanings and considerations. We are to be like alien scientists visiting for the first time, and want to see, what is this strange thing, this exotic human species behavior and idea they call “money”? They certainly seem to place much importance in this idea, and invest much of their time in it, and seem to react to it as if it were something real. What a strange animal. What is this tool, this idea?
I believe this is of both intellectual and practical interest. The spiritual side is also extremely important (and often overlooked)—and relates to seeing money objectively, in clarity—but that will be left for another article.
The dawn of and expansion of Bitcoin and the phenomenon of cryptocurrency are part of what initially spurred this reflection (I will discuss Bitcoin and cryptocurrencies at the end of this piece). In any case I’ve often pondered the nature of money. It seems to have a powerful grip on our minds (thoughts and feelings).
Cryptocurrencies such as Bitcoin have been criticized as having no intrinsic value. But does any type of money (or investment for that matter) have an intrinsic value?
What is meant by intrinsic value? In this context, it is a value that adheres in the object itself, by direct use or as a proxy (the authority to represent). For example, apples have an intrinsic value to humans that’s inherent (in the context of eating food) because the objects themselves are valued as food. That is a direct use. A shovel has intrinsic value as an instrument for digging. A proxy intrinsic value example would be an American twenty dollar bill: it would have the value of being directly exchangeable for a wide range of goods and services (under current conditions) by the wide agreement of many parties who trust it’s exchange value. The value of being tied to a precious metal originally (an IOU for gold) is moot at this point, because the gold may no longer be there for one thing, and for another, no one is seriously using it for that, or for that reason. It’s simply an agreed-upon standard, with historical, political, economic roots and intersubjective agreement.
The argument regarding Bitcoin was that since the “value” swings wildly based on the actions of speculators, and is a digital product – just a set of numbers somewhere in a database – and it’s exchange value for actual goods and services has to go through either the exchange for “fiat currency” or rarely directly for goods or services, it has no intrinsic value. In more dramatic terms, it’s value could suddenly evaporate to zero overnight. It’s not tied to anything.
But in reality, isn’t this also true for regular, non-digital, non-crypto money? If the agreement about it’s value were suddenly forgotten by two parties in an exchange, then it would at that instant have no value. So it is just a matter of perspective and degree.
Money has no intrinsic value in itself. It is a store of value, by the implicit or explicit mutual agreement of the agents of use. The valuation of anything is contextual by nature, and therefore money has no intrinsic value except in a social context, and a intersubjective context of agreement. Money is most often used as a medium of exchange, but a medium’s value is not an intrinsic property, only a function of use. Most simply, considered as a tool for tracking exchanges, money is a unit of account (ideally). An account of what? Some kind of value…
So money is a useful tool for storing and trading value. Looking at some use stories of cases will help the intuition pump towards a better understanding of what “value” means here.
Imagine having to engage in barter every time you wanted something. Let’s say you wanted a stick of butter, and what you happened to have in surplus were a collection of fine, healthy Philodendron plants to trade. You go to the dairy, but the butter maker says she doesn’t want Philodendron plants, but she does need some hay for her cows. So then you need to go back and find someone with extra hay who wants philodendron plants. Or you will need to find whatever you have you can part with that they happen to want—maybe a pile of bricks or some apples or bricks or a carburetor—if you can even find such a party.
In contrast, money can be traded for anything, because the receiving party in turn can trade it for anything. It’s universal (at least within the culture it’s accepted in, as long as it still has significant trading ability).
By way of evidence, let’s explore some strange examples of “money”, in the form of a coin that has value but is never exchanged. In this case, you have a type of coin that was held onto and ended up never being traded: a giant circular stone in your front yard that represents the deed on your house. This is actually the case with the Yapese have traditionally used on the island of Yap (see below), and that is agreed upon by the entire community on your little island society. And if anyone from that society is given, buys or inherits that coin, that represents owning the house, by deed of giant stone-coin. In fact the entire island has houses of this type and a deed-coin in front. However, for some odd historical reason, no one has ever used them for exchange! It’s an unlikely scenario, but the point is it is possible. In other words, exchange is not a natural, inherent, God-given property of money. Strange but true.
But the converse scenario also makes little practical sense: a currency that has no value (by agreement or intrinsically) but was exchanged profusely. That would be a potentially comic situation: one could imagine all these clowns running around making exchanges with each other furiously with, let’s say, pieces of paper with printing on them, but nothing could be done with the papers except exchange them: one could not use them for any practical material purpose (even toilet paper, because of the printing or type of paper), one could not exchange them for anything else except other pieces of the paper, and one could not convert them to other types of money. It would be farcical.
