[Heal the Bern] What Makes Money Valuable?

in healthebern •  3 years ago

This is the first video in a series I'm making called Heal the Bern -- a series dedicated to presenting economic concepts in an easily approachable way

In this video, I discuss what makes a substance valuable as a currency, and dig into some of the implications this has on social issues and policy.

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I will pay 20 STEEM for a transcript of this video; or 30 for synchronized subtitles. If you'd like to do it but need a better offer to make it worth your while, drop a note in the comments and I'll consider it. :)
[Edit] Two people have made transcripts and subs, so this offer is no longer available. You can see the subs/transcript on the video page on youtube, just hit the More menu and select Transcript

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what I find fascinating is too look at how prisons inmate create their own currency when there is no US Dollars around (cigarettes, ramen noodles, etc.)

The fact that you use something as a currency subsidizes somebody to produce that currency.

It's wise to pay attention to what we are subsidizing with our use of a certain commodity as a currency.

These are very insightful words.

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Exactly. That's really the point of this video, is to stress that idea. We don't often think about the externalities involved when we choose to imbue a currency with the value of our labor, but those externalities are very real. In the case of Federal Reserve Notes, we're funding perpetual war simply by accepting their dollars as payment for our valuable work.

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The interesting question is this: do we subsidize the FED when using Steem Dollar?
I guess not. We take the benefit of a ubiquitous currency but skip the evil subsidizing bit - am I right?

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Right, because demand for SD does not increase demand for FRNs. If anything, demand for SD decreases demand for FRNs. An SD is a dollar worth of debt from the holders of Steem Power. A FRN is a dollar worth of debt from US income taxpayers.

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When using LEGAL TENDER DOLLARS, a person is subsidizing the LEGAL slavery system.

The words "THIS NOTE IS LEGAL TENDER" on a dollar note mean "THIS PIECE OF PAPER IS AN UNCONDITIONAL OFFER FOR LAW".

If you accept these dollars, you accept to be bound by the legal acts, codes and statutes of those who back these dollars.

You've probably heard these 2 before : "The only vote that counts is how you spend your money" and "The consent of the governed" ?

Well if you "vote" for/by using legal tender dollars, then you consent to be governed by the laws of those who back those dollars... And we all know what those dollars are backed by : The legal system most of us are sick and tired of.

id feel bad taking your 30 steem and spending 8 bucks at rev.com. so ill just let you know. rev.com will transcribe and caption it for you for a buck a minute. theres also a bunch of similar options on fiverr, iirc.

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I should also point out that I'm preferring to pay Steem rather than FRNs, for reasons alluded to in the video. :D

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ill be perfectly honest... im in the proccess of reinstalling and i don't have the sound card working yet. I noticed the post because i follow you , but i havent actually seen the content yet.

If its an anarchist take onthe virtues (or lack thereof) of FRN's im sure ill consider it an abomination, but ill give it a look anyway. :-)

Im curious as to how you differentiate steem from the federal reserve.

EDIT: ok i got it up on my phone watching now.

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Im curious as to how you differentiate steem from the federal reserve.

I've actually already got that on my list of videos to make! :) I had to make this (and a few other) videos first, though, to lay the groundwork and prerequisite understanding for that video.

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Haha, that's what we call arbitrage, my friend, and it's completely fair. But a couple of others have already done it now, so I'll pay them and perhaps use something automated in the future.

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@sigmajin - why would feel bad. If you know sth that other doesnt that is your leverage. That is why people pay for sth they dont know or for the information about. Look you could take those 30 Steem and add value to it telling @modprobe that he can use next time if you want to.
It's really that simple. You know how to cook and you let ppl pay for that. For you its simple for them not.

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and one more - maybe @modprobe want to save his time and dont want to do this by his own - time is money :) I dont know what drives @modprobe - but I feel bad when some would feel bad about taking money for something he can do what others dont or want

OK my take: The federalal reserve is actually 12 banks, not 1 bank. Their ownership governance and oversight is a matter of public record.

I get that you probably understand the difference, but you're drawing a lot of parallels between coommodity money (which obv the USD is not) and fiat money that don't really hold up. As should be obvious from the name, fiat currency is valuable because of government fiat (which someone already mentioned).

The fed can create money kind of, but they can't really without commerical banks and borrowers. That is to say, they can only create money to give it away and pump it into the economy. its not like the chair of the fed has a scrooge mcduck style swimmin vault and some or all the money they create does (or ever could) go there.

Part of the reason people don't understand this is because they confuse currency with money. FRNs are currency, but its not really correct to call them money. It never has been.

Saying the federral reserve creates money by printing FRNs is like saying that a valet can create cars by printing valet tickets.

To really understand the dollar, you have to understand that there is the dollar in currency, but that it is also backed by a real dollar in money.

