The blog of photographer and musician, Kim Ayres

Do You Believe in Money?

Back in the early days of commerce, barter and exchange were the mainstay of trade. If you were happy to give me 2 chickens for a pair of shoes, we were both satisfied.

Unfortunately, I would probably have eaten my chickens before you needed a new pair of shoes, so barter had its limits, even among a large group of people with a variety of skills and products.

Consequently, a common currency became very useful. If we can put a value on chickens, shoes and even haircuts, then we can tie that value to something non-perishable, like gold (as opposed to, say, chocolate).

So for a long time, we could exchange our gold for goods and services, and vice-versa. The problem, however, was if we accumulated a lot of the stuff, a) it became heavy and a nuisance to carry around everywhere with us, and b) we became easy targets for thieves.

The idea, then, of having a safe place to put our gold and to carry a promissory note around with us, representing it instead, seemed to make sense. Paper money was now the way to go.

In fact, paper became so successful, no one ever needed to see their gold. If everyone believes the paper IS the wealth, rather than just a representation of it, then the existence of the gold is irrelevant, so long as everyone believes it is there. If a gold eating bug crept into Fort Knox and ate all the gold, life would carry on, so long as no one opened the door and looked to see if the gold was still there. The assumption would be enough.

But now we live in electronic times, where we have numbers punched into a computer to represent the paper, which represents the gold, which represents the barter ideal.

More than that, we also live in an age of credit, which means we are borrowing money we don’t have, with a promise to pay it back (plus extra) at a later date. So we are, in fact, taking from a future that doesn’t yet exist.

Because in an age of credit, belief is everything.

If you believe you will have plenty of money tomorrow, you will spend tomorrow’s money today. If you don’t believe you will have money tomorrow, you will cling on to what you have today and not let it out of your sight.

And if you don’t spend your money and your credit, then people providing goods and services won’t get their turn to use it and spend it, so jobs will be lost.

The entire economy of the Western World is run on trying to convince the public to believe money is real, and spending it will make them happy.

Watch the news, and listen to the language: the recession will pass once they’ve hushed up the story of the little boy who said the Emperor was naked, disposed of his body, and everybody returns to believing The Emperor really does have a fine set of new clothes.


Eryl Shields said...

I'm ashamed, if that's not too strong a word, to have to admit that I did believe I'd have money tomorrow. The really embarrassing thing is that I believed it even though I had plenty of experience to suggest otherwise. Not that I spent wildly or anything, I just didn't accrue when I had the chance. According to Nietzsche, and others, self deception is a survival trait so at least I have some excuse.

Jessie said...

I think you have been listening in on my conversations with my husband...just last night even (or was it the night before?) anyway, stop it and go spend your money :o)

Charlie said...

An excellent short history of the evolution of money, Kim, to the point where there is no such thing.

Eryl shouldn't feel too bad about not putting more money by. Martha had an investment program at her old job, in which she put 3% of her gross pay. Two days ago, I got the annual statement:

Opening value at 1/1/08 was $33,400. Closing value at 12/31/08 was $25,150. She put what she thought was money she earned into the account, but now she has what is called a "paper loss" of $8,250.

What has me baffled is where did that money or paper loss go?

Kanani said...

I remember seeing the housing prices skyrocket. Homes were selling for over a million and I kept wondering "What do these people do for a living?"

Of course, I was utterly naive. They were buying on wonky lines of credit. But it wasn't only the house it was the cars, furnshings --all sorts of things. I mean, this went so far beyond anything real. Posh vacations, expensive parties....the whole thing.

Now, the market has crashed. Many of the homes are for sale. It's kind of sad because for a short moment --they had it all.

karatemom said...

lol..loved this post..its very true...its also evident that tax time really is stressful for you isnt it..??

Anonymous said...

You are totally right. Virtual money, aka "earnings' on investments can't really be lost can it?

mighty jo said...

i really can't figure out how i want to respond to this post...i laughted, i i think im just going to go watch FIGHT CLUB & dream of a different tomorrow.

michael greenwell said...

