UK watch....

[Lord Beria3]

Superb conversation folks.

Regarding Biff, I have reached the conclusion he suffers from aurophobia. No logical or rational argument can deflect him for his irrational loathing of gold.

[biffvernon]

most of the gold being produced in the world is a BYPRODUCT of mining for base metals.

I don't know the numbers, perhaps you do? I think quite a lot of gold is mined in operations where the primary metal produced is gold. Let's stop all those ones and then the gold that gets incidentally mined with other useful metals can be used for baubles and electronics.

Steve, when you say money is not debt you're right, at least to some extent. It was true when money was cowrie shells or whatever and used as a token for trading and that still happens a bit. Perhaps I should have said that most money is debt, trillions and trillions of it. And it could all be so. We don't any longer need money as a trading commodity. It can be all transferable IOUs.

[UndercoverElephant]

most of the gold being produced in the world is a BYPRODUCT of mining for base metals.

I don't know the numbers, perhaps you do? I think quite a lot of gold is mined in operations where the primary metal produced is gold. Let's stop all those ones and then the gold that gets incidentally mined with other useful metals can be used for baubles and electronics.

Steve, when you say money is not debt you're right, at least to some extent. It was true when money was cowrie shells or whatever and used as a token for trading and that still happens a bit. Perhaps I should have said that most money is debt, trillions and trillions of it. And it could all be so. We don't any longer need money as a trading commodity. It can be all transferable IOUs.

I don't have them to hand, no. But I can tell you that the largest gold-producing mines in the world are copper mines.

[Little John]

most of the gold being produced in the world is a BYPRODUCT of mining for base metals.

I don't know the numbers, perhaps you do? I think quite a lot of gold is mined in operations where the primary metal produced is gold. Let's stop all those ones and then the gold that gets incidentally mined with other useful metals can be used for baubles and electronics.

Steve, when you say money is not debt you're right, at least to some extent. It was true when money was cowrie shells or whatever and used as a token for trading and that still happens a bit. Perhaps I should have said that most money is debt, trillions and trillions of it. And it could all be so. We don't any longer need money as a trading commodity. It can be all transferable IOUs.

I accept that the world, for the most part, now treats debt as money. However, that is where the problem lies I would suggest because such a system only works as long as tomorrow's economy is guaranteed to be bigger than today's in order to service the interest of the debt. This means, on a finite planet, all debt-based monetary systems will be inevitably collapse sooner or later.

We have to go right back to the basics in order to unpack all of the bullshit that has built up around our money supplies in the last century or two.

In the beginning there were hunter gatherers, In such simple economies of very limited goods and services, direct barter was more than capable of acting as the primary means of exchange. Let's say you produce arrow heads and I produce rabbit skins. I need arrow heads to catch rabbits and you need rabbit skins to keep yourself warm. Thus, we seek to exchange goods. After some negotiating, we arrive at an agreed exchange value of, say, 10 arrow heads to one rabbit skin. Over the other side of the hill, two other economic agents might arrive at a different agreed exchange rate. However, over time, a common exchange rate will evolve. Obviously, if the supply of flint or rabbits fluctuates in any given year, the laws of supply/demand will cause the exchange rate to fluctuate alongside.

Fast forward a millennia or so and these primitive economies have evolved to new levels of complexity. The range of good and services now on offer are such that it is not always convenient or easy to find someone to do a direct barter with. Let's say you come to see me to exchange your arrow heads for my rabbit skins, but I turn round and tell you I have enough arrow heads for the moment. However, I also inform you that I do not have any corn to make bread with and I would be happy to exchange my rabbit skins for some corn. As it happen you know of a man who grows corn in the next valley and he has been recently overrun with rabbits. Thus he will likely be interested in swapping his corn for your arrow heads. Sure enough, he makes the exchange and you had back to me to make the exchange for my rabbit skins in return for your newly acquired corn.

The crucial point here, is that the corn has no use value to you, but you know that it does have use value to other people (namely me). Thus, for the period of time that you hold that corn it can be legitimately regarded as "money". Or, at least, "proto-money" since its exchange value is still limited to only a few economic participants.

Over time, even this form of indirect bartering with proto-money would prove insufficient to meet the needs of an ever growing and more complex economy. At which point, people would have started to look around for a particular commodity that had the least intrinsic use value for the most people in an of itself, but which, due to its limited supply, lack of degradation, portability and divisibility would serve the purpose of being a universal means of exchange. in other words, while having little use value, it would have massive exchange value.

