h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

This my question, though you have certainly at least addressed it, I still don't have an answer, although, it seems as though the answer is "there is no reason."
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Why does money have to backed by something of real value, like gold? Why can't we just print up a bunch of money or give people electronic credits, as much as they want? I guess I'm wondering why we can't just assign an arbitrary value to money and create as much of it as we want. Does that make sense? The reason why I ask is that a lot of transactions take place electronically these days anyway; banks don't actually have all of everyone's money at any given time. Money seems to be fairly virtual, as far as I'm concerned. I took an economics class in high school but we spent an insane amount of time inventing a stupid fake product and pretending to play the stock market. As a result, I learned very little of value about the way an economy works. What do you think?

I am no economist, so I don't know why we cannot have an unlimited amount of money.

However as the entry says, money is an essentially arbitary way of keeping track of the value of stuff.

We would most of us like to have penthouses overlooking the Thames, (or the Seine, or Central Park), but there just aren't enough of them to go round. If we have an infinite amount of money, but still have a limited number of luxury penthouses, then all the money in the world will still fail to buy penthouses that don't exist if only because they don't exist. Most of the things we want in the world like oil and food and diamonds are in limited supply, and therefore have some sort of inherent value.

If you have an infinite amount of money it becomes worthless, and you start having to use things which are finite, such as diamonds. Or gold. Or cowrie shells. Or whatever.

Since it is hard to transfer cowrie shells electronically, having a finite amount of something that doesn't actually exist is a more effective way of doing things.

If you want a real life practical example of what happens when you simply print an infinite amount of money, read up on the inflation in Germany under the Weimar Republic in the 1930s.

Hope this helps, but somehow I think it mightn't.

Here's to buy a soda with though.

Ben

ooh, thanks, I shall look up that time period in the Germany.

Also...I hadn't thought of the limited supply of things. How could anything, even if the supply is limited, be assigned a kind of value at all if the unit of value is limitless? It seemingly wouldn't matter where you set the price-and then it might as well be free, anyway.

This is a very interesting subject, and I think there is more philosophy to it than most people imagine.