19 Comments
founding
Jun 29, 2021Liked by Brett Scott

Ciao Brett, thank you for this post. I love the way you explain things and I would like to share some thoughts with you.

First: in your story you can easily change the word "Bitcoin" with "Euro". So the camera is still costing 5k and still the price in euro, which depends on the exchange rate US$/€, will go up and down while the one in $ will remain fixed. At the same time on another online store based in Italy the price for the same camera in € is 4k and doesn't change. But the shop offers its clients the possibility to pay in US$ and this price is moving up and down while the one in € never moves. Can we say that nor US$, nor € are "money"? Obviously not. So what makes these two currencies "money"?

Second: back on Jan 1st 2001 in Italy we abandoned the italian lira and adopt the €. For several months or years we weren't able to think to prices of what we found at the supermarket in €. We normally translated those prices we read in € back in Lire and only after the translation we were able to take our decision as buyers. After a certain period we got used to prices in € and we were no longer obliged to do a mental translation. How this inability transformed in new ability effects our perception of € as money?

Third: in Switzerland few know that there are two currencies: the Swiss Franc and the Wir franc <https://en.m.wikipedia.org/wiki/WIR_Bank>. Wir franc is a complementary currency which exists since 1934. No other country accepts Wir franc but in Switzerland you are allowed to have banking account in Wir, borrow Wir franc, etc. Is Wir franc money and why?

Forth: Is it possible that the reason why bitcoin seems not money to you is because there is no sovran state which use bitcoin as its currency? And what about if a State tomorrow will announce that it's new currency is bitcoin? I mean it's only currency is bitcoin. Would this announcement trasforma bitcoin in real money?

Thank you very much again for the time you spend on your very smart newsletter.

Take care of yourself,

Marco

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Jun 29, 2021Liked by Brett Scott

You said elsewhere that you think the primary function of money is the standard of value function, which is what this article is fundamentally about. But money-as-we-know-it has the standard of value and medium of exchange functions fused. In days of old, minted coins didn't even have prices on them, because their value was determined my the sovereign, and liable to change. In this case according to your definition, even those coins weren't money, because pure money is a pure measure.

So I find it very hard to say much definitive about money because its very essence seems to depend on context. So I wouldn't call bitcoin money, but I don't have a problem with 'using bitcoin as money' meaning that I can settle debts with it and move it around.

In fact I've notice that every market could be said to have its own money. As Marco points out below, the Euro is just a barter object when something is priced in dollars. This is because a dollar priced object signifies a dollar marketplace where the Euro is not money. I can also imagine non-market contexts when money itself seems to be used more like an object for countertrade...

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Dec 8, 2021Liked by Brett Scott

Big fan of your stuff (obviously, subscriber here), but I feel that your countertrade example doesn't go deep enough. It hinges on a sort of collective psycho-social acceptance of one currency over another. You don't account for the real base of the financial system. It isn't fiat, which is just a number system (Roman, Arabic, etc). Currency at its most basic level is an agreement on the most accurate way to account for the transfer of time. The fungibility of time and its sharing is the key to the entire economic system. The single biggest problem with any scarcity-based currency ($BTC, Gold, whatever)- its inflexibility. Imagine a financial response to the pandemic if the only monetary tool was gold. Catastrophe. While kinetic time declined, potential time increased, and the fiscal and financial responses created a cooperative load balancing. Example: Farsighted logistics companies frequently pay trucks to run empty between two cities, just to maintain future capacity. With a finite monetary base, future capacity can't really be funded. Especially if it's a decentralized system. The various holders of the DeFi currency would've demanded higher interest rates to compensate for risk! This would've destroyed the economy. Crypto has a potentially potent role. Arguably, it's a far, far better store of value of gold. Why that's so is a longer, more controversial convo.

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Hi, Brett. I came with another argument how to show that money create environment which prices goods and services. If there is some slight mistake on the banknote of some kind, you would still be able to pay with it like with other money. But when collectors find that there is some rare issue of banknote with some mistake on it, they would immediately buy that for more than the nominal cost of banknote is.

So you can either pay with it while the banknote remains part of the environment ascribing the value to other goods, or you can "rip" it from the environment, make it "luxury" good and sell for much more. Or maybe speculate on it. And this is the difference between money and goods. I know you know the difference, but this possible duality due to mistake really helped me make sense of how it works.

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Jun 30, 2021Liked by Brett Scott

Great piece!

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Interesting set of examples and valiant effort.

A much simpler way to explain is that cryptocurrencies are nerd art or collectibles.

Art and/or collectibles have value but they aren't currency.

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First off, thank you for your work, you're incredibly generous with your knowledge and I appreciate it. I do have some quick questions for if you have the time/inclination. Are assets like Dai or USDC still primarily counter-tradeable collectibles or are they comparable to bank-money/deposits/poker-chips? If they are just collectibles, is this solely due to their function(they aren't used to compensate labor or buy goods within a closed system) or is there something about the form of these Cryptos that prevent their use as bank-money? How about CBDCs like the digital Yuan, are these state-money, are they still collectibles, or are they a different thing entirely? Lastly, In the States there's some movement on the left(though mostly just talk) to push to allow our postal service to offer bank services, have you written on this? If not, do you have an opinion on postal banking? Can banking be a public utility in the same way that cash is or is this a terrible/impossible idea? Again, thank you so much, your work has made this topic so much more accessible to me.

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