The Value of Money

One bill makes you larger, two bills make you small, and the ones that 
Uncle gives you aren't worth anything utall.......

I thank everyone for the explanations I read; they were all quite 
interesting, informative, and enlightening.  I think that asking about 
the origins of the concept of money supply is a bit like asking about 
the origin of God or the Universe:  it's just there.  My question is 
still unanswered in my mind, and I think the best thing will be to do 
some further research in the library:

Where did Alice get her money initially which she deposited in a bank 
for its safe-keeping and interim use.  It was printed by the 
government.  How did the gov. decide how much to "create" (print) and 
then assign a "value" to, from their gold reserve (back when it meant 
something).
Too much or too little currency in circulation, and you have either 
inflation or deflation; I know it's arbitrary, but how was an 
acceptably correct proportion established initially, beginning from 
when the US was established as a legitimate nation; how was the process 
started, based on what sort of relationship between the abstract units 
and the available "stuff" used as reference to base it upon.

The act of assigning abstract numbers to a concrete substance like 
gold:  someone made the initial associations and established an 
understanding among the intended users.  The procedure of using an 
exchange medium was familiar from centuries before.   The medium 
changed, but the system of exchange remained and has been expanded 
upon, until now it is very complex.  Really, now all that we mostly see 
are "money-numbers" attached to checks, credit cards, bank account 
statements, receipts, shares, etc.  I don't ever see the gold and if I 
exchanged all of my checking account for it, I would probably find 
resistance to its use from the inconvenience and danger of actually 
handling it.

This is now pretty well just an act of assessing value/worth based upon 
knowledge gained from the past relative to what everybody else has been 
doing, in terms of assigning any worth to any thing in terms of some 
number.  It all makes sense, now.

I understand this much:  there is some gold and other actual metal 
located in a vault, sitting there as a symbolic standard of wealth, 
worth, value.  Everyone stakes a claim to it, and they exchange that 
claim to others in substitution for something else (dog, rifle, gas in 
the car, baby-sitting).  These claims can circulate as fast as a 
computer can calcualte & transfer them, and that is all that circulates 
while the standard continues to sit in the vault, not being used for 
anything by anybody.  As long as you hold a claim to this lump of 
stuff, you're Somebody  -  a force to contend with in the Market Place. 
 All you have to figure out is how to *get* some of that Claim in your 
hands so that you, too, can be involved in the Circulation Business.  
Something which can be converted from a solid to a liquid so it can be 
re-converted back to a solid or something similar.  But you always want 
to maintain some Claim, some attachment, to that symbolic reference 
from which all money numbers derive their assigned worth.

It's easy, when you know how.  :>)

Oh, and. . . uh.. .what this has to do with cypherpunks is... uh . 
..uh. . .anarcho-capitalistic control of my destiny based upon 
fundamental comprehension of currency denomination & free market 
methodology with future potential within an encrypted digi-cash system?

Blanc

C'punks,

On Tue, 3 May 1994, Blanc Weber wrote:

> One bill makes you larger, two bills make you small, and the ones that 
> Uncle gives you aren't worth anything utall.......

This is brilliant.  I love it!  But . . .

> . . .  How did the gov. decide how much to "create" (print) and 
> then assign a "value" to, from their gold reserve (back when it meant 
> something).

The idea is to create a unit of currency whose value is convenient for 
typical transactions.  Some amount that is easily grasped by the average 
person.  Originally the US dollar was 1/20th of an ounce of gold.  That 
amount of gold, today, has the buying power of US$18, or so.  A bag of 
groceries more or less.  The amount of gold determines the total value of 
the money supply, but the number of people and transactions in which it 
must take part determines the number and denomination of bills and coins 
to be printed and minted.

> Too much or too little currency in circulation, and you have either 
> inflation or deflation;

No, no, no.  This is a common falacy.  It is the *change* in the amount 
of money in circulation that constitutes inflation or deflation.  If 
there were only one ounce of gold in the whole world, it could easily 
back any amount of economic activity.  Just the ratio of gold to currency 
would change.

> The act of assigning abstract numbers to a concrete substance like 
> gold:  someone made the initial associations and established an 
> understanding among the intended users. . .

There is nothing anymore abstract here than, say, using different systems
of weights to measure your gold.  1 troy oz. = 31.103+ gms.  Just like
saying, "US$1 is defined as 1/20th troy oz. of gold."  Nothing too abstract
about that. 

> . . .
> I understand this much:  there is some gold and other actual metal 
> located in a vault, sitting there as a symbolic standard of wealth, 
> worth, value.

Nothing symbolic about it.  Gold has value because people value it.  Just 
like potato chips and romance novels.

> Everyone stakes a claim to it, and they exchange that 
> claim to others in substitution for something else (dog, rifle, gas in 
> the car, baby-sitting).  

No, the owners own it.  The owners may exchange certificates of ownership 
for other property.

> These claims can circulate as fast as a 
> computer can calcualte & transfer them, and that is all that circulates 
> while the standard continues to sit in the vault, not being used for 
> anything by anybody.  

Not being used?  I thought the gold was supporting commerce.

> As long as you hold a claim to this lump of 
> stuff, you're Somebody  -  a force to contend with in the Market Place. 

Or other lumps of "stuff."  Property is wealth.  But in the Market Place of 
Ideas, for instance, other "currencies" are paramount, and so it goes.
 

 S a n d y