A real dollar isnt made of paper, it just exists in a ledger as a bank balance.... why does the grocer accept your dollar bill? its not because of force, or value perception or anything except the fact that his bank will take it. Why will his bank take it, because the federal reserve bank will take it and give him a real dollar (a dollar in bank balances) for it.

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The fed is 12 banks in principle, but all 12 were created and have always been controlled by the same group of people. We don't know exactly who those people are.

They have no transparency (why don't you try to go into a Federal Reserve building sometime? You can't), they are not part of government (government is beholden to them, as government uses their money and is not willing to rock the boat and jeopardize their privilege of unlimited inflation), and we know remarkably little of their inner workings. As with everything in the modern financial sector, they say one thing is happening, but if anyone ever tries to verify or audit any of that, they are silently ignored (or silenced and ignored).

FRNs have no backing whatsoever. Originally they pretended they were backed by precious metals, but that was never real backing as it's always been a fractional reserve. They claim they have still have gold reserves, but overtly deny that anyone may redeem their notes for that gold, and they haven't let anyone see this gold in decades. Does the gold even exist anymore? There's no way to tell for sure, but if it does, there's no good reason they won't let anyone check it.

We haven't had real dollars in a century. All we have is FRNs, which is like a carton of milk without the milk in it.

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FRNs have no backing whatsoever. Originally they pretended they were backed by precious metals, but that was never real backing as it's always been a fractional reserve. They claim they have still have gold reserves, but overtly deny that anyone may redeem their notes for that gold, and they haven't let anyone see this gold in decades. Does the gold even exist anymore? There's no way to tell for sure, but if it does, there's no good reason they won't let anyone check it.
We haven't had real dollars in a century. All we have is FRNs, which is like a carton of milk without the milk in it.

The milk is bank balances. Its been that way for 50 years or so. You might think that balances in an electronic ledger is sour milk (so to speak) but thats whats there is. Its really no different from a crypto currency.

I actually didnt know they still claimed to have gold reserves, thats kind of crazy if true. I can't imagine what relevant justification there is for them to keep precious metals on hand.

history trivia -- when was the first us paper currency printed? this surprises people a lot. I think the history of the "greenback" and where the notion of a dollar bill comes from would be an OK vid for your series.

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The milk is bank balances.

Bank balances of what, though? Of FRNs! So the 'milk' is just another empty carton. It's just cartons filled with cartons. There is no milk, anywhere. Fundamentally, the only thing backing FRNs is debt, which is to say, nothing at all, just an empty hole where they pretend something will eventually be. But government debts are never intended to be paid off (there is no asset with which to pay it), so that hole will always be empty, growing without bound, until it simply implodes.

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Precisely. At the end of the day, it's nothing but an entry in the fed's ledger, which is backed by nothing. It's an empty carton, there is no milk.

replying here due to nesting. just like a bitcoin. Or an ether. or a steem. but there's a video about crypto coming up, so ill let you address that there.

regardless, That entry on the Feds ledger is still a thing. It exists. It can be evaulated according to your five characteristics of money.

And these ledger enteries have all five of the the characteristics you discussed.

they are divisible
they are fungible
they are widely accepted
their supply is predictable
their creation subsidizes an activity. The fed puts dollars into circulation by lending them to commercial banks, which lend them to businesses to conduct commerce.

These ledger entries can take the pepsi challenge and beat gold or silver on any of the criteria for what makes something a good unit of money.

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no of dollars. money that exists on an electronic (but not distributed) ledger, just like steem or bitcoin (except centralized). WHat, did you think the crypto guys thought of it first? They didn't. All they figured out was how to make it work without a central trusted actor. A FRN is not a dollar. Anymore than a valet ticket is a car. Or those absurd coins you always see pictures of are bitcoins. The real dollar simply exists electronically.

When you give up your real dollar at the bank (the dollar of balance in their electronic ledger) the bank gives you a green valet ticket, that has no value except for the fact that somone can later go back to the bank and present it in exchange for that electronic balance that you gave up.

People deny this, even finance and economics people, but what replaced the gold in the gold standard wasn't fiat currency, it was tick marks in an electronic ledger.

The grocer takes a $100 bill because he knows he can exchange it for something that he considers valuable (a $100 entry in an electronic ledger at his bank). His bank accepts it because they know they can exchange it for a $100 entery in the fed's electronic ledger.

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His bank accepts it because they know they can exchange it for a $100 entery in the fed's electronic ledger.

Precisely. At the end of the day, it's nothing but an entry in the fed's ledger, which is backed by nothing. It's an empty carton, there is no milk.

I like the question - what are you subsidizing ? What kind of system. That is why I do my best to switch to DAC and crypto. What worries me most in this are all sort of scams. People who are using the new idea to make money not to evolve.

