Good ideas don’t require force. That describes the Internet, mobile telephony and cryptocurrencies.
What is money? We all assume we know, because money is a commonplace feature of everyday life. Money is what we earn and exchange for goods and services. Everyone thinks the money they’re familiar with is the only possible system of money—until they run across an entirely different system of money.
Then they realize money is a social construct, a confluence of social consensus and political force– what we agree to use as money, and what our government mandates we use as money under threat of punishment.
We assume that our monetary system is much like a Law of Nature: since it’s ubiquitous, it must be the only possible system.
But there are no financial Laws of Nature for money. In the past, notched sticks served as money. In other non-Western cultures, giant stone disks (rai, a traditional form of money on the island of Yap) and even salt served as money.
In our experience, 1) money is issued by a government or central bank (i.e. a currency), and each of these currencies is the sole form of legal money (legal tender) in the nation-state that issues the currency; 2) each of these currencies is available in physical coins and paper bills and digitally as entries in bank and credit card accounts; 3) our currency is borrowed into existence by the central bank or by fractional reserve lending in private banks, and 4) this currency meets all of the utility traditionally required of money:
- It is divisible into smaller units, i.e. a dollar is divided into quarters, dimes, nickels and pennies, or it is a small unit (for example, the Japanese yen, which is roughly equivalent to a U.S. penny).
- It is secure, i.e. everyone can’t just print or make their own in unlimited quantities.
- It is fungible, meaning all the units are interchangeable.
- It is easily transportable.
- It has a market value that’s easily discoverable, so buyers and sellers can confidently exchange it for goods and services.
But history informs us that money doesn’t have to be issued by governments,nor does it have to be borrowed into existence by banks, nor does every form of money have to satisfy all five requirements; it’s possible to have multiple forms of money which each serve different purposes.
In other words, our system of money is merely one of many possible systems of money. With the advent of digital cryptocurrencies, the range of monetary systems has expanded greatly.
We tend to look at money as value-neutral and apolitical, but as a social construct, it reflects specific social and political values. As I’ve explained in previous posts, our money is created and distributed at the very top of the wealth-power pyramid.
This feature of our money optimizes the accumulation of wealth and power in the top of the pyramid, and thus our social contract of money guarantees the concentration of wealth and thus rising wealth-power inequality.
To understand why, we need to start with money’s three basic functions.
As a general rule, money is:
- A store of value (i.e. it serves as a reliable repository of wealth);
- As means of exchange between buyers and sellers;
- A tool for recording transactions of credit/debt (i.e. it facilitates recording transactions and keeping track of credits, debts, assets and payments).
Modern-day government-issued currencies perform all three roles. The U.S. dollar, for example, acts as a store of purchasing power, a global means of exchange, and as a tool to keep track of transactions, debts and financial assets.
But in other social constructs, different kinds of money perform different functions.The giant stone disks on Yap (rai) are a store of value, and a means of exchange for high-value items.
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But the recording of transactions involving the rai is done in an oral-history ledger: the transfer of ownership of a particular rai is recorded in the community memory, and so the heavy 2-meter-high stone doesn’t have to actually move in physical space to transfer ownership. As a result, a stone rai resting at the bottom of the lagoon is a perfectly functional store of value and means of exchange.
The rai are quarried on another island, and not easily counterfeited. They are not necessarily interchangeable; the value of each one is recorded in the oral record. But since a rai isn’t divisible, or easily transportable, another form of money is used for day-to-day transactions.
The point here is there is no intrinsic reason why the three primary functions of money have to be satisfied by one single currency.
Nor is there any intrinsic reason why one form of money has to be equally tradable for all goods and services. In some cultures, certain forms of money hold symbolic value and are used solely for transactions of symbolic import, for example, as a wedding dowry.
We assume money has been stripped clean of symbolic or moral value, that it has no connection to anything but its current market value. Yet once again, there is no intrinsic reason why money must be stripped of symbolic or moral value. That our money has no symbolic or moral value is entirely a result of our specific social construct.
In cultures with forms of money that aren’t issued by a government, social consensus defines what serves as money and what functions it fulfills.
Which Brings us to Bitcoin
Bitcoin’s limitations are well-known: the blockchain/mining consumes vast quantities of electricity, and bitcoin can’t be scaled to replace all the credit card transactions in the world. But as noted above, every type of money does not need to perform all the functions of money.
Thus some commentators anticipate bitcoin being used for large, infrequent transfers rather than the purchase of consumer goods and services. Other cryptocurrencies may arise to fill that role.
