28 August 2013

Money Defined

Money - World Book Encyclopedia
Money is anything that is generally accepted by people in exchange for the things they sell or the work they do. Any object or substance that serves as a medium of exchange, a unit of account, and a store of wealth is money. To be convenient, however, money should have several qualities. It should come in pieces of standard value so that it does not have to be weighed or measured every time it is used. It should be easy to carry so that people can carry enough money to buy what they need. Finally, it should divide into units so that people can make small purchases and receive change.

A unit of money is the lowest common denominator for comparative valuation among many persons. Money allows the exchange of goods and services to be conducted in interregnum transactions. Something of value is exchanged for an amount of money, and that money is later exchanged for something else of equivalent value with someone else completely unrelated to the first exchange. That is the simplicity and beauty of money.

A History of Interest Rates by Sidney Homer, Rutgers, 1963
A study of primitive money catalogues some 173 objects and materials which in ancient and modern times have had monetary attributes in one or more places and at one or more times. Those most frequently mentioned include beads, cattle, cloth, copper, gold, grain, iron, rice, salt, shells, silver, skins, slaves and tobacco.

Commodities, some more than others, have an intrinsic value that is uniform, storable, divisible, and transportable. Cattle sufficed as money for large transactions, but obviously not smaller transactions since cattle are not divisible. However, cattle sufficed so well for larger transactions that the term pecuniary, which means 'related to money,' is derived from the Latin pecuniarius, meaning 'wealth in cattle.' What does and does not qualify to be called ‘money’ is not cut and dry.

For discussion purposes, all persons who use the same form(s) of money comprise a ‘society’. The valuation process increases in complexity as the number of different forms of money in coexistence increases, to such a degree that no more than a handful would most likely coexist at the same time within the same society. Which commodity transforms into or out of the category of ‘money’ is a Darwinian selection process determined by the Market.

The mere logistics of gathering, manufacturing and handling each form of money significantly shapes the culture of a society, impacting the way and manner a society interacts. All those who use the same form, or forms, of money have something in common with each other. Any change in the form of money will impact societal interaction as a whole and individually. When a society changes or alters its form of money, societal changes occur in proportion to the magnitude of the change or alteration.

11 August 2013

The Market

Market (Random House Dictionary)
A meeting of people for selling and buying.

Trading allows one specialty to be exchanged for another specialty. Each specialty has its own nuances and learning curve to overcome. Nobody can cover all the required specialties of life, hence the need for trade. Specialties develop economic efficiencies, which saves work, time, and resources.

The intrinsic value of each form of money is comparative to the intrinsic values of all other forms of money. All factors affecting the valuation of each and all forms of money are inclusive in the Market. The Market checks and balances the valuation of each form of money in relation to everything that is valued. The valuation process is comparative, variable, corrective, and ongoing in the Market.

The relational complexity of the Market is analogous to the complexity of the weather system. Modern weather forecasting is still limited in accuracy to less than a few days. In fact, the weather itself can significantly alter Market valuations by drought, flood, etc. and is therefore a significant component of the Market. The complexity of the Market is all inclusive.

Barter is the process by which valuations are mutually achieved. Whether one takes the price as is or haggles over it, it is still part of the barter process, with or without money. Money merely facilitates the barter process.

Transactions of categorical sizes, large to small, use different forms of money, with overlapping of all categories, which allows the Market to make comparative valuations among the various forms of money. All forms of money cannot be perfectly proportioned throughout a society, which creates societal distinctions based on the proportional use of each form of money. Historically, metals had been established forms of money long before written history. Large transactions used gold, small transactions used copper, and transactions in between used silver, all overlapping in use. The metals are still represented in today’s coinage, though not in substance.

05 August 2013

Minting Money

Any form of money can be minted into Monetary Units: packaged units of money of specific quantity and quality. The Monetary Unit is a reliable and convenient store of value, simplifying the valuation and logistical process of barter. The Minter guarantees the content of each Monetary Unit, such as a stamp, and keeps a portion of the minted material, called seigniorage, to cover the expense of minting.

The Monetary Unit is equivalent to a standard weight and measure. A meter is a fixed length, and a liter is a fixed volume. Once defined, the standard should never change. A changing standard is societally disruptive. As an example, if the meter or yard were to be redefined, the impact upon science, engineering, and the trades would be severely disruptive. In the same manner and same magnitude, redefining the Monetary Unit disrupts comparative valuations, negatively impacting the Market and Society.

The minting of money is very ancient in origin.

Moses, Prince of Egypt by Howard Fast (Fictional History)
Yet a sort of money there had to be, and among the Phoenicians pearls and precious stones became the units of trade and measure. The Sea Rovers of the Achaean islands used balls of tin and gold and silver, and the people of Hatti used the most precious metal man had ever found, iron, in cubit-long bars. Among the Egyptians, yardage of linen and sacks of wheat had become too cumbersome for the ever growing commerce of the City of the Ramses, and finger-rings and bracelets of copper, tin and gold were becoming set units of value. Nowhere on all the known earth was there a place where the Egyptian ring had not found its way, and there was no movable product of the earth that had not been unloaded at the stone docks of Ramses.

The legacy of the ancient metals as forms of money lingers today in modern coins. Such pieces of metal have been excavated in Troy, Asia Minor, Babylonia, Assyria, Syria, Egypt, and Iran. The first public building constructed by the new government of the United States, well before the Capitol or White House, was the Mint.