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John Merryman

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Defining currency as a contract, rather than a commodity

As a medium of exchange, money is a form of public utility. It is the basis of the economic circulatory system and if it was understood as such, could be far more effectively managed. I recently wrote an essay on this topic:
http://www.exterminatingangel.com/index.php?option=com_content&task=view&id=826&Itemid=662
" If people understand that money is a form of public utility and not actually private property, then they will naturally be far more careful what value they take out of social relations and environmental resources to put in a bank account. This would serve to make people's own self interest a mechanism to put value back into the community and the environment and allow more organic systems of economic connectivity and reciprocity to grow, as well as reduce the power of large financial and governmental systems over our lives."

Topics: philosophy
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    Mar 16 2012: Krisztian,
    There is no law forcing you to accept money. It happens all the time. Someone might not want to sell something, or insist the value given is a favor, etc. Let's make this simple, Say I give you an IOU. How is that any practical difference from giving an amount of currency? How is it any different than writing up a contract that I will return some value to you, or whomever you designate, at some point in the future?
    When the money was supposedly gold based, the principle was that it could be exchanged for gold. How is that not a contract entitling the bearer to the gold? Gold based currencies evolved because it was dangerous to carry gold, so gold certificates were issued and these eventually evolved into the concept of notational currency. Now that it is formally debt based, it still entitles the bearer to a certain amount of value.
    You say there are no universal contracts. Would you not consider a constitution to be a contract between a government and the citizens of the state to which that constitution applies? I certainly didn't sign the United States Constitution, but I assume the rights granted by it apply to me, as a citizen.
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      Mar 17 2012: look again. there are. many laws. that's why we call it "fiat" money. it is money because it is forced on us. unlike gold, which, as you say, could be freely rejected.

      believe me, i know how money was created. i followed a one year course in economics. gold based currency is not a social contract. you have a contract with your bank. but nobody has to accept neither gold, nor bank notes redeemable in gold. you accept it if you want. and so there is no obligation on anybody, nor on "society", to accept it and give something for it. if tomorrow everyone decides that gold does worth nothing, and only silver is a good thing, you will stuck with your gold, and it is your loss.

      the constitution is not a contract. first, it binds only the government. but second, none of the people living today agreed to it in any way. it is forced using blue dressed gentlemen. it is like the mob law. of course you accept it, and even accept its benefits. but that does not make it a legal contract. it was made at gunpoint.
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        Mar 18 2012: Krisztian,
        There are many forms of notational currencies. Prior to the formation of the Fed, in 1913, local banks often issued their own currency. There are various examples of local currencies which worked quite well in their circumstances. I certainly agree the US dollar has become an economic monolith and I'm not defending it. I'm just pointing out that currencies are a promise of value, ie. a contract. Not a store of value, ie. a commodity. When the current situation does blow up, people are going to have to develop new methods of working together. As I point out in the essay, civilization is bottom up. When it gets too big and unstable, it collapses back down to smaller units. That's where we are headed. The question when we get there, is what kind of society do we want to start over in? One with some sense of laws and reciprocity, or one where the strongest rule? If there are no laws, it is like Somalia. If the state is overwhelming, it's like North Korea. We want something in the middle, between oppression and chaos.
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          Mar 18 2012: as i have said already, i know how money works, you don't need to teach me

          either money is fiat money, in which case you can call it a "social contract" to cover its coercive nature.

          or it is a free market money, in which case it is not binding at all, having it entitles to nothing. there is no contract there. free market money is a commodity.
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    Mar 24 2012: Ken,
    In most businesses, this would likely fall in the category of buyouts. As the system slowly implodes, there is alot less work. Mergers, acquisitions, ipos and many other of the functions of normal capital markets are significantly less then they used to be. A lot of the income of the big banks comes from buying central bank paper and lending it back to governments. Also the TBTF banks have market advantage over the smaller non-TBTF banks and are buying them up, or squeezing them out. So even within banking, the concentration of wealth and power is getting more concentrated. Think of it as a rash that is slowly forming into a boil. Eventually it will pop. And it won't be pretty.
    Two of my favorite financial sites are zerohedge and nakedcapitalism.
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    Mar 24 2012: Have you seen this john?i thought that's strange as it looks like a reshuffle or because of Greece

