this post was submitted on 08 Feb 2025
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One of the main things I learned during my economics degree is that money is fake.
To quote Brian Brushwood, "It's just pieces of paper that we believe in."
U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion
Was not expecting to see Street-Fighter's-Guile-as-a-magician quoted in this comment section... PR at all really. He's come a long way since Scam School, I guess.
The Modern Rogue was fun while it lasted.
The reason that you and everyone else believe in it is primarily because you need it to pay taxes, so the belief is not arbitrary.
Thinking of how I got here, reductively speaking:
I agree, but that leads to an infinite regress of your parents observering their parents, etc. My argument is really about the start of this chain.
Ah I see!
Convenience ought to have helped too! Though yes when the person with that monopoly on violence thing asks, you do.
You don't need Bitcoin to pay taxes, yet belief in it continues to grow.
That is true, but Bitcoin, like all other crypto"currencies", is a Ponzi scheme. Its value is driven purely by speculation, and the hope that it can be passed on to a "greater fool" for profit. This is true for a lot of financial assets, by the way.
You don't think secure time stamps are useful?
Lots of people don't have to pay taxes.
True, but somene has to, and they will create a demand for the currency. If I hear that Joe the baker needs money to pay taxes, and I want to buy bread from him, I know he will accept the government currency as payment for his bread. This in turn makes me demand money to be able to buy the bread.
Money is made up, but it's definitely real. Magic is made up and fake. If it actually exists and does something, it's real. You can bring something from non-existence and make it real. It has no intrinsic value.
A bit subjective depending on the circumstances though right? Say a man has a horse that you want. Well, today, there probably exists a monetary figure that the man would accept to sell you his horse, even if it's absurdly high. But let's say something cataclysmic happens and humanity is blown back to the dark ages. If there is no society available for the man to use the money, then it really doesn't matter how much you offer him because at that point money isn't real. You could offer to trade good or services, but not money. You might as well be offering leaves from the ground.
That's what the guy said. Money isn't "intrinsically" real - it doesn't have something in-and-of itself. It's extrinsically real - it represents something in the society we live in, a system of arbitrage and barterage that we use to represent an amount of work (Poorly, and with little benefit to a large number of people).
So no - if the extrinsic reality changes, then the barter or arbitrage currency will change - bottle caps, for instance, take over. But for a large society to function, a commonly accepted means of representing "value" has to be agreed upon. I can't just say, "Well, I've got the worth of x hours worth of time spent on projects to provide", instead I'll say "I've got x pounds to provide".
Originally, this was made more explicit, and it still exists on UK currency: "I promise to pay the bearer..." At that point, the notes had a (Bank-enfornced) intrinsic value. The words meant a promise to provide the currencies face-value in Gold. Now, we've done away with gold-backed currency, and the raw value is arbitrary, it has no intrinsic value but that set by extrinsic realities.
Money is an intersubjective reality, like nations, religions, and ghosts.
Two for three.
Definitely a fun philosophical and semantic thought experiment!
Money is fancy IOUs, that people mostly believe will be repaid.
I’m proud to have properly digested how inflation works. But I still don’t understand it.
Inflation can be seen through the lens of lessening scarcity but for money.
And I suspect you might even suggest the only real aspect of economics boils down to supply vs demand regardless of what the thing in supply or demand is?
Definitely not. The rules behind supply and demand hinge on some extremely flimsy assumptions, namely:
For things like food, housing, medicine, etc. People don't get the luxury of voting with their wallets, and this is why the free market cannot allocate resources effectively.
Just because I went to school for economics does not mean I am a free market capitalist. I'm definitely not.
Totally agree
This is actually pretty well deacrived by what's called the price elasticity of demand in standard neoclassical models. For things like housing one might say that the demand is very inellastic: A change in price does not affect the quatity demanded.
Yes exactly. This is why I find it funny when they use two different, yet contradictory reasons to justify the sin tax:
When really they're primarily taxing the things poor people are addicted to.
Idk, I'm generalizing, I'm just kind of pointing out how a lot of the supports capitalism rests on are weird little opaque excuses to convince the masses that exploitation is what's best for us
So many economists are stuck in a box of what our society has been, they can't think past our current rules and regulations to what could be, because they think that the rules and trends they learn in school are the only possibility, or that profit must be king.
Ah ok, I see the flaw in my thinking.
Things that are always in demand don't drive a price solely based on supply, and since people don't act in their own best interest the actual demand of something can't be a useful way to determine the value of a thing.
So that sort of says to me that with a truly free market economy, it would be just as impossible to model future prices because of the inherent unpredictability of humans.
Ehhh, not sure I'd go that far. Money, no matter what backs it, is just what people value it as. Just that when backed by real goods, e.g. gold, that it gives people a better reason to value it because the goods are worth something.
Mostly saying, money backed by a good have at least the value of the good itself. Which I would say makes money not fake.
When it's backed by belief, then it's fake.
But if it’s not backed by belief, it doesn’t work.
The value of those “real goods” is typically just as fake as the value of fiat currencies anyways. Trying to use things with actual usefulness as money has its own issues too.
Modern money is backed by the economic power of the state issuing it, so its workers, infrastructure, education, soft and hard power. Those are definitely real things with real value.
But then said good only has as much value as we put on it. There's a tacit acceptance of what a group of people decided that good is worth. Its value is as real as we collectively decide it is; it's a construct
Yes, but things like gold have actual uses which give them at least some actual value. Fiat currency is backed 100% by belief.
Gold as a currency only has as much value as people assign to it. It's really no different than a fiat currency.
Fiat currencies are actually backed by the tax liabilities denominated in them. If you are liable for one of my business cards, else a guy with a gun shows up at your door, you suddenly have demand for my business cards.
To be fair i was being hyperbolic. Money has the power we give it. And we gave it too much.
We print money through increasing interest rates, increasing divide between rich and poor requiring the working class to take out loan after loan after loan.
Some may say interest is the cost of borrowing money, but it is money value that comes out of nothing, it's made out of thin air and reduces the value of our dollar.