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Well, if you're wondering what the creators of Steem see as its long-term purpose, @dan / @dantheman has conveniently posted it for us: https://steemit.com/steem/@dan/steemit-s-evil-plan-for-cryptocurrency-world-domination

Great video/post @modprobe! i was just thinking about crypto-currency values the other day, and this video really helped me make sense of it.
please keep posting fly as fuck content!

... considered half as my horrible...

There is a funny error in the transcript at 2:22.

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Haha, thanks. Fixed! :)

Good Talk @modprobe! You have a good radio voice.
How do I send you subtitles? Or transcript?

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You should be able to add them directly on Youtube. In the More menu under the video, hit Transcript and select Add Subtitles/CC in the language dropdown.

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Adding now being submitted for review. Cheers!

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Good stuff. Paid! :)

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Thanks Very Much! Anything I can help with that within my reach please don't hesitate to extend offer I will be more than happy to try and help!

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Update. Subtitles completed. It may be waiting to complete fully upon review but they are on now.
(J.C) SomeofeverythingalotofLove
My Channel for caption added

So I whipped up a transcript for you, where should I send it?

Please post if you already have them submitted by someone else, Thanks!

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You should be able to add them directly on Youtube. In the More menu under the video, hit Transcript and select Add Subtitles/CC in the language dropdown.

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Thanks @modprobe, but it looks like there is already an automated subtitle on the video. Also, I only wrote up the transcript (not supported for English), so I didn't time it out to create a subtitle file. When I tried to upload it I get "Unknown subtitle file format". No worries... Still liked the video and think its something everyone should consider - even in crypto. Cheers!

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Yeah, it appears the automated subs are better than I'm used to. I'm impressed. Anyways, I paid you anyways. Thanks! :)

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I actually figured it out and I'm half-way done! Thanks for the payment, I was actually just going to copy-paste it up there piece meal to see if it would be a better option than the automated version. Sometimes the automated reads like 70's kung-fu flicks subtitles.

@ modprobe , This is a great post. I like your break down of what makes currency valuable. I also want to say thanks for the insight of asking "What are we subsidizing when we use an FRN".

I don't like the current system, because it's shown it self be corrupt. Why would I continue to subsides this?

I continue to subsidise this because it's the system that I'm use to. I believe it's the concept of ubiquity that casues me to be hesitant about Steem Dollars. I have to convert my dollars through middle men to get them and then convert them again to get them back. With each step it takes to convert my money, it causes friction.

Being new to crypto currency, this is my hang up. This is my third day on Steemit and I'm working to get an understanding of it.

Thanks again for your post.

wow I clicked upvote and it increase about 50$

Love the videos man, you are 100% right people cast their vote buy the commodities they choose, by the money/currency they choose, where we choose to eat, what we choose to buy. That's the true vote that's cast by the people.

One thing I'd like to point out, I don't know if you're aware of the distinction or not if not and maybe for the benefit of whoever reads the comments there is a difference between money and currency.

I would like to hear how you would define

  • money
  • currency

What is the difference?

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For the purposes of this video, the two are interchangeable. Some people distinguish between them (see other comments here), but I don't want to make that distinction since I want my videos to be easily approachable to people who don't spend their free time reading/thinking about economics. :)

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Got it and thats fair. I would be interested in a video/article where you go into this. Understand if you are not interested because of the above.

Fabulous lecture! I learned a lot!

My request to you is to never shave your fabulous beard.

The economy must be economical, but unfortunately this is not so

Interesting. I love finance.

Currency has value because governments say it does...

On a side note it will be interesting when the dollar is no longer the worlds reserve currency... America will no longer be able to be "the bank in monopoly" and it will have to play by the same rules as everyone else.

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Indeed, changing the world reserve currency will be interesting. :)

I would say that currency has value because it's incredibly useful in economies of scale (when we can no longer keep track of everyone by reputation alone); what governments tend to do is threaten to hurt people who don't use their preferred substance as currency. So it's not that currency has value because governments say it does, but that governments use threats and force to control which currency people make valuable.

I'm planning a future video which addresses what makes one currency valuable as opposed to another, when both meet the criteria outlined in this video.

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I believe that gold for example is listed as an official currency by some state governments, yet if I went to pay for my groceries in grams of gold that would be a no go.... is that a business decision on the store's part or why is it that gold is not used in transactions even if you want to?

This is a little blurb that I use to help people grasp the underlying idea of currency

If I have $1, but I am the only person in the world, does that dollar have any value? No, you minus well burn it for warmth. Now, say there are 2 people in the world. Me and Chris. If I have $1, and Chris will accept that dollar in exchange for a slice of bread. Then, that dollar becomes valuable. So in essence "money" is the faith that the collective majority of people have in it.