    http://www.activistpost.com/2012/03/worldwide-banking-resignations-triple.html
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      Mar 24 2012: The above was a reply to this. The way these conversations format is a mess.
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    Mar 21 2012: But there's a general acceptance of the bubble - how would you reverse that? It's not a question of what would you put in its place, but the much more difficult question of how you might get people to adopt a different model.
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      Mar 21 2012: Anne,
      Reality is composed of bubbles. Structures containing space. Atoms, molecules and cells are bubbles. Buildings are bubbles. Nations are two dimensional bubbles occupying a given area on the planet. Our awareness and our bodies are bubbles. The thing about bubbles is that they are defined and constrained by various physical laws and when they exceed the criteria of those requirements, they collapse and die.
      The current financialization bubble, turning any and all value that can be drained from society and the earth's resources into notational wealth, ie. money as a commodity, is like a metastasizing cancer. It is not stable, but must grow at increasingly exponential rates. As such, it is killing the host organism. For much of the last three hundred years, it could find new markets, countries, resources, etc. to exploit, for the benefit of those controlling this process as well as those facilitating it. Now that it is starting to reach the edges of the terrestrial petri dish, it is turning inward and starting to feed on the facilitators, ie. the middle classes of the developed countries that had grown up in its shadow and taken its benefits for granted. It's eating away at its own support structures. When it does collapse and those dollars we have been flooding the rest of the world for the last sixty years start to come home, because other countries no longer value them and prices go up much more than wages, then people will start to consider alternatives.
      After the collapse will not be the time to think through what the alternatives might be. That planning has to happen beforehand. These ideas I'm putting out are like seeds. I don't expect them to get much consideration now, but maybe, when the time comes and people start looking for alternatives, they might start to flower.
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        Mar 21 2012: That still leaves the very big question of whether it's possible to persuade people to change the system before it collapses, or whether collapse is the only way of prompting change. Have you any suggestions about how a change could be prompted? People tend to react (positively or negatively) to a proposal they can build on.
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          Mar 22 2012: Anne,
          That is definitely a point I've given a lot of thought to. Unfortunately there are various catch 22's involved. Often the people who best understand a topic and/or are in the best position to effect change, or even just get others attention, are often very invested in the status quo of that topic. Systems and institutions naturally tend to promote those who most advocate for/believe in that system, while sidelining those who question it. It is when the facade starts to crack that people start asking questions, but then the momentum goes the other direction and some other opposing system benefits. It's another reason why I went into the physics of the situation in that essay. By trying a broad, but gentle argument, it's an effort to nudge the discussion on a range of issues and still focus on what might seem like a technical point, that of the nature of money, but does go to the heart of why this economy is out of control. I've posted it in a few places and received some interesting feedback. I have a diary on Daily Kos, under my middle name, brodix and pasted the entire essay, without linking it to Exterminating Angel, just because I felt it would get more reads. Two people got on me for cut and pasting it from my own article and one other chimed in that another piece I'd put up about a year ago has identical to something I'd put on The Nation comments section. So some people are definitely reading it, but I just don't get much feedback.
          http://www.dailykos.com/story/2012/03/17/1075305/--What-is-Your-Occupation-
          One thing life has taught me though, is patience. I just forget the lesson on occasion.
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    Mar 20 2012: John, there's another way of looking at it. Money was the first financial instrument and financial instruments have been getting increasingly unreal ever since. Yet most of the world has gone along with that, and tried to make a profit out of it, whether it's margin on sales or subtle arbitrage. Perhaps it's the gambling nature of humanity which enables money and other financial instruments to survive.
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      Mar 21 2012: Anne,
      Very true and what they have done is blow a bubble of illusionary wealth. The question is what form the contraction/reset will take. Given the extent to which everything is being done to preserve the bubble, rather than address, let alone fix the underlaying problems, the eventual consequences will be serious, to say the least.
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    Mar 20 2012: Krisztian, (no reply button)
    "jee-zus, man, you speech has fallen apart. "commodified trust", "manufactured by creating demand" ... and again, nobody talks about barter. i recommend to read the conversation again."
    Do you always assume what you don't understand is gibberish? If so, that suggests a large ego and small intellect.
    A commodity is the service someone supplies to the larger market. So for bankers, money is the service they provide.
    If you study how the financial system works, you would know that the banking system sets rates and then simply issues the amount of credit people are willing to borrow at that rate. If a particular bank doesn't have sufficient reserves, it borrows that money from the central bank, or others with excess, at slightly lower rates than the loan it made to the public. As for the currency in circulation, the Fed buys government debt and then issues the money which it buys that debt as currency. That's why, along the top of the US dollar, it says "Federal Reserve Note." Do you know what the Federal Reserve is, or should I explain that as well?
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    Mar 20 2012: Krisztian,
    Then you will be happy to know you are in agreement with the worlds bankers, to whom it is a quite valuable commodity, which they can therefore create enormous amounts of, simply by promoting as much debt as possible, in an economy that they have effective control over.
    I, on the other hand, think that if society begins to treat it as a contract, will begin to understand it needs to be more effectively constrained.
    Orlando,
    Reality is that thin line between chaos and order. Too much chaos and complex life collapses back into single celled organisms. Too much order and it dies anyway.
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      Mar 20 2012: you simply can not get it right, can you? "world banker", that is, the current mainstream theory of economics, advocate fiat money. fiat money is not a commodity.
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        Mar 20 2012: Right. It is in fact a contract, but because it is commodified trust, it can be manufactured by creating demand, ie. debt/obligation.
        I have nothing against barter, since I largely work within my family, much of what sustains me amounts to barter. Just don't expect a barter based economy to produce the degrees of complexity required to create that computer you are staring at.
        Currency lubricates the economy, but capitalism is based on the assumption that it fuels it. That the greater amount of "liquidity," the stronger the economy, but beyond what is necessary to create a healthy interaction between the resources, labor and innovation which actually fuel the economy, excess capital is extremely corrosive and only allows the bankers to tax the system.
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          Mar 20 2012: jee-zus, man, you speech has fallen apart. "commodified trust", "manufactured by creating demand" ... and again, nobody talks about barter. i recommend to read the conversation again.
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    Mar 20 2012: Krisztian,
    The reason there are so many words in the language is because they have different nuances. "Mob rule" was originally a derogatory description of democracy by monarchists.
    Definition and limitation are two sides of the same coin. You can't have definition without creating limitations and limits create definitions. You seem to have a strong adverse reaction to society placing limits on you, so can you describe this ideal situation in which large numbers of people would be able to function, without having limits placed on their actions?
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    Mar 19 2012: This seems to lean more towards anarchist thinking...very nice.....

    But I'm quite perplexed as to what Krisztian is trying to imply
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      Mar 19 2012: imply? i thought i was kind of straightforward:

      "either money is fiat money, in which case you can call it a 'social contract' to cover its coercive nature.

      or it is a free market money, in which case it is not binding at all, having it entitles to nothing. there is no contract there. free market money is a commodity."
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        Mar 20 2012: I was referring to your comment about mob law but thanks for clarifying being that I did not see your post referring to the free-market money.
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      Mar 20 2012: Orlando,
      I have to admit Krisztian has me a bit confused as well. As I see it, there are commodities and if we trade them around with no intermediation, it's barter, but if we use a medium of exchange, it's a currency. Some are more coercive than others, but then lots of things can range along a spectrum, say from mean to nice, but that's nuance and Krisztian doesn't seem to do nuance.
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        Mar 20 2012: That is exactly how I saw it...in anarchist circles bartering is main thing that is really talked about, which is why I mentioned that your post sounds similar to anarchism (not that i'm implying that you consider yourself one)....

        I would have to agree with you about Krisztian and nuances...from personal experience he's not a big fan
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          Mar 21 2012: Orlando,
          "What John is doing in this thread is looking for possible alternatives for the current global economic system that we are in (correct me if I'm wrong John)."
          You are right. It's a question of what succeeds the current system, because it is rapidly spinning out of control.
          Interesting article:
          http://www.outlookindia.com/article.aspx?280234
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        Mar 20 2012: that's unfortunate. i said money is a commodity, and you think that this is barter. i rest my case.
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          Mar 20 2012: Krisztian,

          no one mentioned that money is barter..if you would have read John's comments carefully he stated "As I see it, there are commodities and if we trade them around with no intermediation, its barter"

          I'm perplexed as to where you see that he mentioned that "money is barter"

          What John is talking about in terms of commodities is resources and in terms of the social system in which one lives in, the resources could be traded off or bought with means of some form of social currency (money). What John is doing in this thread is looking for possible alternatives for the current global economic system that we are in (correct me if I'm wrong John).