I recently paid translators in South America with bitcoin. The transaction fee was about $4.50. Clearly, bitcoin functions as a means of exchange.
I made a few dollars of profit using bitcoin for transactions like this last year and I paid income taxes on those modest gains. Clearly, bitcoin is a legal financial instrument that the federal government accepts as the source of taxable capital gains.
For those who don’t know the situation in Venezuela, its government has destroyed the value of the nation’s currency, the bolivar, which traded at roughly 10 to 1 US dollar as recently as late 2012, when bitcoin was roughly $10.
The black market exchange is now over 98,000 bolivars to the US dollar, and one bitcoin is now worth over 1 billion bolivars. Clearly, bitcoin has acted as a store of value. The resident of Venezuela who traded 100 bolivars for $10 and traded the $10 for one bitcoin how has 1 billion bolivars or $13,000 US dollars.
Clearly, bitcoin is a means of exchange, a legal form of capital that accrues taxable capital gains and it’s a store of value. So by the conventional definition of money, bitcoin is money. It’s our right to think it a nonsensical form of money, just as it’s our right to mock the stone rai, and deride the packages of ramen noodles that serve as money in prisons. But our mockery doesn’t change the functionality of these forms of money.
No doubt the conventional wisdom in Venezuela dismissed the functionality of bitcoin in late 2012, just as the conventional wisdom continues to dismiss bitcoin’s functionality as money. So who was right, and who was wrong? The believer in the status quo who held onto his 100 bolivars as a means of exchange and store of value , or the independent who traded bolivars for bitcoin?
Good ideas don’t require force. That describes the Internet, mobile telephony and cryptocurrencies. Bad ideas require force: that describes the Venezuelan government’s management of its currency, and the central bank/central state form of money that dominates the global economy.
This essay was drawn from my new book, Money and Work Unchained, which I’m offering to my readers at a 25% discount ($7.45 for the Kindle ebook and $15 for the print edition) through Saturday, December 9, after which the price goes up to retail ($9.95 and $20).
Read the first section for free in PDF format.
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You can read more from Charles Hugh Smith at his blog Of Two Minds, where this article first appeared.
Buttons can be money if people agree to trade goods and services for them. But right now, we aren’t using just paper fiat money, we’re using military scrip (Federal Reserve Notes), so we really need to find something else (or remain enslaved, legally and literally in admiralty hell). Why are we using military scrip? Because we live in martial law venues which is the same thing as a military base – we have been conquered by the foreign and sovereign territory, Washington, DC.
So I’m all for a totally different way to trade but I won’t ever call it currency because that’s a martial/admiralty and/or maritime law term. Currency = current. Banks = river banks. And in this nautical system of fraud, we are given berth to give them the fruits of our labor via certificate = birth certificate. We’re under the law of the sea (the Holy See, and I wish I were kidding, it’s Roman Canon admiralty). The law of the land could come back (common de jure law) if everyone stopped feeding the “current” de facto system. My comments below in brackets.
“As we have said, the Federal Personal Income Tax is collected under a military venue within a martial law jurisdiction. Federal Reserve Notes are Military Scrip circulated in a Military Venue. The problem is the people don’t understand how the entire United States is in a Military Venue. … Under the Social Security Act  there was brought into existence Ten Federal Regional Areas. These Ten Federal Regional Areas [sounds a lot like FEMA regions, yes? That’s because they ARE the FEMA regions and they’ve been around nearly 100 years] are the same as a military base [gold fringe around the flag]. It is not unconstitutional to circulate “military scrip” on a military base as the base is considered to be a military venue.
“”Military Scrip” cannot circulate in the civil jurisdiction of the United States. To get around this Constitutional bar the Congress created Ten Military Venues called Federal Regional Areas. The problem the Congress realized was, while Congress could restructure the Government agencies into these Federal Regional Areas, the people could not be identified to be [see: jurisdiction, they tricked us into it!] within this Military Venue but by their own consent [a commercial contract].” Dyett v. Turner, 439 P2d 266 @ 269, 20 U2d 403 (*1968*) The Non-Ratification of the Fourteenth Amendment by Judge A.H. Ellett, Utah Supreme Court.
