Money Explained

[Farsight]

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?

 

Oh yes, I can explain Energy.

[Farsight]

The above was the intro to ENERGY EXPLAINED, but it made the overall essay too long. So I've split it out. It's just a bit of "out of the box" fun really, but I hope it's interesting fun that demonstrates just how much we take for granted.

[insane_alien]

ooo so insightful. seriously, if more than 5% of the boards active members didn't know that the monetary system doesn't really have value if you take people out then i would be surprised.

 

on another note, energy does not work like money. stop fooling yourself.

[Sequence]

Agreed, energy is not like money. I think most people here know that monetary units are all based on the fact that people want them. If all the people suddenly decieded that only red rocks were worth having, that would be currency and we would be wiping our ass with Mr. Franklien.

 

Of course I don't think the governent would like it if all we used were red rocks. Here is somthing to think about though, You can't take a gold bar into block buster and rent a movie. BUT, our accepted paper money is based on the gold standered. So, that makes the gold esswtially worthless unless you trade it in.

 

Anyway, the rambling moron will conclude his post by say that it was a good read.

[Klaynos]

untill the last few years you could still take sterling to the bank of england and they'd give you the gold to the same value.

[D H]

Farsight, you have an image of a $100 bill. Did you read the fine print? "This note is legal tender for all debts, public and private". That $100 bill is real money.

 

Most money is in accounts of some sort. If it is in a US bank, the account is insured by the US government. Other countries have similar concepts. Just because you can't touch it, feel it, smell it doesn't mean it isn't real. People who play funny games with a bank's balance sheets tend to find how real that money was.

 

BUT, our accepted paper money is based on the gold standered. So, that makes the gold esswtially worthless unless you trade it in.

 

I don't know of a single country that still uses the gold standard. Certainly no Western nation does. The dollar, the mark, the pound, etc, are worth what money traders are willing to pay for them.

 

==========

edited to add:

 

Farsight, you are far too enamored with analogies. Analogies are very helpful in making strange new concepts seem familiar. However, one can easily get caught in a false analogy if the analogy is extended too far. This has happened to you more than once.

[Farsight]

Farsight, you have an image of a $100 bill. Did you read the fine print? "This note is legal tender for all debts, public and private". That $100 bill is real money.

 

It's not real money. It's just a piece of paper that says "I am real money".

 

Most money is in accounts of some sort. If it is in a US bank, the account is insured by the US government. Other countries have similar concepts. Just because you can't touch it, feel it, smell it doesn't mean it isn't real. People who play funny games with a bank's balance sheets tend to find how real that money was.

 

Money only "exists" only because people agree it "exists". Like insane-alien says, take away the people and the money's gone too.

 

Farsight, you are far too enamored with analogies. Analogies are very helpful in making strange new concepts seem familiar. However, one can easily get caught in a false analogy if the analogy is extended too far. This has happened to you more than once.

 

When have I been caught in a false analogy? In fact, What analogy? I don't think Money is the same as Energy. It's like I didn't say Colour is the same as Time in TIME EXPLAINED. The idea is to show the reader something obvious that's taken for granted, then move on to something a little more difficult. Sadly, some people just don't want to know.

[Sequence]

Alright, it's backed by gold.

[Glider]

untill the last few years you could still take sterling to the bank of england and they'd give you the gold to the same value.

The promisary notes fromt the Bank of England were based on silver (sterling).

 

The British pound sign '£' is a stylised 'L' which is for the Latin 'Libre' = Pound. Back when money was worth something, the promisary note for say one pound (£1) was worth, and reclaimable from the bank for one pound of sterling silver, which is why British pounds are called 'pounds sterling'.

 

Today, a pound coin is barely worth the metal it's stamped from *sigh*

[D H]

There is no gold standard nor silver standard for any Western nation's unit of money. The relative worth of the dollar, pound, mark, ... are determined on the international exchange market.

 

Google Bretton Woods system.

[Edtharan]

It's not real money. It's just a piece of paper that says "I am real money".

But that is what real money is.

 

All trade is based on the barter system. This means that if I want a good or service, then I have to barter for it. In stead of having to carry around a whole heap of various goods with which you can barter with, we use a common standard with which to barter with. When you get your pay form your employer, you are getting an amount of money that you have bartered your service for.

 

We use a common exchange medium (money) so that these exchanges are easier to perform.

 

The reason that shops and such charge different prices is that we are bartering with them for that particular good or service.