          As of right now, your correct, money is a commodity but this is not what John is addressing...
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    Mar 19 2012: I can see Krisztian's point. Money is an abstraction intended to represent the means of survival. Go back far enough in time, and that's not very far, there were agreements between people of similar power that they would use pieces of paper, or clay tablets, to represent goods with intrinsic value, and they traded these papers in lieu of goods. Ordinary people just bartered and they understood what they were getting.

    Today we have dozens of 'local currencies' and yes, the dollar is a local currency even though there are more dollars in circulation than have ever been legitimately printed. Our governments are telling us which currencies we must use to support our local bureaucracies. Retailers are inventing their own currencies in the form of loyalty points - which are nothing more than currencies with poor exchange rates and low liquidity. But currency isn't a utility in the way gas, or electricity, or hot water, or drinking water is. Utilities all have some tangible value, whereas money is an abstraction.

    As regards defining money as a contract, have a look at UK banknotes. Each one contains the statement 'I promise to pay the bearer on demand the sum of £XX'. That looks like a contract, but what does it really mean?

    But think a bit more broadly, and look in your wallet for loyalty cards.
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      Mar 20 2012: Anne,
      Yes, it's an abstraction, but so is a contract. It's a promise, just like a contract. As in 'I promise to pay the bearer on demand the sum of £XX'.
      A contract is an extension of trust. Economists have long studied aboriginal societies in order to try to understand how money first evolved, but haven't been able to find any that we would consider as currency. Often they were symbolic forms of gifts, or religious tokens. The simple fact is that such organic societies are based on trust. When schisms occur,there is separation and conflict, not lawyers and bankers. It is only as societies grew too large for everyone to know everyone else, that institutional resolution and mediums of exchange became necessary.
      When you consider how African villagers have taken to using cell phone minutes as a form of currency, it is not only the wealthy who find it a useful convenience.
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        Mar 20 2012: There is more to a contract than an abstraction, when you break it down to its components of offer, acceptance and consideration. A promise alone is not a contract.

        Re who finds money useful, that's a different issue from its origin. My point was that there were agreements between people of similar power to use the early financial instruments. It so happened that this tended to be the merchant classes, and geographical dispersal was one of the main drivers. Interestingly, this worked because of middlemen, or brokers, and it only worked because these people were trusted.

        Have you considered the role of specialisation in the evolution of money? When individuals or families produced their own survival needs, barter was based round surpluses. When people started to specialise, that was no longer the case, and getting life's necessities involved an increasingly complex supply chain. Money allowed the specialist to go directly to the producer of the goods needed, rather than working through a series of barter transactions.
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          Mar 20 2012: Anne,
          I agree a contract is more of a codification, than an abstraction, but it is a bit of an abstraction to argue money is more of a generic contract to the larger market, facilitating that increasingly complex supply chain, while it is a commodity to the bankers operating the system, much as contractual agreements are the commodities produced by the legal profession.
          While the history and operations of monetary systems are exceedingly long and complex, what I'm focusing on is a very clear and distinct point; that for the market, money is a contract, not a commodity and that the obfuscation of this particular point is what enables the financial system to tax the rest of the economy far beyond any rational compensation for its services.
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    Mar 19 2012: But if you track back through history and prehistory, you will still find groups fighting other groups because they were 'different'. Today it might be Christian or Islam, atheist or theist, communist or capitalist..... So humanity hasn't really evolved much, it's just acquired more powerful tools and weapons.
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      Mar 19 2012: Anna,
      Very much true and that goes back to the beginning of life. That's why I started that essay by showing how basic physical functions manifest throughout our reality, such as information and energy reflected as our nervous and circulatory systems. The question though, is what is the other side of the coin? The mind functions largely by making distinctions, but it is the connections which make life possible. The vast networks, from neural to communal and how they adapt to change. A big part of the problem with coming to terms with this is the tendency toward simplistic view points that reenforce our positions, rather than giving us any insight into others views. Individual people can be quite observant, but often in groups, there is a tendency to gravitate to common denominators. Especially when those in power profit from the current assumptions and actively support them. It's not that these processes can be avoided, but it may be possible, at certain times, to inject different ways of thinking into the larger public debate, to steer it in positive directions. I think the current economic and financial situation offers an opportunity to examine the nature of monetary systems, how they are used to control populations and how they might be better understood and managed. If you follow my conversation with Krisztian in this thread, it's obviously not a point that appeals to everyone.
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    Mar 19 2012: Unless one is a slave, they have the option of moving out of a community whose terms they cannot accept.
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      Mar 19 2012: just like the mob law. if you don't like it, you can get the hell out of there. nice thinking.
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        Mar 19 2012: Krisztian,
        I'm not sure what world you live in, but I'm trying to come to terms with the one I live in. We have ridden a wave of cheap energy fueled lifestyle for the last hundred years, that won't last forever and is going to get a lot more cramped, at least likely in your lifetime, as you appear about twenty years younger than I. Do we let it just crash, because not that many people are interested in how this reality functions, they just want their wishes filled? If you have any ideas, I'm certainly open to hearing them.
        Mob law is not a pretty possibility, but there is a big difference between putting up with local zoning laws, vs. living in a situation like some areas of Mexico, where mobs/militias do set the rules. In twenty years in the US, I wouldn't be surprised if some areas do reach that stage of anarchy.
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    Mar 19 2012: Krisztian, (the reply buttons seem to have a mind of their own)
    I suppose we have hit an impasse here.
    What if the rest of your community is willing to accept the convenience of a currency system, in exchange for accepting the rules necessary to keep it stable and sustainable?
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      Mar 19 2012: community can not make contracts. only individuals can. they were not asked. i personally disagree with the state imposed money system. so it is kind of sure i didn't agree to any such contract. yet i can't say no. i'm threatened that i will be imprisoned, my business will be shut down, etc.
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        Mar 19 2012: Krisztian,
        Communities make contracts all the time. They are called laws. Frequently they do discriminate against particular people and practices. In more corrupt societies they are designed to benefit the few and in healthy societies, the many. It is such community laws which discriminate against those who might walk into you business and rob you. Throughout history, there have been communities which allowed slavery. The point is to be able to sufficiently understand how such societies, laws, contracts, etc. function, in order to be able to create better communities. All people will tend to act in their own self interest. If we do understand that money is a form of community contract and not personal property, then people will be more careful how they use it and it won't have as much control over our lives. People will do more bartering among themselves and store value in their environments, rather than in the banks. What is most corrosive for the monetary system is hoarding, as it acts like stores of fat, so it would even be more healthy for it not to be overused.
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          Mar 19 2012: sigh. do you think that starfish is a fish, just because it is called that way? community contracts are not contracts. they are not made in mutual consent of conscious adult persons.

          money is just as much a contract as slavery is. good example, congratulations.
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    Mar 18 2012: Krisztian,
    Consider this example:
    http://www.guardian.co.uk/world/2012/mar/16/greece-on-breadline-cashless-currency?newsfeed=true
    It's not coercive, as no one is forced to use it, but using it does entail abiding by the rules. What money doesn't that apply to? No one forces you to use any currency. You just have to have enough other people willing to barter directly with you, then their commodities are the currency and there is no need for a financial medium/currency. It still doesn't get around the fact that when the community uses a financial medium, it is a form of community contract.
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      Mar 18 2012: stop saying that because it is *false*. i have to pay my taxes in money. if i have a shop, i have to accept money. accounting has to be done in money terms. if i "gain value" by having something that went up in price in money terms, i will be taxed! there are multitude of laws that lock citizens in the national currency. this is deliberate, because a state issued fiat money is not good on the market. it needs the might of the state to grant it any value.

      and yes, it is a community contract. in other words, social contract. which are not contracts. it is a misnomer. these are state-enforced, coercive structures, not created through mutual consent. just as the word "fiat" implies.
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        Mar 18 2012: Krisztian,
        There are tradeoffs to anything. Yes, if you want to have a business within the community, generally you have to follow the rules of the community ant there will be those who have the power in that community and will use it. Would you like to try setting up a business where there are no laws, currencies, regulations, etc. There are certainly places like that in the world. Somalia comes to mind.
        Life frequently isn't fair and some people have more opportunities than others. When the system is too oppressive to allow people to grow and prosper, they either put up with it, rebel, or die. You seem to be in a situation where you feel the opportunities are not worth the effort. If you can't move to another place, then how do you go about changing the situation where you are now?
        That is what I'm trying to do, by making the point that money is a contract, not a commodity. It is because people think of it as a commodity, that the banks have so much control and can tax the rest of the economy for the services they provide, thus further burdening all other businesses trying to function in that economy. As it is now, money is like that worm on the fishhook. It looks good, but it is tied to something larger. We cannot avoid the fact that it is part of something larger, because that is how it functions as a medium of exchange for all businesses, so if people are not deceived, then they will start to be far more careful how they use money and demand more control, as a society, over its functions. Much as people learned to demand more control over government, because they knew they needed a legal system, but didn't want an oppressive one. There is no happy medium. Reality will always be swinging from one side to another. It is part of the eternal rhythm.
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          Mar 18 2012: first: this is still not a contract. you might say it is necessary, which is a whole new debate. but surely not a contract.