Hope that helps.

forgive the typos
Hello all it’s Nathan again in this video I want to talk a little bit about currency and economics and specifically addressing what makes money valuable so obviously numerous substances have been used as money throughout history and there are lots of lots of implications from what substances you use as money and so I want to start this will be the first video in a few videos I make that really dig into this concept which I find incredibly interesting and also incredibly important to understand especially where other issues like policy-making and social good and how do we make this world into the world that we all want to live in all of these things there is definitely an economic component to them and a very large component of Economics is currency and so that's why I want to address this topic so the first thing I want to talk about it what makes currency valuable so the most basic level of this is that there are certain properties that we really like to have in a currency to the first of these would be divisibility let's talk about gold for instance if I've got a big gold nugget right and I cut it in half resulting halves are equally size each of those is exactly half of what the original gold nugget was worth no value was lost in the cutting so that's called the visibility and that's a property we really like the contrast that with diamonds for instance if I have a big diamond and I cut that in half then the two halves or word for far less than half of the original Diamond was worth more a half of the original worth of the big duck so you lost an enormous amount of value simply by cutting it in half we prefer substances which are still considered valuable even though they are half as big they're considered half as much as elusive as the bigger one and so that's the visibility another another probably would be fun to Billy which sort of follows from the visibility if I cut the big gold nugget in half and there's two gold nuggets now and I have one and you have the other than if we swap those across neither of us gains or loses any value it break completely even and that's basically it means that given two units of the Cross and no value is gained or lost to either party and part of that is just that you can find two equivalent units again if we look at diamonds diamonds and it is incredibly difficult to find two diamonds that have exactly the same value and even if you can it's a lot of work but they are exactly the same Really disrupt the economy because there's so much more going through all of this up so it's got a relatively predictable Supply and an implication of that is I want to point out an idea which I have not seen anyone else to discuss which is the all currencies subsidize something all currencies pay for some action simply because people are using it as a currency now in the case of gold use of gold of the currency subsidizes gold mining it's expensive to pull gold out of the ground and refine it and according to them actually get people get that out there for people to use as currency why do people bother doing that well because the gold is valuable there for the fact that people are using gold as currency means that they are as an economy subsidizing the pulling of gold up out of the ground in the case of dollars the creation of dollars is something that most people don't think about but that's controlled entirely by the Federal Reserve and they don't have any formal rules on when they get to create dollars what they create dollars for how many dollars they can create and I will argue this is a huge problem because we as an economy by using dollars are subsidizing the Federal Reserve to do whatever the heck they want and we don't know what exactly they're doing more than that we don't even know who is doing it we don't know who owns the Federal Reserve a private bank it happens to be the bank that controls all of dollars but it's a fact we don't even know who the owners are and that's the point I want to make is using currency or the fact that you use something is currently subsidizes somebody to produce that currency and you are paying them to do it now you as an individual or paying that much but collectively across the entire economy we're paying a great deal for them to do things and I think it's so it's wise for people to pay attention to what the what we're subsidizing with our use of a certain commodity as a currency and that really plays back into those social issues that I talked about at the beginning of this video and because if you just don't want to think about how currency words when it gets created when it gets destroyed and as an indication of that what are you subsidizing when you were willing to accept this substance is currency for your work if you don't want to think about that that does not change the fact that your actions have an effect and that you are in fact subsidizing certain activities and so I encourage people to question what exactly am I such that I think when I accept something as a currency so that's the point I wanted to make in this video let me know in the comments see if you if you have any interesting thought to come from this or any remarks and especially let me know if you have any requests for other videos you would like me to do in the future thank you for watching and have a great day

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My window wasn't large enough to see the edit. My bad.

If I could add, I think the regression theorem also explains how money gets it's value or even becomes money in the first place. Money, sound money at least (unlike fiat dollars as you point out) starts as a commodity on the market that is usually more "saleable" than other commodities. Meaning, these goods are accepted for a wider range of other goods (so ubiquity as you point out). It gains this because economic actors see that if they collect that commodity, they can trade it for a wider range of commodities they may desire. But this means that money must have a use or value outside of being a medium of exchange to a wide range of people. So salt has other uses outside of a medium of exchange. Gold, silver, and other metals like platinum also have industrial uses outside of being money. So something also needs a use or value outside of a use as a medium of exchange. US dollars fail at this as well.

Enjoyed the video though. You should do books on tape man.

All I can say is you better start stacking some real money. The dollar will collapse and the empire will crumble soon.

If you need to put some french or spanish translation in your video, keep me in touch. ;) Have a nice day!

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Duly noted. If I find that there's a demand for french or spanish translations of my content, I'll reach out. :)