 

Now, originally money was objects that were considered by that society to have an intrinsic value (rocks, metal, seashells, pigs, etc), however it is not always easy to cart around these objects (rocks and metal can be heavy and pigs tend to want to run away). So someone had the bright idea to stick all these objects in a secure location and to hand out pieces of paper that allowed the bearer of them to claim them.

 

This practice didn't start out with banks, but were first members of the nobility and the merchant elite. These eventually started charging for this service (taking a bit of the goods for themselves). Slowly they managed to begin dealing in enough goods that they were able to use that as their sole income. They were then banks.

 

Now banks didn't just hold onto the money, they used the money that they invested it into other industry (like digging out more precious metals and rocks for money).

 

So what is money?

 

Money is a common exchange medium that allows us to barter for a wide variety of goods and services with the goods and services that we own or can give.

 

What is the notes and coins that we use?

 

Money is a common exchange medium that allows us to barter for a wide variety of goods and services with the goods and services that we own or can give.

 

When have I been caught in a false analogy? In fact, What analogy? I don't think Money is the same as Energy. It's like I didn't say Colour is the same as Time in TIME EXPLAINED. The idea is to show the reader something obvious that's taken for granted, then move on to something a little more difficult. Sadly, some people just don't want to know.

Ok how about irrelevant content? If it is not supposed to be an analogy, and it has nothing to do with the subject matter, then why include it?

 

How does an analogy, that you have admitted is not applicable to the subject matter, aid in our understanding of the subject?

[Farsight]

Ok how about irrelevant content? If it is not supposed to be an analogy, and it has nothing to do with the subject matter, then why include it? How does an analogy, that you have admitted is not applicable to the subject matter, aid in our understanding of the subject?

 

...

 

The idea is to show the reader something obvious that's taken for granted, then move on to something a little more difficult. [b']Sadly, some people just don't want to know.[/b]

[JohnB]

But some notes are worth more than their face value.

This is the old $1 note. As a security feature there was a metal strip in the paper, it's position varied from behind the central kangaroo to near the head of the goanna. When held up the the light it gave a black shadow similar to a "Finish line".

 

This gave rise to a form of betting called "Kangaroo Racing". Two competing notes were held up to the light and the kangaroo which was further over the line won. The winner gained the losers $1 note.

 

A pointless piece of trivia perhaps but it does show that we Aussies will actually bet on anything, even our money.

[ecoli]

Farsight

The idea is to show the reader something obvious that's taken for granted' date=' then move on to something a little more difficult. Sadly, [b']some people just don't want to know[/b].

 

yep, attack the people you are trying to convince. That makes a lot of sense [/sarcasm]. Watch the ad homs.

[Farsight]

Good one JohnB.

 

ecoli, here's the background:

 

Do not take this to mean that I think you belong in the loony bin with Farsight...

[ecoli]

Good one JohnB.

 

ecoli, here's the background:

 

I don't understand the point of this thread. Do have any qualifications to teach people about money? Any economics classes/degrees, anything?

 

And why do you think talking about money makes it easier to understand energy? (Especially considering I don't know why I should beleive anything you're saying)

[Farsight]

yep, attack the people you are trying to convince. That makes a lot of sense [/sarcasm]. Watch the ad homs.

 

Oh, the irony.

[Corillian]

Its true, money used to be coins, which were actually their worth, out of gold, silver ,copper, bronze etc. Now most of them just represent their worth, a note is used to be called a receipt, now of course, it is called a bank note. Or steel, which doesn't actually match the worth it is supposed to be.

[ecoli]

Oh, the irony.

 

questioning your credentials is not an ad hom. But, I commend you for cleverly avoiding an answer.

[Royston]

Oh yes, I can explain Energy.

 

Care to elaborate on this statement.

 

You've used money as an analogy for energy...in that I work, I gain money, and then spend this money on items that have required work from other individuals, and value (although this becomes erroneous) is due to how much work I put in.

 

This doesn't explain energy, it's just an analogy for the exchange of energy...and unfortunately your example, and energy, are incomparable anyway.