Some no doubt will say this is the situation with some cryptocurrencies currently! But most cryptocurrencies can be exchanged for other currencies, and do have some, however debatable, intrinsic value as a unique implementation of an instance of a useful class of technology.
Philosophically of course, there is no ultimate inherent value in any money whatsoever, no matter how brilliantly conceived, engineered, or widely adopted. Money only has the value it is given by the psycho-social milieu of assumption, faith and trust of the society in which it exists. In other words, it is a projection. This is easy to demonstrate if you do a simple thought experiment or two.
Let’s say a race of powerful aliens came to Earth, godlike in their intelligence and capabilities, and they had a technology, programmed with a fully advanced neuroscience of human minds coupled with a superintelligent computer system, and some kind of brainwave projector that re-aligns human thoughts along whatever lines is programmed into the machine. They decide to play a joke on humans and re-program everyone on the planet into forgetting what the US dollar is and what it’s for, no matter if its paper currency or numbers on a screen. They program humans to forget that it has any value (to keep it simple we won’t worry about automated exchanges, and just look at a very short term scenario). They do the same for gold, silver and platinum – both the physical metal and representations of it – just for extra fun and to make sure their little joke works.
Zap! Suddenly this money has no value. So why would anyone choose to exchange it, or even care about it, except as a curiosity? It has no inherent value, other than for the physical money for kindling or paper, or paper weights or ballast (especially coins), or for its fiber content or the uses of the metal in engineering. The entire currency collapses. The same would be the fate of Bitcoin or any alt-coin or cryptocurrency, if the aliens decided to zap human minds about it. The companions and communication over the internet would continue to happen, and there would be information in crypto wallets, but it would have no social or psychological value, and therefore no exchange value, because that projection was zapped. One would look at some numbers on a computer screen or in a hardware wallet and they would be just numbers, with perhaps an engineering or historical interest. In the longer run of course things would resurrect themselves and the system would be built back up, and value restored once the mental map was re-learned by individuals and groups. But the point is made.
A less exotic example can be imagined. As the reader may or may not be aware, on the Island of Yap in Micronesia, traditionally the Yapese used large circular stones as money, called Rai stones (https://en.wikipedia.org/wiki/Rai_stones). These could stand for anything from the ownership of a house or the smaller ones could be used for the purchase of food. Since the stones are for the most part too large to move (and subject to damage if moved), they are kept in place, and the ownership is recorded orally. Nothing is written down. The “ledger” is in the minds of the Yapese. Now let’s say, back in the day when the island was unknown and there were no other currencies from the outside world in use (these days the Yapese use dollars and Yap are used only occasionally or ceremonially), some plague wiped out all the inhabitants. If a ship of Europeans, or anyone really – for example a boat full of Micronesians from another island with no cultural exposure and no use of stones as currency in their society – were to land on the island, they would not place a monetary value on these coins and not consider them standing for anything, unless they decided to start doing so (for example they might be taken as valuable museum pieces, or the quartz mined from them for various uses).
So one can see it is the social matrix that gives money its value ultimately, and the individual programming of the members of that society.
Money cannot by nature have any inherent value.
This can also be seen if you hand a hundred dollar bill to a Bonobo Chimpanzee, our closest relative genetically. They are a very intelligent sentient being, and their groups have their own culture and means of communication (though it is not a written one). They might sniff it, look at it, play with it, throw it, wipe their ass with it, but they are not going to use it for money, no matter how long you give them money and no matter how much. It’s possible I suppose that a researcher could train them do trade money tokens for food, but as far as I know this has not been attempted.
As a side note money also depends on the concept of counting and numbers, and this is not inherent – despite what Chomsky theorized – even to humans, as proven by the the anthropologist Daniel L. Everett and his patient work with the internet outage (not an uncommon occurance) or one is not on the internet, or some kind of catastrophe occurs, or even a programing or configuration error – a bit or two, out of place, the wrong comma placed in a line of code – the whole silicon house of electric cards comes crashing down, or at least screeching to a halt (as has happened with cloud storage such as AWS outages on occasions).
As a concluding note, since much of my blog has to do with the philosophy of happiness, and “spiritual” or psychological topics, the facts and notions outlined in they essay regarding the nature and power of money, do not imply or mean that money is required for or coupled with happiness. They are on quite independent axis, as will be discussed in an upcoming article.
Thank you for listening.
Be Free, Be Happy.