Any given object has the same value to anyone at any time.If you don't have enough money for food and shelter, you are allowed to die, establishing a rather precise money "value" of a human life (typically poorly estimated as "minimum wage").The more money you have, the more goods and services of value you will be able to access.Failure of money as a proxy for value results in all kinds of distortions, including the illusion that Such needs are not subject to the rules of arithmetic. The system works because any two people will have wildly different valuations of any particular object at any given time. Value is based on what one individual perceives to be needed at a particular time. This flies in the face of both everyday experience and the way our "great ape" minds work. The assumption is that all things traded (or "owed") can be measured in money. Of course, "official" money has a serious drawback. Nations establish "central" banks and currency that is, in effect, an IOU from the central bank (the Nation). Quite naturally, we evolve into a system where most debts directly or indirectly are owed to or from a bank. Banks naturally step in to the void to "do the math" in a complex web of who owes what to whom. Gold certificates (IOU gold) replace actual gold for all but the smallest transactions. Gold quickly converts itself back into an IOU system. Money based on specie (such as gold) is actually a step backward from the natural system. Spend some time in a thrift shop or garage sale if you think the price of something is an intrinsic property like it's weight. These are not wild exceptions - in practice, everything is like this. For example, saving someone's life or finding a suitable husband for a friend's daughter creates a debt but not one that can be repaid in any ways subject to monetary calculation. We would see some difficulties in re-inventing money this way that essentially re-play the problems with its introduction in the first place. Magically, the economy boomed without "money". This apparently happened in Ireland during a 6 month strike of bank employees. If there were no banks and all cash magically vanished, we could instantly go back to an IOU-based economy.
#Zen time value of money skin#
They don't have a pile of cash in the vault to lend you - the money they lend is created out of thin air, or, if you like, from the skin off your back. The other important function of banks is to create money by saddling someone with an equal and opposite debt. One function of banks is to make it possible for you and me to consider our IOU's as equivalent even though they are owed by different banks or the government. Most of my "dollars" are actually numbers in a bank account, which record an IOU from the bank to me. If I give you a dollar, the Government owes you one more dollar and me one dollar less. A dollar bill is an IOU from the Government. All the great apes seem to behave in this way to some degree.īringing the discussion into the 21st century, we see that money is just a standardized form of an "IOU". It is embedded in a wider set of customs that add up to encouragement of behaviors that tend to bind he community together while discouraging freeloaders and cheaters. It's based on sharing, generosity and reciprocity between friends and neighbors. Such a system is not "communism", where all goods are held in common, no matter how and by whom they were produced.
If I'm in bad shape and have nothing to give in return, it would not be unusual for the fish to keep appearing at my door (perhaps even more frequently). Perhaps at some point, I'd mow your lawn or give you a basket of berries, or jam from my last berry picking trip. On the other hand, we would tacitly understand that this establishes a debt. It would not be unusual at all for you to show up at my door and offer me a fresh salmon "for free". Say, you go fishing and catch 5 nice big salmon. Rough standards might emerge (eggs for field work), but the underlying sentiment was "we're all in this together". We also have times, such as the "Dirty 30's" where, for technical reasons, nobody had "money" but everybody had more than they need of some things and/or spare time available to "work". This can be seen when "cash" is in short supply or in small groups (families, neighbors) who exchange goods and services without cash, even indignantly refusing cash when it would be perfectly sensible when interacting with a stranger. There is scant evidence that "cash" arose out of this situation. Otherwise, so the story goes, you and I would simultaneously want something somebody else had (say, you have more fish than you need and I have extra sheep). It turns out that I don't have much more to say about the "Zen of Value".ĭiscussions about how money originates often start with the fable that it evolved to facilitate trade and "store value". This was originally posted in its own "Zen of Value" blog but has been moved here for sake of integration and connection.
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