          second: money worked well for thousands of years without that kind of "contract". so while you might convince someone that police or public schooling is good, that has no bearing on the money issue. money is just fine without state intervention.

          i'm saying the last time: money is NOT contract. it is either a commodity, or a "social contract", that is, a government imposed structure. and there is no debate about that. that's why it is called fiat money. but a social contract is not a contract, it is just called that.

          from now, if i simply don't answer to a post of you, it means that this above paragraph is my reaction.
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    Mar 18 2012: What exactly is "free market money?" Would you trade something of value for it, if you didn't know what system secures it? If it's minted out of precious metals, then it is a commodity, because it has inherent value, though in the actual market for gold and silver coins, some of the value is a function of who mints it, since there are instances of counterfeit coins. So what examples are there of free market money?
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      Mar 18 2012: sure i would. this is what happened for many thousands of years. every community develops its own money, let it be salt, sugar, tobacco, cattle, butter, grain or gold. it is not like "would i accept it if i don't know if others accept as well", but the other way around: "what is the thing that is most marketable, most likely i will be able to sell quickly". on any market, the commodity that is best fit, emerges as money. that is free market money.

      please note: nobody has an obligation to take it. nobody is forced to accept it. it is money because people usually accept it. but i can't know for sure. if money is wheat for example, and some scientist show that wheat is bad for health, i can set my sacks of wheat on fire, because that much it worth now. there is no contract behind it, just the anticipation that such a thing won't happen.
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        Mar 18 2012: Krisztian,
        In Sumaria, 4000bc, they used clay tablets, signifying how much grain you had in the granary and these tablets were traded around as a form of currency. These clay tablets were a form of contract. Would you prefer a system where everyone had to carry around the bags of grain?
        Yes, there were times when there were more tablets than grain, but that was less of a problem than having to carry around gags of grain. Nothing is perfect. It's just a matter of what works better.
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          Mar 18 2012: i prefer a system in which people can decide freely what they want to carry around, and what they accept or not. gold, bitcoin or dollars, all fine as long as it is not coerced.
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    Mar 17 2012: John, is it really difficult to view primitive cultures in modern terms? Or is it a mistake to think that humanity has evolved to a point where it cannot be compared to society of a few million years ago? That's not such a long time in evolutionary terms and the human brain still has some pretty strong 'primitive' functions.

    Re shamanism and weakness, my point isn't that shamanism is based on weakness, rather that it was a niche which could be exploited by the physically weak.
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      Mar 18 2012: Anne,
      I'm often surprised how difficult it is for most people to understand other cultures, let alone ones long extinct. A good example I've been thinking about is how people in the west try to understand Islam in terms of Christianity.
      One of the primary and fundamental facts about Islam is that it was one of history's most successful political movements for its first seven hundred years and coasted for the next six hundred on that foundation. It is only really in the last hundred years that the industrial west conclusively eclipsed it.
      On the other hand, Christianity was an underground movement for its first four hundred years and was rather forcibly co-opted by the declining Roman empire. As in erasing any vestiges of heretical or gnostic thought.
      So one might understand there are profoundly different views about the relationship between religion, the vision of society and government, the management of society.
      Meanwhile Judaism evolved for the last two thousand years as a religious and cultural movement, but didn't have to deal with the many issues of governing a state. The problems of which are now arising in Israel.
      It should also be pointed out that it was not monotheists who originated democracy, but polytheists. If you are going to have a religion where the Gods argue, why not have a government that incorporates it as well? On the other hand, monotheism largely served to validate monarchy. When there is just one entity in control of all the heavens, then it's natural to have a similar form of government down on earth. Commonly referred to as "the divine right of kings."
      Possibly the best book I've read which connects pre-historic society to the modern age is Gilbert Murray's The Five Stages of Greek Religion.
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    Mar 15 2012: Krisztian,

