Money Explained

[Farsight]

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?

[Farsight]

This essay is part of a set, and is intended to illustrate that something very common is perhaps not what you thought it was.

[YT2095]

actually the Old pennies (pure copper) the ones that don`t stick to magnets, are actually worth a fraction more in scrap value than their Face value

[Farsight]

actually the Old pennies (pure copper) the ones that don`t stick to magnets, are actually worth a fraction more in scrap value than their Face value

 

Like I said in the essay:

 

"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...”

[YT2095]

Interesting, I know the UK coinage was like that, I was unaware that applied across the pond too.

IIRC, some of our old silver coinage was quite literaly That, Majority Silver, I forgot the "cutoff" year though

[Edtharan]

something very common is perhaps not what you thought it was.

A lot of the old money was based on what is called precious metals. But really, why are those metals precious? It's because people valued them as precious, not for any "intrinsic" value.

 

So, even the old economies that were based on "money" that was metals of a certain value (gold, silver and the like) were not really based on an actual value, but on an agreed value, just like the "promissory notes" that we use as money today.

 

But lets actually look at what that money is really representing.

 

Whatever form "money" has, whether is it gold, seashells, pigs, etc, it doesn't matter. All these things are are a physical representation of an abstraction. This abstraction is of "Work". You get paid to work.

 

Whether this work was going out and hunting dear and antelope in stone age times, or for writing up the company's budget in a spreadsheet, you have to have some medium for exchange. IT is not easy to equate something like dear meat and spreadsheets. Also, since the exchange rate of Antelope to Spreadsheets might mean that you need a herd of Antelope to pay the IT worker, this kind of direct barter is not very practical.

 

Humans have a fairly unique talent (there are a few other animals that do share this talent, but not to the extent that we humans have it). This talent is "Abstraction".

 

A long time ago humans hit upon the idea of abstracting the effort that they put into work. They came to an agreement that for a certain amount of work in a particular "job" would be worth a relative amount of effort in another type of "job".

 

They also knew that if they broke this relative "worth" in very small pieces, they could easily exchange their "work" for small items.

 

Eventually we needed some kind of physical "token" to represent this abstraction. This way we could save up these tokens and exchange them for something that was worth more than a person could do in 1 day.

 

And thus was "money" born.

 

Now. lets re-examine the Promissory Notes that we call money today. We are given these notes when we do work. These notes are a physical token of the abstraction of the concept of work. We get them for working and we exchange them for the work of others (or produce of the work of others).

 

However, we have found it advantageous to re-abstract the token into Bits in a computer. In our information driven society, we can pass around these abstracted "monies" much easier than we can pass around actual tokens.

 

Really, those original tokens were abstracted so that people could more easily exchange "Work". We have continued this process by abstracting the tokens so that we may more easily exchange them.

 

Salt use to be worth a lot. It used to be a "currency" (yes that is right Salt use to be money). That is in fact where we get the term Salary from. Salary actually means Salt in Latin.

 

The title of this essay is "Money Explained", but it really doesn't explain what money is. It does not even look at what money originally was. It only looks at the tokens and ignores the abstraction that they represent. It doesn't "Explain" money at all.

 

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?

Not really.

 

You say that "money" doesn't really exist and that is why it can't be created or destroyed.

 

But, if energy doesn't really exist, just like you have claimed about money, then no "work" (in the scientific meaning) can be done. There would be no movement, no explosion, no sunlight, etc, etc.

 

So, looking at it this way, energy is nothing at all like what you represent money as.

[Farsight]

You talk about work at length, then say money is nothing like energy. Groan.

[insane_alien]

farsight, there is more than one definition of work. just like there is more than one definition of colour.

 

for instance, you have the colours of the spectrum (red, orange, yellow, etc. etc.) and then there is the colour force. which is completely different as it describes how subatomic particles such as quarks interact. its also called the strong nuclear force.

[John Cuthber]

Money is a medium of exchange. It can stand for hours worked but, since my hourly rate of pay is more than some peoples and less than others it can't be that simple.

I'm not much good with animals but I like eating meat. The farmer doesn't have much tallent as a chemist but, ocasionally he wants the benefit of knowing chemistry. If those were the only two jobs in the world it would be fairly simple for us to simply get together and agree an exchange rate; they feed me and I check the concentration of stuff in their sheepdip and the vitamin levels in the feed (or whatever).

Once you have many jobs going on- a potter or baker would probably have been a fairly early profession (and we needn't worry what profession was first) things get complicated. It makes it much easier to have an accepted mechanism for agreeing how to get the chemistry, farming, pottery and bakery done by those who have talents for those jobs.

There may be other ways to achieve this but money seems to work quite well.

[Farsight]

farsight, there is more than one definition of work. just like there is more than one definition of colour.

 

for instance, you have the colours of the spectrum (red, orange, yellow, etc. etc.) and then there is the colour force. which is completely different as it describes how subatomic particles such as quarks interact. its also called the strong nuclear force.

 

Human work is not substantially different from physics work, Insane_alien. And "Colour force" is not colour, really.

 

John Cuthber: I'm sure everybody will agree with your post above.

[Edtharan]

You talk about work at length, then say money is nothing like energy. Groan.

I meant work as in a Job. This has a completely different meaning to the scientific term Work. They are in some ways similar, but not significantly.

 

Just because they are spelt and pronounced the same does not mean that they mean the same thing. To suggest other wise is the Equivocation logical fallacy (http://en.wikipedia.org/wiki/Equivocation).

[Farsight]

You're the one who brought up work as in a job, and you totally missed the "some ways" similarity between joblike work and energylike work. And now you accuse me of equivocation to try to cover up your sloppy mistake?

 

It just won't do, Edthraran. See below for the relevant paragraph from ENERGY EXPLAINED, which you've forgotten about in your burning desire to discredit these essays:

 

Another illustration is money. You can spend money like you can expend energy. But the money doesn’t disappear, just as the energy doesn’t disappear. Somebody else now has your money, just as some other thing now has your energy. Think about an old house, nestled in the countryside. It’s picturesque, worth a lot of money, and it’s built out of cob. Way back when, some guy put some energy into shifting earth and straw to make the walls of this house. He did the same with the wood, which grew out of the earth because the trees put energy into shifting water and CO2. The guy made money out of that house. They paid for the energy he put into it, through the work he did moving stuff. That’s why money and energy are similar. They get things moving, they get work done. One makes the world go round, and the other one makes the world go round too.

 

Please do try to find flaws, I really do seek feedback. But please try to take a rational, open-minded, scientific approach so that your feedback is quality feedback with undisputed value. Then when I'm a celebrity and RELATIVITY+ is in the physics curriculum, you can say I helped. You can be proud of your contribution to 21st Century physics. The alternative will be guilt and shame for the rest of your life.

 

Think carefully on this.

[Robonewt]

So What happens if you take your money from your monthly wage out of a useful hole in the wall, pile it in a safe place and burn it?

 

The money is destroyed, you have less of it, but no one has more. The total sum of money in circulation has been reduced.

[John Cuthber]

If enough people do that you get a negative rate of inflation (and broke).

[swansont]

Human work is not substantially different from physics work, Insane_alien.

 

Hold this piano stationary for eight hours. I'll pay you according to how much physics work is done. Interested in the job?

[insane_alien]

and then i'll give you triple what swansont gives you.

[ydoaPs]

Another illustration is money. You can spend money like you can expend energy. But the money doesn’t disappear, just as the energy doesn’t disappear. Somebody else now has your money, just as some other thing now has your energy. Think about an old house, nestled in the countryside. It’s picturesque, worth a lot of money, and it’s built out of cob. Way back when, some guy put some energy into shifting earth and straw to make the walls of this house. He did the same with the wood, which grew out of the earth because the trees put energy into shifting water and CO2. The guy made money out of that house. They paid for the energy he put into it, through the work he did moving stuff. That’s why money and energy are similar. They get things moving, they get work done. One makes the world go round, and the other one makes the world go round too.

 

Please do try to find flaws, I really do seek feedback. But please try to take a rational, open-minded, scientific approach so that your feedback is quality feedback with undisputed value.

 

On my desk is a $1USD bill. To the right of Mr Washington near the bottom of the bill, it says "SERIES 2003" indicating it was printed in the year 2003. Thus money can be created. As shown above, money can easily be destroyed. Energy, however, can be neither created nor destroyed; it can only be changed in form.

 

Another difference is inflation. [math]1_{2003}dollar<1_{1920}dollar[/math] whereas [math]1J_{2003}=1J_{1920}=1J_{\infty}[/math], where the subscript represents the year. Money loses value; energy does not.

 

And that's just off the top of my head.

