Crossposted from The Stars Hollow Gazette
First of all you have to give up the idea that “money” has any utility except as a medium of exchange.
If you have a goat or a camel you can milk it, you can eat it and use the hide, AND you can make cute little baby goats and camels. On the other hand they eat and are smelly and ill tempered. Gold is shiny and pretty, non-reactive and a good electrical conductor, as well as being easy to shape and bend. You can’t eat it or use it for tools (try tightening a bolt with a solid gold wrench).
Now whether it’s Dollars or Gold or Yap Island Rais the essential concept of “money” is that it is something that you can trade for a goat should you happen to need one for milk or meat (not to mention those cute little baby goats) without the inconvenience and stink of actually being a goat herder.
Moreover if you’re weighing the economic advantage of camels v. goats (you can ride them and use them to haul heavy things, on the other hand they spit at you and bite you) instead of figuring out how many goat carts makes a camel load you can go to the magical free marketplace and find out how many carved stone doughnuts it takes to get one.
And it gives you an easy way to deal with fractional goats. How much is a a haircut worth? A pair of shoes? A suit?
Because of it’s adaptable and arbitrary nature “money” is a useful measure of the difference in societal desire between various objects. This is one reason inflation is economically useful, because it encourages investment in actual goats and camels that produce milk and meat and stinky little goats and camels rather than simply holding hoards of rocks you can’t eat. There are no cute little baby golds.
“Money” is a lousy store of value.
There is over $700 Trillion of ‘notional’ value floating around in the magical free market place. This is enough to buy all the little goats and camels for 30 years but that’s not a problem if you don’t need one right now so you can sacrifice to the gods and read the entrails for augury. Should everyone need ALL THOSE GOATS AT ONCE RIGHT NOW! there is literally not enough “money” in the world, even including camels. Store of value? Goats 1, Rocks 0.
It’s really all about convenience.
Nobody wants to smell like a goat herder and hard think make brain hurt. Especially pampered privileged Masters of the Universe types. They whine and complain not only over their pwecious wittle fee fees but are constantly surprised when the magical marketplace doesn’t conform to their ignorant expectations.
Ah, if only we had less uncertainty. And it was a bad lie, I’m taking a mulligan, it’s not that I’m a horrible golfer at all.
Dollar dominance is a historical oddity. It’s partly a result of the fact that after WW II we were the only economy left standing. It’s also a result of elite intellectual laziness and the fact that there are penalties for being the world’s reserve currency.
Felix TV: Will the US downgrade be a nonevent?
Felix Salmon, Reuters
Jul 27, 2011 12:50 EDT
The fact is that Treasury bonds are going to remain the global fixed-income benchmark, simply because there’s no alternative. There are $9.3 trillion in marketable Treasury securities outstanding – that’s five times the debt stock of triple-A countries like France, Germany, or the UK. And when it comes to liquidity, the gap is even bigger: daily Treasury volume of $580 billion is 17 times higher than the next most liquid triple-A security, UK gilts. And UK gilts are denominated in pounds, which is hardly a global reserve currency; they’re certainly not much use for, say, financial institutions needing collateral for their dollar-based triparty repo transactions.
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Or: “…historical oddity…”? But…but, we’re exceptional! Just ask Chris Matthews. If you can get a word in edgewise.
Fantasy of Wall Street completely blocked by giant piles of stone donuts. And one banker saying to another, “Maybe we went too far.” (I did say it was fantasy.)
A vague memory of a fad among the ditzy rich for eating gold leaf covered chocolates. So you CAN eat the stuff if you have the wherewithal. Ultimate consumption. All greed, no nutrition. Which, now that I think about it, is a not a bad metaphor for the oligarchy.
… stories told about money by the neoliberal economists.
What they need for their model is a “numeraire”, not real money institutions, because their model is a fantasy in which money has no impact.
In the real world, money is needed because all production cannot take place instantaneously ~ just as transport is needed because all production cannot take place at a single point.
Since it is in the interest of corporatists and lackeys of the entrenched aristocracy of wealth for people to be hopelessly confused, the fact that the Harvard Economics Department fairy tales are hopelessly confusing is rather more than less convenient.
In reality, the fact that the US$ is not a store of value useful for a peasant to store up their retirement in hidden boxes in various locations around the cottage is neither here nor there, since the actual money supply of the actual US has over the past three quarter centuries served its necessary role as store of value over the multiple overlapping production periods of different lengths quite well.
The last time we had serious trouble with our money working as a functional store of value was 1930 to 1932, in the wave of bank collapses that destroyed massive amounts of bank money ~ and bank accounts are, of course, the majority of our money supply.
The next time will be whenever we let the banks collapse again after deliberately forgetting the lessons of the 1930’s ~ but that would be hard to place at the feet of our monetary system, that it can do its job perfectly well, but we refuse to permit it to do so.