[Farsight]

Snail: I've got a separate essay called ENERGY EXPLAINED. When I first wrote it I used money as an introductory analogy to demonstrate how much people take for granted. However the the overall result was too long. So I separated MONEY EXPLAINED out and made it a separate little essay. The trouble is ENERGY EXPLAINED is still too long, so I need to do some more work on it, and I've been busy this last week or so. Here's an excerpt:

 

Let’s start by saying that energy is the property of a thing. It is not a thing in its own right. To illustrate this, I can talk about a red ballon, a red bus, or a red red ruby. All these things have the property that we call red. A thing can be red, but you cannot remove this red, or purify it, or hold it in your hand. You could remove the paint or the dye and hold that in the palm of your hand, but you cannot then remove the red from the dye. Yes you can use red when you make things, but it’s red paint in your workshop, a thing that is red, not pure distilled essence of red. When you imagine red, the blotch in your mind’s eye is a thing. Your image is a thing. You always need a thing to be red. There is no such thing as “raw red” or “pure red”. In similar vein there is no such thing as “raw energy” or “pure energy”. You can’t make buses out of red, and you can’t make things out of energy. But you can use energy to make things, just as you can use red when you make buses.

[ecoli]

As I see it, if you need an entire thread just to explain what's supposed to be the layman part of the analogy, chances are, it's not a very good analogy.

 

An anology is supposed to clarify things, and should be pretty much self-evident as to the meaning.

As we can see in this thread, understanding the concept of money isn't the easiest thing, and so why use to explain energy, which also can be a difficult concept to understand.

 

In addition to that, I'm not sure (judging by the multitude of responses from both the Energy and Money explained threads) if you have the capacity to explain either Energy or Money to anyone. I'm not trying to be cruel, but, if your purpose was to try and describe Energy with an accurately so that the layman can understand it, I don't think you are successful. Neither thread has helped me to understand energy (or money) any better.

[Royston]

Let’s start by saying that energy is the property of a thing. It is not a thing in its own right.

 

Well, energy and mass are interchangeable...so a 'thing' as you call it, requires lots of energy.

 

To illustrate this, I can talk about a red ballon, a red bus, or a red red ruby. All these things have the property that we call red. A thing can be red, but you cannot remove this red, or purify it, or hold it in your hand.

 

That's just semantics, I'm colour blind, so if I say the bus is green, or the bus isn't a bus (if I interpreted the bus as something different), then your argument is flawed.

 

You could remove the paint or the dye and hold that in the palm of your hand, but you cannot then remove the red from the dye.

 

Why not, all I have to do is say, that isn't red.

 

Yes you can use red when you make things, but it’s red paint in your workshop, a thing that is red, not pure distilled essence of red. When you imagine red, the blotch in your mind’s eye is a thing. Your image is a thing. You always need a thing to be red. There is no such thing as “raw red” or “pure red”. In similar vein there is no such thing as “raw energy” or “pure energy”. You can’t make buses out of red, and you can’t make things out of energy. But you can use energy to make things, just as you can use red when you make buses.[/i]

 

Then you take this massive leap as to what we perceive, is what constitutes energy...how, you can't mix physical principles with subjectivity. Work is being done in this field, but by judging your arguments, this is a far cry from the logic (or lack of) that you've described. Energy is not a semantic term with regards to physics, and all you seem to be doing is making rather loose analogies around a theme, which amounts to what exactly ?

[Farsight]

questioning your credentials is not an ad hom. But, I commend you for cleverly avoiding an answer.

 

All: Oh yes it is, as is "cleverly avoiding an answer". I'm not going to respond to somebody who accuses me of ad-hominem personal attacks whilst turning a blind eye to those inflicted on me, and meanwhile delivers his own subtle little ad homs like "you attack people" or "you have no credentials" or "you avoid answers and are evasive". Now if this is a misunderstanding on my part I'll apologise. Otherwise I'm not getting into it. There's far too much of this nonsense on forums like this.

[Farsight]

As I see it, if you need an entire thread just to explain what's supposed to be the layman part of the analogy, chances are, it's not a very good analogy.

 

An anology is supposed to clarify things, and should be pretty much self-evident as to the meaning.

As we can see in this thread, understanding the concept of money isn't the easiest thing, and so why use to explain energy, which also can be a difficult concept to understand.

 

In addition to that, I'm not sure (judging by the multitude of responses from both the Energy and Money explained threads) if you have the capacity to explain either Energy or Money to anyone. I'm not trying to be cruel, but, if your purpose was to try and describe Energy with an accurately so that the layman can understand it, I don't think you are successful. Neither thread has helped me to understand energy (or money) any better.

 

Aw, here we go. Either thread. LOL. There is only one thread. And lookie here, ad-hominem attacks like I'm not sure if you have the capacity to explain either Energy and Money to anyone.

 

OK ecoli. Let's talk about hypocrisy, dishonesty, and intellectual arrogance. Yours.