Humans have discovered and used several forms of commodity for this purpose over the millennia. Sometimes it has been salt, sometimes shells etc. Some have been more stable than others. It turns out gold has been used over and over again independently in many parts of the world because it has all of the above qualities in spades.

Whatever commodity/s it turns out to be, one way or another, in a contracting world economy, money is going to have to go back to being commodity backed. In a contracting economy, un-backed promises to pay at a future date are worth precisely shit as we are currently discovering.

[biffvernon]

David Fleming in Lean Logic :

MONEY
What do you mean by that?
For a long time before the invention of money in the form of coins, there were other forms of exchange, such as slaves, sheep, tools (spades, hoes, knives and fire-spits), and ingots, or at least lumps, of precious metal. The Chinese were using coins in the twelfth century BC, but they were made of base metal, which limited their use, in effect to small change. Precious metals began to be used in China as late as 1890.
The evolution to coins was gradual, but the decisive step came in about 610 BC. Both Lydia (part of modern Turkey) and Ionia (Greece) took part in this, and they were in touch by sea. It was probably Lydia that made the breakthrough, but Greece that, by using coinage as their main medium of exchange, changed the way civilisation works.
The classical scholar Richard Seaford gives us some guidelines for clarity on what money is. An exchange medium is money if and only if the following conditions are met, (1) its value lies in its ability to meet social obligations rather than as something for which there is a practical use; (2) it is easily quantified (counted in convenient units); (3) it is a measure of value, so that it enables (for instance) the value of a purchased good to be accurately represented if payment is made at a later date; (4) it has general acceptability as a means of exchange, and (5) that general acceptability applies exclusively to money; (6) there is fiduciarity – that is, collective confidence in the money, beyond its physical value (e.g. as a quantity of silver); (7) the state may be involved in its supply.
He concludes: “The pivotal position of the Greeks in world culture stems largely from the fact that the sixth-century polis was the first society in history (with the conceivable exception of China) to be pervaded by money. Coinage was invented towards the end of the seventh century BC, and spread rapidly in the Greek city-states from the beginning of the sixth. Did not the Babylonians, for instance, use silver as money well before that? On any sensibly narrow definition of money, no they did not.”

[JavaScriptDonkey]

I have to quibble about Steve's corn being proto-money.

Money is only money if it has no value other than as a marker for debt. Corn, even if it is of no use to me is of use to someone as corn. Money is only ever money.

You can measure wealth and debt in money as money is a means of measuring those things. Money can be created either by debt (credit) or industry.

You do £10 worth of work for me in order to buy £10 worth of food and I give you £10 to settle my debt with you.

Money is a lot like energy - when thinking about it it's probably best not to ask where it all came from.

[Little John]

David Fleming in Lean Logic :

MONEY
What do you mean by that?
For a long time before the invention of money in the form of coins, there were other forms of exchange, such as slaves, sheep, tools (spades, hoes, knives and fire-spits), and ingots, or at least lumps, of precious metal. The Chinese were using coins in the twelfth century BC, but they were made of base metal, which limited their use, in effect to small change. Precious metals began to be used in China as late as 1890.
The evolution to coins was gradual, but the decisive step came in about 610 BC. Both Lydia (part of modern Turkey) and Ionia (Greece) took part in this, and they were in touch by sea. It was probably Lydia that made the breakthrough, but Greece that, by using coinage as their main medium of exchange, changed the way civilisation works.
The classical scholar Richard Seaford gives us some guidelines for clarity on what money is. An exchange medium is money if and only if the following conditions are met, (1) its value lies in its ability to meet social obligations rather than as something for which there is a practical use; (2) it is easily quantified (counted in convenient units); (3) it is a measure of value, so that it enables (for instance) the value of a purchased good to be accurately represented if payment is made at a later date; (4) it has general acceptability as a means of exchange, and (5) that general acceptability applies exclusively to money; (6) there is fiduciarity – that is, collective confidence in the money, beyond its physical value (e.g. as a quantity of silver); (7) the state may be involved in its supply.
He concludes: “The pivotal position of the Greeks in world culture stems largely from the fact that the sixth-century polis was the first society in history (with the conceivable exception of China) to be pervaded by money. Coinage was invented towards the end of the seventh century BC, and spread rapidly in the Greek city-states from the beginning of the sixth. Did not the Babylonians, for instance, use silver as money well before that? On any sensibly narrow definition of money, no they did not.”

Well, I would agree with much with all of that since much of it echoes at least some of my own views.

[Aurora]

The Independent - 31/07/12

More dire figures hit Britain's hopes for recovery

Raft of bad news sees mortgages slump and credit squeeze on small businesses.

Article continues ...