    Social contracts tend to be less formal, so maybe it would be an explicit economic contract. No, it is not voluntary and the degree of coercion, both overt and covert, is large. I'm not sure if you read the entirety of the article, but the paragraph I quoted makes the point that if we openly accept that it is a form of public contract and not actually private property, we would be better able to understand and control its power over our lives. Personally I don't make much money, but then I've always worked within my own extended family, largely horses, and the returns are more organic.
    Actually this particular form of money works quite well at what it is designed to do, enrich its proprietors and increase the power of the state.
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      Mar 15 2012: a contract has two sides. i do something, you do something. in this "social contract" case, the government does not give you anything. increasing its own power is not a service to me.
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        Mar 15 2012: Money is a promise by all of those willing to trade in it, that you are owed a certain amount of value. A contract is also a promise of return for a given service. If I buy insurance from you, we both sign a contract that I will pay you for certain returns, under specific circumstances. The only real difference is that money functions as a universal contract for all exchanges, as opposed to specific requirements of a specific contract.
        It functions as an economic circulatory system, because a barter economy has serious efficiency limits. It's a bit like a road system is a physical circulatory system. It should function as a public utility, but being private, which our banking system including the central bank, largely is, it makes the system of economic exchange a profit generating business. One which is in a unique position to extract maximum profits.
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          Mar 15 2012: do you really think that if i don't accept money from a person, he can go to court, and sue me for it? and the judge will consider my contract with this person? what contract? i never saw him. i've never heard of him.

          no. i will forced to accept the money not because we have a contract. but because the state wrote a law that requires me to do so.

          there are no universal contracts. a contract must be explicitly agreed by both parties. i never agreed to take money. i never even was asked about it.
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    Mar 13 2012: a contract is made between two persons. who are these persons in this case?
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      Mar 14 2012: Kristian,
      There are lots of multiparty contracts. The Constitution would be one, which most, if not all federal employees swear to uphold. Yes, money evolved out of barter systems and for much of history was minted out of precious metals, which gave it explicit value. Notational currencies function as a form of trust in the system, not an actual store of value. It's a piece of paper, for God's sake. As such, it is a form of contract, a written promise.
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        Mar 14 2012: contract should be agreed upon. nations don't have contracts. if so, where can i opt out?

        if all paper is a contract, what about the ... okay, i will skip this low level joke for now.
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          Mar 15 2012: Don't we all wish we could opt out at times.

          Do you have a concept of what money is? A commodity? What gives it value?
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        Mar 15 2012: i do have a concept, but we are discussing yours now. you said money is a contract. but i see no voluntary contract here. is this a form of "social contract"? i refuse to accept that as a contract. social contract is a coercive measure, imposed by the state. in this sense, modern fiat money is indeed a social contract.

        but if you talk about money in general, well, fiat money is only one form, and it does not work too well.
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          Mar 15 2012: I meant the above as a reply here.
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    Mar 13 2012: The inclination to have 'stuff' probably goes back to the earliest 'gatherer' days when a well stocked food pile made the difference between life and death in the cold seasons. The next step would have been either co-operative or a leadership one, where supplies in excess of need would be a reason for others to join your group. History tends to suggest that the leadership model was more common than the co-operative one, and more successful when groups were in contention.

    A 'hunter' culture would be less inclined to focus on possessions for two reasons. Firstly meat spoils more easily than nuts and grains, unless you are in a polar region with temperatures permanently below freezing, or permafrost storage. Secondly, where there was a need to follow prey, there was a limit to the amount of possessions which could easily be transported.

    These models don't really work with the nuclear family and big city environment. Instead we have very large scale power centres - commercial, political and media. Add a little corruption to those and you get people who have a sense of entitlement to take from the common pot. This has a knock on effect on the rest of the population, who start to feel equally entitled. Eventually you get more people taking from the common pot than are contributing. when the contributors realise this they either turn into takers or move elsewhere. It's a recipe for social anarchy!
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      Mar 14 2012: Anne,
      Remember that primitive cultures had both a chieftain and shaman role, ie, government/management and religion/vision.
      The mind has two hemispheres; The linear, logical left brain and the non-linear, intuitive right brain. In our analytical society, the right side gets short shrift as simply emotional and illogical, but it serves far more complex functions. Mentally it is a form of parallel processor, that can far more quickly access the stores of learned information then can the left brain. Consider how instinct would be different to an artist, a scientist, an athlete, a businessman, a soldier, etc.
      The problem is that we have a top down model of society, which both validates and is validated by the monotheistic premise of a singular moral and intellectual ideal, by which society's elites can claim validation of their position. What used to be called "divine right of kings." The assumption their position is God's will.
      The logical fallacy is that knowledge can be absolute, but knowledge requires perception, which is inherently subjective. Multiple perspectives will start to cancel each other out, leaving a reductionistic conceptual blur.
      What we need to do is start developing a network theory of life, where multiple perspectives serve to support each other and trying to reduce this complexity into a singular vision destroys much of its vitality.
      Of course, pointing that energy in a singular direction creates a very effective force, but it needs to be built up first and can be easily dissipated, especially when all members are not committed to the stated goal.
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        Mar 14 2012: The most primitive stage may well have been the family unit based round providing and procreating roles. Both these aspects contributed to the survival of individuals and the species. The tribe / clan stage was the next step on from that.

        The leader / shaman concepts are interesting in that the role of the leader is self-evident in terms of physical ability underpinned by intelligence. The shaman role can be interpreted as a niche created by the physically weaker to ensure their survival and wellbeing.

        By the way, I don't agree that modern society eschews the right brain. Politics, commerce and media all have strong right brain strains. Politicians are voted in on the basis of emotion, PR and advertising exploit emotion, and the media certainly does, whether in entertainment or reportage.
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          Mar 14 2012: Anne,
          I agree society does respect the right brain. I suppose my point is that it doesn't easily recognize the intellectual function, because it is not a clear cause and effect linear process, but more of a quantitative weighting process. The left brain is like a clock, in that it proceeds in a linear fashion from one event to the following event, while the right brain is more of a thermostat, in that it acts on multiple levels coming together. In simple fashion, the right brain assesses the situation, while the left brain is plotting a course through it.
          It's a bit difficult to really describe primitive cultures in our modern terms. They function as networks in which some connections are stronger than others, but this was probably more fluid in some ways and more rigid in other ways, than we can easily discern.
          I seriously don't thing the shaman role is based on weakness, or it wouldn't have survived. That is the court fool role. The fact is these people seriously recognized the world is a large and dangerous place and there was a definite role for someone studying these larger forces.
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    Mar 13 2012: Anne,
    Yes, that falls in the category of promises made by political systems with insufficient return. The point is to make responsibility far more of a local function. All societies need to support some amount of currently unproductive elements, either children or others with the potential for future productivity, or enough of a safety net to sustain the sense of community, because if people feel they will be ostracized the moment they are not sufficiently productive, they are not going to have a very strong sense of communal attachment in the first place.
    This isn't so much an argument for reforming the current system, as a potential blueprint for starting a new one, when this one does fall apart. And the reason it will fall apart are all those legacy costs, of misallocated resources of all kinds. It's a bit like fat in the body. Some is necessary. A little extra is okay, but too much and it starts to take over.
    As for the money itself, we can only own it communally. It's drawing rights to community productivity. It's a contract. Unless all participants to the contract are willing to respect it as a necessary communal function, then everyone will be trying to cheat everyone else. If you don't believe me, try printing some up and see who holds the copyrights.
    There is also lots of evidence that people do value community property. Religious organizations are a prime example. It amounts to a matter of respect for oneself and one's community.
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    Mar 12 2012: The evidence is that people are more likely to take care of what they own than of things owned communally.

    One of the problems with money today is that it is no longer closely tied to its ability to buy things that sustain life, especially in a society with a welfare system. And one of the weaknesses in a welfare system is that the 'communal' ,i.e. depersonalised, nature of the benefits makes it easy for people to believe they are harming no-one if they 'exploit', i.e. steal from, the system. Which comes back to the first point.
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      Mar 13 2012: Anne, I would suggest we tend to conform or work towards the greater good in small groups, people we know.
      Not so good when anonymous or around strangers - when no kinship or "tribal" links.

      Public toilets are always disgusting.

      Modern life is 90% strangers with no intuitive evolutionary links. The others/outsiders or non people. This sometimes is offset by fear of embarrassment, or rational or higher thought as to contributing to the greater good for a wider group.

      Interesting point on welfare. I wonder if is a sense of take what I can if you are down the bottom and feel left out. Perhaps a sense of entitlement as get wealthier. Middle and upper class welfare is a joke - whats in it for me attitude.

      Having stuff, the displays that show you, or make you feel successful, wealthy, lots of resources is a strong drive that is deeply engrained in our species.