 

Then when I'm a celebrity and RELATIVITY+ is in the physics curriculum, you can say I helped. You can be proud of your contribution to 21st Century physics. The alternative will be guilt and shame for the rest of your life.

 

Think carefully on this.

I've seen no physics from you.

[MolotovCocktail]

Energy cannot be created when one needs it, in fact it cannot be created period. Money, on the other hand, is created and put into circulation. When you create too many dollar bills, this results in inflation. The same cannot be said for energy.

 

But hey, if you want to put it to the test, I have a very large, 56 inch wide screen TV that needs to be moved from one room to another. And I'll pay 56 J per hour .

 

 

I've seen no physics from you.

 

Ditto!

[the tree]

Money is really fairly simple. The fact that it's not tangible doesn't make it in any way deep or complex, it's just an abstract quantity used for transactions because it's significantly more efficient than just bartering.

 

It is not like energy in many, many ways. For one, there is often more or less money in the world than there was the day before. For another, money relies on perception, energy doesn't.

 

Also, I'll quadruple whatever Insane is paying you for keeping that piano stationary.

[Gypsy Cake]

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?

 

Of course there is conservation of energy. But that doesn't mean none exists; just that there is a constant amount in an enclosed system.

__

 

Anyways, Money does exist because money is the word used for anything that exchanged. It is a human invention and therefore it does not have to be tangible to be siad to "exist".

[Edtharan]

You're the one who brought up work as in a job, and you totally missed the "some ways" similarity between joblike work and energylike work. And now you accuse me of equivocation to try to cover up your sloppy mistake?

Yes, I brought up Work (job) in an effort to provide a better background to what money is. I did not attempt to associate it with Work (physics) at all.

 

Yes, doing Work (job) usually entails some form of physics (even if it is just the neurons in your head that is being effected). But using that same line of reasoning, then Then breathing is the same as energy because it too entails a physics change, an amount of work if you will.

 

You can push almost any analogy, but that does not mean that they are equivalent.

 

This is why analogies are a bad tool to use as a basis of an explanation. They create too many discrepancies.

 

It just won't do, Edthraran. See below for the relevant paragraph from ENERGY EXPLAINED, which you've forgotten about in your burning desire to discredit these essays:

I'm sorry, I though we were talking about what money is as this essay we are discussing is called "Money Explained".

 

What you seem to be attempting to do here is create an elaborate analogy and then use that as a further analogy in another essay. An analogy of an analogy is pretty thin for an argument.

 

Please do try to find flaws,

The fact that you have misunderstood what money really is?

 

I really do seek feedback.

From the responses to other feedback that you have done, it seems that you are only interested in feedback that agrees with you. You dismiss any feedback that disagrees with you. It is the feedback that disagrees with you that should be the most important. It shows where people are having trouble understanding you, or where you have made mistakes.

 

I used to have to train people to accept feedback. The hardest attitude to overcome was precisely this one. I tend to ignore feedback that agrees with me and instead focus on feedback that disagrees with me. Only through that kind of feedback can we learn.

 

Then when I'm a celebrity and RELATIVITY+ is in the physics curriculum, you can say I helped. You can be proud of your contribution to 21st Century physics. The alternative will be guilt and shame for the rest of your life.

 

Think carefully on this.

Ego tripping or what!?

 

You know what? You are already convinced that you are right and we are wrong, so nothing we can ever say will be of use to you as already in your mind we are an insignificant little blip.

 

With that attitude of yours, of what use is this discussion at all?

[insane_alien]

With that attitude of yours, of what use is this discussion at all?

 

maybe he planned it to be a nice little ego trip for him where we would all drop to our knees and hail him as a demi-god or something. or maybe he's just an attention seeker.

[MolotovCocktail]

who knows...

 

Personally I think he is just one of those people who wasn't very successful in life, or doesn't feel satisfied with it, and feels the need to make himself known in any possible way. In some ways I feel pity for the guy.

 

I tried to give him info and references as to why we know what we know, and we have repeatedly asked for him to give us experimental proof, but hey, if he doesn't want to listen to any of it, there is nothing we can do for him.

[ydoaPs]

I notice he's left this thread alone since he asked us to pwn him(post 12) and we did.

[Edtharan]

we have repeatedly asked for him to give us experimental proof

I would have even just settled for a thought experiment that highlighted the differences between his theory and currently accepted theories.

 

I notice he's left this thread alone since he asked us to pwn him(post 12) and we did.

In another thread he said he was leaving, so it might be that he has left.