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

Hi Geoff

It seemed to me to be wise to take our discussion out of Peer Review.

Although I consider my points of view to be rational, well thought out, and symptoms of genius () I am interested when people disagree.

If I am lucky, they will change my mind and I will have learned something.

If I am unlucky, I will just refine my wording to get my existing point of view across more clearly.

So - tell me - at what point do you think 'this woman is daft' in the money entry; and - more to the point - why?

a tree hugging hippy (sometimes) - called Ben (always)

Ben / Gonzo / whatever

I never said "that daft woman";- you must be telepathic as well as genius.

I don't think that you're wrong per se. I just consider that the article overstates its point. Yes, confidence and belief play a big part in international finance. Yes, share price movements, derivatives, futures et al are becoming divorced from the realities of companies' abilities, but I draw a distinction between that and the nature of money itself. In fact, the Dotcom boom'n'bust was due mainly to people ignoring reasonable calculations of the money these companies could make. (ie they couldn't make any )

Someone's mentioned a good illustration on the peer review thread about a cow not being worth a chicken in barter, yet half a cow would be worthless. Hence tokens were exchanged..."I promise to pay the bearer, on demand, another chicken". This is money, and it has its root in tangible reality.

Moreover, money can also represent the value of time. When you earn a salary, you are being given a token in return for your time and skill. When you pay for a meal, you are giving a token in exchange for the service received. These services have no tangible reality, but they do have value. The extent of the value is determined by how many tokens you are willing to exchange for the service.

As someone mention in the PR thread, a £5 note may not have an intrinsic value, but it has an extrinsic value placed on it. This is not a belief, but a commitment. "I promise to pay the bearer..."

Thanks for the reply. I think I can see where out opinions diverge.

My point is that all money requires belief, not just futures and options and shares in dot bombs.

Yes the wording on a bank note is a promise. But the reason bank notes work is because we can beleive and do beleive the promise will be fulfilled. When for any reason we can't beleive that they become worthless. I have a physically large collection of banknotes. The Marks, Franks and Lire are worthless now, because I can no longer beleive that they will be redeemed. But they are the same Marks Franks and Lire as they were 12 months ago. They had no intrinsic value then, and they have none now. What has changed is the banking structure that supported them.

Now none of those banks went bankrupt. But in the 19th century there were a large number of private banks in the UK which printed their own currency, as the RBS, The Bank of Scotland and the Clydesdale still do. But when any of the private banks which issued notes went bankrupt, as all but those 3 did, the notes became worthless. Now imagine people on a ship using said bank notes. They can continue playing poker or agreeing to buy or sell property or services between each other with the 'worthless' bank notes. The notes are not valueless on the ship, because the people on the ship still believe them to have value. The notes don't become valueless until she ship docks and they get the news that the bank has gone bankrupt.

Now 19th Century bankruptcies were often precipitated by a 'run on the bank'. What happens here is really interesting. A decreasing number of people believe that the bank will fulfill on the promise to pay the bearer. Therefore an increasing number of people go into the bank and ask to be paid. In gold. Most of these people are not goldsmiths, or indeed the manufacturers of hifi cables, so they have no actual use for the actual gold. The only reason gold is more valuable than paper is that more people believe in it.

I am not saying that money has no connection with tangible reality. Only that the connection is ENTIRELY and 100% within our minds.

Interesting you mention the dotcom boom and bust. I am currently reading 'boo hoo'. But all bubbles, from Tulipomania to the Dot Bombs, are based on emotions such as hope and greed clouding rationality. The Dot Bombs were just the most recent manifestation of that.

Of course the key point about money - and the reason we need it - is because it is a neutral method of exchange. I means I can exchange my day at work for the right to live in my house for another week or so.

The entry doesn't say we don't need money. Quite the reverse. It implies we need it more now than we ever did.

Thanks for your comments Geoff, and please reply again if there is anything you disagree with in this post.

I can see from the reactions that I have had that the entry is NOT actually putting across the points I want it to put across. I will therefore probably take it out of PR in a couple of days, and sling it into the WW for more comments, and then rewrite it completely.

One lives and learns.

Thanks again

Ben

No arguments here, other than to say that almost any personal interaction relies on the belief you describe; ie the belief that another person will do what they commit to.

I look forward to what you come up with.



Geoff