If you think about it, it's kind of strange.
Why do the pieces of paper we hold in our hands allow us to purchase other things?
Cultures in the past used shells, beads, and grain for money. Many in modern society find this notion almost laughable, but their practice of trading scraps of green Federal Reserve paper for goods not any less "silly."
Let's do a little thought experiment.
Imagine a group of people in the mountains, like here in Nagano (see video). Let's say this is "post-apocalypse." All state issued money has become worthless as the state has been effectively wiped out. The families residing here in the mountains burned all the money for heat last winter.
There is one small town which is isolated and in which there reside about ten families. The families are farmers and grow delicious, corn, soybeans, beets, pears, turnips, and apples.
About 5 miles away is another small town. The families here run small lumber mills, stone quarries, and are also skilled in metallurgy.
The people in town one wish to have tools and implements for farming, as well as building supplies, and the people in town two need food.
Of course, they could trade directly for these things, but that can become cumbersome and inexact. Imagine wishing to buy a plow for your field, in pears.
A plow is probably going to cost an awful lot of pears. So many, in fact, that one might not be able to meet the required amount of value in pears, or might not be able to easily transport them in an efficient and timely manner. Or maybe the plow maker accepts the value of pears, but doesn't need all those pears all at once.
One day, a little boy from town one is walking around in a field and he finds a snail shell glistening in the sun. The warm sunlight on his skin, the fresh morning air on his face, awakens a wonderful idea.
Aha! The boy runs home to tell his father and mother.
Pretty soon, people in both towns are scouring the landscape for the snail shells. There are plenty to be had, but not so many that any one family is buried in them to the point that they become worthless.
In much the same way as planet Earth is in the "Cinderella Zone" of just the right conditions for life to be possible, the individual-to-shell ratio is golden, allowing for scarcity, but not to the point of making the snail shell currency impractical.
Even as more people move to the towns, every year the snail shell supply continues to grow naturally at a rate suitable to this influx, and each year enough snail shells are broken or lost, to create a kind of "Cinderella zone" economy as far as these shells being suitable currency is concerned.
This is essentially the same idea that is behind any currency, including cryptocurrencies such as Bitcoin, Steem, Ethereum, etc.
People decide to agree something has value, use it to trade, and thus, it does. Any sound currency should follow the general economic principles of supply and demand, and scarcity (unlike the US Dollar or any other fiat flotsam passed off as "money") and be relatively easy to use.
The fiat currencies we use today (which are actually just monetized debt) are, in all actuality, worthless scraps of paper. They only have value because the government (monopoly on "legitimized" violence) declares they do, and people accept them because of this in market exchange.
Bitcoin gained its value when the first person decided selling two pizzas for it was worth the 10,000 BTC he received in exchange. Bitcoin in and of itself is just ones and zeros in a computer. Yet, add people agreeing to use it as a common tool of exchange in a market, and it gains value.
Humans value things, or do not value them.
As value in the market is subjective, what humans decide to value together has value, and what they don't, doesn't.
The human mind is one of the most powerful things on the planet. Perhaps the most?
We really can create money out of thin air.
Forget trying to grow some kind of money tree.
If the human mind can do this, there is no reason we go on honoring the blood-stained IOU's of the state. We have the minds, and they are afraid. We have the minds, and they, only the withered carcass of a long-since obsolete charade known as "government."
~KafkA
Graham Smith is a Voluntaryist activist residing in Niigata, Japan
Great video, Graham! I love the #bitcoinpizza reference (see popular posts there).
I see money as a ledger. A mechanism for keeping track of value exchange. The blockchain is the best ledger ever invented. Therefore, blockchain based currencies are the best forms of money ever invented.
That is a good way to look at it, Luke. I am always looking for new ways to look at these things. Much appreciated
Love the video, well thought out.
would love to Vote on it, but can't figure out how. :(
help?
Thanks a bunch. You can just press the little "up" arrow next to the dollar sign. Cheers!
Great explanation!. It really isn't all that complicated, even in a very complex economy. Money can be thought of as simply an accounting system, so what can be better than a transparent accounting system that can't be rigged by people having a monopoly on legalized violence.