The solution was to create another Military Venue which would trick the people to voluntarily accept recognition that they are within a Military Venue. Congress solved this problem by creating the ZIP CODE.The “zip code” divides the United States into Ten Military Venues called “National Areas”. When a Citizen receives mail from an agency of the federal government (such as the I.R.S.), in the return address of the federal agency is the district within the regional area the letter is sent from, and on the address of the”Citizen” it was sent to is the national area [ZIP] in which he received the correspondence from the I.R.S.. In other words, the correspondence was sent from one of the federal regional areas [military venue] to one of the National Areas [another military venue]. “Taxing Districts” are established within one of the Federal Regional Areas, which places the collection of taxes under a martial law jurisdiction.
Military commanders can set up “taxing districts” in an occupied region. In the United States, the President (who is the Commander in Chief of the Military) has been authorized to set up Internal Revenue Taxing Districts, ever since the Civil War. [see 26 U.S.C. § 7621]. [So if you pay federal tax, you live in military occupied territory.]
“It is an established fact that the United States Federal Government has been dissolved by the Emergency Banking Act [Social Security Act], March 9, 1933, 48 Stat. 1, Public Law 89-719; declared by President Roosevelt, being bankrupt and insolvent.” H.J.R. 192, 73rd Congress in session, June 5, 1933. [So there is no real federal government, there is only a foreign power/corporation masquerading as it, with no real authority without some sort of contract.]
Joint Resolution to Suspend the Gold Standard and Abrogate. “The Gold Clause dissolved the Sovereign Authority of the United States and the official capacities of all United States Governmental Offices, Officers, and Departments, and is further evidence that the United States Federal Government exists today in name only. United States Congressional Record, March 17, 1933 Vol. 33.”
Why do we ‘need’ currency at all? Or is it that kakistocracies(States, Corporations, Banks) and those behind them need us to believe in it? The Americas indigenous peoples didn’t have currency systems until they were forced upon them, and their social systems were just fine. My point is, currency is slavery in what ever form it is in. Controlled by those whom wish to control others.
and that would include oneself, who stands up in the morning and goes to work, for money… the creativity and the reward part of the brain got nicely pre-programmed…
Currency is slavery. Period. Like States, corporations, i.e. kakistocracies, are contrived, made up by people and do not exist in nature. Same with currency. Many indigenous peoples had/have no currency based systems, thus no prosperity-austerity, wealth or poverty. Meaning: currency only exists because people believe they must have it to survive. Why? Because those at the top need it to control the population. You must have this piece of paper or shiny object to have anything. Phfft. The writer of this object uses the people of an island to make his example. But what about the America’s originals that had no currency? The original inhabitants of Australia still do not. How can they survive, gasp!? We need nutrients, water, oxygen, shelter, to survive. Not States, not corporations, not currency. The writer also didn’t bring up any extrinsic values to currency? Why not I wonder? There is none except for control. For those whom believe that electronic currencies are freedom; “The best form of slavery is when people believe they are free”. Do a genealogy search on the creator of bitcoin. He is a ghost. If he is a ghost, he was manufactured. If he was created, then it was done by Intelligence. Why? Where do the banking families and their States(kakistocracy) wish to go with currency? Electronic. Why? Absolute domination and control. How do they get people to go for it? Create it, create a market, make people think it is they that are in control. Mmmhmmm. That is how Intelligence works folks, subtly, softly, slowly, Delphi procedure, cue bono, problem-reaction-solution, etc. People are waking up to fiat currency, to the dollar et al. Solution? Electronic currencies. Problem-reaction-solution, with cue bono, create bitcoins et al crypto currencies. Some proponents say former bankers are creating block chains. Who says they are former bankers? Them? We have former bankers and corp workers in our and other governments all the time, it is called the ‘revolving door’. Have/are they doing anything that benefits the majority populations? No? Just these current bankers I suppose, for once in history. Also not being discussed, or brought up in this article is the barter system. I have apples, food, etc, you have blankets, clothes. Exchange. You have gardens, I have ability to work your garden for you for some food. Easy. No currency necessary. There is a store in New York City that does this. Do some work, get some food. No currency needed. If it can be done there, it can be done every where.
you ask: But what about the America’s originals that had no currency?… The answer: no way to build a defense against invaders. Can’t possibly keep up with technological advances of other nations/tribes who do employ capitalism. Face reality. Learn from history. “Do some work, get some food.” …and watch how easily you will be enslaved if that’s all you do. Don’t point to someone in NYC as “being free”. Please.
For the first time in who knows how long, blockchain technology allows for a society to bypass government control of currency. I think……………………………………… Time will tell.
Good ideas don’t require force. That describes the Internet, mobile telephony ….??? With the exception for the frequency and amplitude range of the emanated radiation, by those devices! That was/is NOT a good idea.