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Medium of Exchange

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  • Medium of Exchange

    I came across a thread that reminded me of Sapiens, but was soon deleted and I didn't save the rest of it.
    "I will spare you all the Creation myths and will go straight into explaining why you are working so hard and have so little to show for it.
    The world’s people are controlled through something most people call “money”. The problem is that most people don’t understand what “money” is and how it is used to control people.
    If you are a financial wizard, please put aside everything you have been taught by your Harvard, Yale, Wharton, etc. luminaries for a while and I will let you free from your gilded cage.
    “Money” is an idea that has different physical representations.
    You cannot touch a thought, but you can have a physical representation of that thought communicated through a symbol.
    The attributes of “money” have been discovered through trial and error and are not shared widely as not to impede the flow of human energy.
    The general characteristics of money as they are taught in Academia are that money must have “[[…} durability, portability, divisibility, uniformity, limited supply, and acceptability.]” and the functions are as a “[[…]Medium of exchange, store of value, and unit of account.]”
    It is very important for you to keep this rule in mind as you deal with money, “Similar things are not exactly the same thing.”
    I am not trying to insult your intelligence by writing this to the lowest common denominator, I am doing it so as many people can understand the system of control.
    The fundamental purpose of “money” is to ease trade between people.
    “Money” is an intermediary medium acting as a place holder for access to the ultimate service or thing desired.
    Some examples and illustrations are in order to help you comprehend it better:
    A rancher wishes to trade a cow to a farmer for some grain, here the end commodities have been exchanged without an intermediary (material, thing, or medium) and the transaction is made complete upon the exchange of its respective commodities. Notice, however, that the rancher has to trade the whole cow for the grain, the farmer on the other hand had the flexibility to divide his grain to the right amount that the rancher was willing to accept for the whole cow. For the sake of simplicity we will not examine any more trading scenarios of this particular transaction because it would introduce complexities that we are trying to avoid at this time.
    Next, let us add an additional actor into the previous example, you have a rancher, a farmer, and a blacksmith that wish to exchange with each other, except that there is no reciprocal demand between the parties. That is to say, the blacksmith wants meat, but the ranchers does not need blacksmith services at this time, the rancher wants grain, but the farmer does not want a whole cow, but wishes to have some tools made up by the blacksmith, however the blacksmith does not desire grain. The only way to satisfy the wants of all parties in this case is to set up a three way trade:
    Blacksmithtrades toFarmertrades toRanchertrades toBlacksmith.
    As you may imagine, this is not very efficient, and very complex to negotiate. The blacksmith may not be able to take the whole cow, so divisibility of the cow in one of the complexities, as the grain provided to the Rancher may not be sufficient to compensate the blacksmith for his services. You can imagine the complexity of this type of barter that would compound exponentially if you have hundreds, thousands, or millions of actors. [Side note: today in the age of instant electronic communications and fast computers such a system could be made to work, but more on that later.]
    (Now, I need you to pay careful attention as I introduce this subtle concept that if you fail to grasp it this whole exercise will have been a waste of time.)
    In order to simplify the complexity of transactions our ancestors discovered that they could introduce a universal element of weight and measures into trade which could serve as a reference index to value their transactions. For example, the Rancher, the Farmer, and the Blacksmith agree that a thing they will call a Yak would equal either 1 cow, 1,000 pounds of wheat, or 30 days of labor from the Blacksmith; and in order to avoid disagreement as to the quality of the cow it is to weight equal to the 1,000 pounds of wheat.
    Notice what happened there, we took an imaginary thing, a concept, gave it a name (Yak) and defined it in relation to two physical things (the cow, and grain), and an action (the labor). To make transactions even more efficient, we need a technological breakthrough called writing.
    With writing it opens up even more options to optimize and make trade more efficient, not only that, it gives the ability to shift trade from the momentary market to the future in time and place. Notice however that this shift in time and place cannot take place without first having an agreement between the participants to do so, which came in the form of customs and traditions.
    (Again, I ask for your patience as we move along these examples as we want to draw out any subtleties so our lowest denominator may comprehend the concepts we are discussing.)
    With the imaginary unit defined (Yak) and writing, now we can advance to carry trade in a more efficient and substantive way, not only that, we can shift transactions to take place into the future.
    Soon, we hit a snag, we find that we have no physical representations of our imaginary Yak, so if we wish to trade at another place far from our present market, we would have to take the commodities there at great hassle and expense. For example, if you were to find yourself about 100 miles from home at a fishing village and your lodging was to cost you a Yak, you would have to find a way to either deliver 500 pounds of wheat, a cow, or 15 days of blacksmith labor to the Innkeeper in payment for your lodging. However, if the physical representation of the Yak is defined as 1 Gram of Fine Gold with a stamp on it of $1Yak, all you would have to deliver to the Innkeeper would be a Gram of Gold to pay for your lodging.
    Now, pay attention as this is important, notice that the Yak is still an imaginary unit, all we did was to fashion a physical representation of it by using a gram of fine gold, assign it a symbol ($) to distinguish what the measurement in gold meant.
    Again, this would speed up trade, decrease inconvenience and facilitate the productions of all kinds of goods and services.
    But there is an insidious problem with fashioning a physical representation of the Yak that is not immediately observed, and that insidious problem is that since the Yak is an imaginary unit there is no limit to the number of Yaks, but there is a limit of physical representations of Yak you can create fashioned in Gold.
    Why is this a problem? It is a problem because Gold can be hoarded and put out of circulation."