What is money?

We’re used to thinking of money in certain ways. Coins with the Queen’s head on them; rectangular pieces of paper printed by a government.

Maybe even in asset forms: money is share certificates, a brokerage account, a pension plan.

All of these things are symbols that instantiate the core idea of money: something I trust enough to stand as an intermediary.

Basic exchange between people is barter. I can make a herbal tea that relieves your sinuses, you need the relief. You can fix my bicycle, I need that. We exchange my doctoring for your repair skills.

This is true whether we’re dealing with time spent doing something (labour) or with an exchange of products that resulted from labour. I have eggs (because I spend time keeping hens), you want some; you have bacon (because you spend time raising and butchering pigs), I want some).

But what if you don’t need what I have today? Are we stuck?

That’s where money comes in. It allows me and you to have an intermediary for exchange that frees us from needing what each other has at the moment. I can sell my diagnosis and herbal treatments, or my eggs; you can sell you repair services, or your bacon; each of us can exchange the intermediary to avoid having to find a match today.

Money, therefore, is trusted not because it says “Bank of Canada” on it — it’s trusted because I believe it will still be worth as much as it was when I received it, when I need it.

After all, if money depreciated to be of no value overnight, for instance (let’s say money came in the form of “a hot meal”, and once it cooled off it was worthless), it wouldn’t be enough of a intermediate storage vehicle to be very useful.

Beyond that, anything can be money (and a trip to a good currency museum will show you that many things have been, from pebbles and beads, to playing cards and cigarettes).

Gold and silver have often been money because they’re durable (a century-old coin is still good — I have an Edward VII Canadian silver dime here, worn from use but still as good as the day it was minted over a century ago), and, in the case of gold certainly, generally chemically inert as well. In other words, it doesn’t easily decay or physically change.

But anything will do — which is the principle of local currencies.

As long as there is trust between the users, it’s a money. This is why people will actually choose to use a local currency over their national one.

It’s not just about feel-good factors, or community-building. It’s about feeling that there’s some control.

That’s why Zimbabweans, in their recent inflation, struggled to find US dollars — comparatively speaking, they could trust them to hold their value. It’s why, during the Balkan wars of the 1990s, Deutsche Marks were prevalent in place of the dinars still in circulation (which weren’t inflating, but the wars meant that governments were under threat).

If you have a situation where the money supply of a community currency is rigorously controlled, so that there’s no “funny business” (i.e. it’s very trustable) and the national currency is undergoing all sorts of inflation, or money printing (such as Quantitative Easing), people slowly become even more willing to receive the local currency than the national one.

Indeed — as was seen in Brixton (a poor part of London) when the Brixton Pound came in, you have people receiving funds, from pay cheques and social assistance payments, in British Pounds, and trading them for Brixton Pounds. They may not have had much, but they felt more in control of the money used locally.

Some communities may fall back to old “junk silver” — non-numismatic but perfectly servicable — coins. Others may issue local currencies. But the trend to regain control is rising.

A dollar won’t be a dollar in the years ahead.

Advertisements

2 Comments

Add yours →

  1. The “dollar” has not been worth a dollar since the early 1970’s, meaning it has lost 90% of it purchasing power since that time. Local currencies such as the Brixton Pound and Berkshare(and soon the Bridgetown Buck) are backed by national currency, they will also lose purchasing power. It’s very hard to get consumers & merchants to understand or use anything other than units of national currency. This type of local currency is popular mainly because it focuses shoppers away from big box retailers like Tesco & Walmart and into the locally owned and operated stores. It does not compete with national currency and never will replace. Also, the term “money” is not properly used here. Money is what the government creates, legal tender=money. You say “anything can be money” NO, anything can act as currency. In prison cigarettes are currency, in Greece now the TEM is the local alternative currency, in some Pacific islands dolphin teeth are regarded as the best currency…none of these are “money”.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: