Cash versus value


Don't let the politicos fool you
There's a difference between cash and value.

Cash is a way of keeping track. It's a polite fiction.

Cash has value only because people agree that it does.

Value can and does exist independently of cash.

For example, original animation cells from Disney films used to be sold in Disneyland for just a few dollars. Before long, people said, "Hey, Wait a minute!  These are works of art! They're worth MUCH more than that!"  Now an original early Disney cell is worth at least a couple of thousand, striking scenes from the best loved films can be worth more than ten thousand.

The value changed not because Disney raised their prices or because of an act of Congress, the value changed because people thought it was worth more.

Now value is a pretty relative thing. An animation cell is next to worthless if you are dying of thirst in the desert.

Roughly speaking, your value is the part of the economy that you control.  You don't exchange your labor for groceries, you exchange your labor for cash which you then exchange for groceries. If you sell your car, you don't expect to be paid in shoes.  You expect cash which you can then exchange for shoes and the services of a plumber to get that bathtub fixed with some left over.

It's easy to dilute value. Airlines did it with frequent flier miles.  They used to be worth something. Now they are barely worth the trouble to keep track.

Cash is just the mutually agreed on medium of exchange, value exists despite cashflow.

One group where I am active suggested replacing cash with cell phone minutes. That may be pretty practical, although right now we don't know how many cell phone minutes it takes for a new lawnmower blade.

It the dollar collapsed tomorrow, there's no doubt in my mind that within a week there would be hundreds of alternatives, and within a month there would be five or six really strong replacements with proven track records and national distribution.

The value would not have changed, just the medium of exchange.

That brings us to those interesting slips of paper we pass back and forth.

Paper money is not the problem.

The politicos attempting to set the value of the paper money, that's the problem.

With competition and a free market, the value would set itself. Then it wouldn't matter if
the paper money was drawn against gold, oil, frozen orange juice concentrate, or Star Wars collectable figurines.

Or all of them at once. Or something completely incomprehensible to us now.

The problem isn't with the polite fiction we call money. It's with the politicos and bureaucrats proclaiming that the dollar is worth so much or that the minimum interest rate must be defined by a government agency.

Most of our problems with money losing value are caused by government trying to dictate the value.

If Company Alpha issued oil certificates and Company Baker issued gold certificates and Company Yellow issued uranium certificates AND if all those certificates had to compete in trading exchanges like the stock market or the commodities exchange, the value of the certificates would be mostly self governing. As time passed, that value would be more and more stable.

The certificates are paper.

The paper is money.

But under the situation I've just described, the value is set by the free market based on what the certificates are drawn against, not some government edict.

Paper isn't the problem.

Government is.

— NeoWayland

Posted: Sun - November 16, 2008 at 03:33 PM  Tag


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