At Quora

What is the value of money, and why?

Tim Worstall, Journalist (2004-present)
Answered just now

If people will accept it as money then it is money. If they won’t then it isn’t.

That all sounds a bit simple, possibly even tautological, but it is the truth of it. Everything else that is said about money – government issuance, that it can be used to pay taxes, that’s it’s useful in transactions, that it maintains value and so on, they’re all details.

Humans have used butter, copper sheets, cowrie shells, pieces of paper, gold, silver, government promises and all sorts of other things as money. The one unifying factor is that other people in the same society – and often beyond it – regarded the things being used as money, that this thing, whatever it was, had value. So, it did have value. QED.

21 thoughts on “At Quora”

  1. The one rule which seems correct is that if too much is printed, dug up or promised, the money loses its value.

  2. To add to the list,a fact i learned from the quiz question,. what did the Cree indians use for currency? Answer:Pipes.

  3. What is the value of money?

    Whatever goods and/or services you can get for otherwise worthless tat.

    Why?

    Because all we really care about is the tat valuable good/service we want which others will take our otherwise worthless tat for.

  4. Mibbe I’m just old, but my gast is unceasingly flabbered at people attributing value to virtual internet money.

    Absolutely crazy stuff going on in the semiconductor market at the moment, with people unable to buy graphics cards for the purpose they were made for (to display graphics) because they’re all being hoovered up by mining consortia

  5. Likewise cigarettes.

    In the Skylab missions, the chocolate cookies in the ration packs became prized items and defacto currency between the astronauts.

    I read a wonderful description of money-free economies: one was the Soviet Union, where vodka was said to serve, another was the US Army, which is/was genuinely a barter economy: Radar O’Reilly’s long and complicated swap chains to source whatever ot was the 4077th was short of was not completely made up…or so it was claimed, anyway 🙂

  6. I’m similarly bewildered by cryptocurrency valuations, while at the same time aggrieved for not having bought a couple of bitcoin for the sake of it five years ago.

    My current crypto investment plan is as follows.

    A) Set up 100 twitter sock puppet accounts in the name of Elno Musk, Eloi Must, etc etc
    B) Buy $1,000 worth of dickcheezcoin or whatever
    C) Use sock puppet accounts to puff dickcheezcoin
    D) Cash in

  7. Vaguely related, but this, from the South China Morning Post, made me larf.

    “China’s central bank says a government-controlled digital currency is needed to ensure financial stability in case “something happens” to Alipay and Tencent’s WeChat Pay.”

  8. I am in discussions with a “name” to do something similar. Money is whatever people think it is. So, new coin, give lots away. It will have value…..

  9. “Humans have used butter, copper sheets, cowrie shells, pieces of paper, gold, silver, government promises and all sorts of other things as money.”

    You forgot squirrel hides, that used to be the Finnish “paypal”.

  10. @Steve: A friend of mine has just sold a 3 year old graphics card that was state of the art when new (so slow today) to a Bitcoin miner for 25% more than he paid for it. Utter madness.

  11. Probably a key aspect of money is it being ‘fungible’ – that is lots of things that are mutually agreed to be the same and so you don’t get which particular one of it you get.

    So whilst sheep can be bartered they can’t (generally) be money, you would care if I gave you a sick old sheep rather than a healthy lamb.

    Similarly a barrel of oil couldn’t be money, you would care if it contained sunflower oil, engine oil or crude oil, and you would care about the volume. However a barrel of brent crude oil can be used as money because there is agreement as to the size of the barrel and the chemical composition of the oil. Hence why there are futures markets where you can invest and trade in oil that hasn’t actually been extracted from the ground yet.

    Crypto-currency does meet the same criteria, the market has decided that some numbers fitting a particular definition (‘cryptocoins’) are fungible with others and have some form of innate value. In my opinion it makes the tulip bubble look sane (at least there you had the chance of ending up with a pretty flower which you could perhaps cultivate).

  12. A friend of mine has just sold a 3 year old graphics card that was state of the art when new (so slow today) to a Bitcoin miner for 25% more than he paid for it. Utter madness.

    I didn’t realise bitcoin miners had gone back to graphics cards. I remember when mining moved on from reasonably chunky but off the shelf PC hardware to using graphics cards, and deciding I couldn’t be arsed to mine anything. And then later noticing that mining was happening predominantly on racks of custom ASICs suspended in vats of liquid coolant, with a hardware generation lifetime measured in weeks before a newer faster board was needed to keep up. At the time, I expect the board makers were more profitable than the miners.

    So when did it shift back to commodity GPU hardware?

  13. We have an accidental collection of obsolete coins – Belgian francs, that sort of thing. I noticed the other day that the local hospital invites donations of them. OK: but what does it do with them?

  14. Some central banks will still take them. Coin collectors. At the extreme there’s always the scrap metal market…..

  15. I thought part of the point of Bitcoin was that there was a fixed upper limit on the number that could ever be mined? Is that still the case, and how long until that point is reached? If so the behaviour mentioned above could be due to miners desire to get the last ‘new’ bitcoins.

  16. @Andy ex Taiwan
    It will be more than a century before the last fractions of bitcoins are mined, perhaps in about 2140.
    The block reward, distributed roughly every 10 minutes to the miner who mines the latest block, halves about every 4 years (known as a “Halvening”).
    Currently the reward is 6.25 BTC, and according to the code the reward after the final Halvening will be 4.2*10-7 BTC. The last single bitcoin will therefore take many years to mine (I can’t be arsed to work out how long exactly).

  17. @dearieme
    “We have an accidental collection of obsolete coins – Belgian francs, that sort of thing. I noticed the other day that the local hospital invites donations of them. OK: but what does it do with them?”

    It is my understanding that those who issue such things, central banks or otherwise, consider it a matter of honour and trust that they will always redeem that which they issue (“promise to pay”) – so you can cash in your old outdated monetary units, though I may be being naive about this.

    Perhaps other readers can come up with examples where banks have or have not redeemed “expired” tokens.

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