“This planet has — or rather had — a problem, which was this: most of the people living on it were unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small green pieces of paper, which is odd because on the whole it wasn’t the small green pieces of paper that were unhappy.” (Adams, “Prologue”, _Hitchhiker’s_, 1).

Kim Ayres said...

Eryl - nothing to be ashamed of - it's what we've been given the hard sell about for the past decade or more.

Jessie - great minds think alike, and all that...

Charlie - it went into the pockets of the people who make money on other people's losses.

Kanani - I recently heard some TV economist saying that while it was true house prices had dropped by 40-50%, this just put themback to the same price they were 4 years ago.

KarateMom - that is probably the most insightful comment you've ever left :)

Starrlife - only if everyone else believes it is...

Mighty Jo - that's about the best praise I could possibly get for a post :)

Michael - ah yes. If it was a democracy, I would vote for Douglas Adams for God

Fat Lazy Guy said...

Money, money, money...
Always funny...
In a rich man's world


Mary Witzl said...

Great post, Kim, and you are so right: the whole idea is that the money is backed up by something. Theoretically it ought to be possible to go to Fort Knox and demand the equivalent of your $1 in gold dust... Lucky them that nobody does this.

The trick is to spend as much as you need to stay alive and happy -- and to not need very much to be happy.

Conan Drumm said...

Right, I'm a banker and I'm betting €10 that money exists.
Ok, I don't have €10 right now so I'm getting a loan.
My loan is approved because my assets are worth €10.
My assets are €10 worth of shares in the bank that is giving me the loan. It is also the bank that I work for.
Every other shareholder is also betting that money exists.
Something happened and now my shares are worth €0.10, and including interest I owe the bank €11.
But money DOES exist.

That's how it's been working in Ireland.

Jeff said...

Kim, Great thoughts. I have been looking at this alot of late. If you have not seen zietgeist the movie you should check it out online. Very interesting how the world banks are going to do us all in once again. Who are we all bailing out.....the banks. Nothing makes sense today which makes me feel nothing is real. Hang in there....


savannah said...

niall ferguson "the ascent of money"

no matter how things change they stay the same.


Can Bass 1 said...

How very interesting. Personally, I never had enough money to take a serious interest in matters financial. Honestly, the parsimony of the Church of England has to be endured to be believed. Btw, any relation to Pam?

Sandy said...

I'm quite sure if barter carried on, a pair of shoes would now cost 3 chickens and you'd only be able to buy 2 chickens with a pair of shoes. If you could make your living playing tunes (nice idea) then would you have to pop round to you local tax office to play every 3rd one.


Kim Ayres said...

FLG - I never took you for an Abba fan. My entire image of you will now have to be revised.

Mary - all suffering is caused by desire. To rid ourselves of suffering we must rid ourselves of desire. Very Buddhist :)

Conan - much like self confidence - it exists for some and is an enigma for others

Jeff - "There are no facts, only interpretations." - Nietzsche

Savannah - the world changes, languages change, cultures change, but human emotions never do

Can Bass 1 - welcome to my ramblings and thank you for taking the time to comment :) No relation to Pam so far as I know (at least no common ancestor for 5 generations back)

Sandy - how many chickens for a mandolin? And do they have to cross the road?

Jupiter's Girl said...

I have been paying for what I used up many years ago - and will be - well into the limitless future. Since I don't play the lottery - I try not to think of how there's not enough hours in the day to earn back what I've gotten from the instant gratification of yore. And if you call gas in my car and groceries in the pantry instant gratification, so be it. I was grateful for credit when my chips were down. I take full responsibility for my debts, though dreams of filing bankruptcy creep in at night. Oooh, to just walk away from that weight... Can't or won't.

Great post, Kim. I am sorry for those with disappearing pensions. That is weird.

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