Тег: Money

Graeber, Mises, and Evolution

@SperryUNIVAC, whom I infinitely respect for his frantic work ethic and very broad range of interests, besides various commissioned books and military-technical analysis, also runs a small channel (slightly larger than mine) purely for the soul — about coins. I don’t understand much and am not particularly interested in how many ounces of silver were in which thaler, but when he posted a powerful cycle of texts called “What is Money,” I could not help but give it my close attention.

Mainly, the text is a retelling of Graeber’s book “Debt: The First 5,000 Years,” but in some places, the accents are set differently.

Part 1 — in which the author immediately describes the economy as a zero-sum game, but at least acknowledges that not everyone adheres to this ancient belief. Also, the concept of debt appears on the scene as a moral obligation, which is the basis of all economic magic.

Part 2 — in which it is pointed out that the strong can easily impose debt conditions on the weak that have nothing to do with justice. In general, the idea of debt is based on violence. If there is no possibility to forcibly reclaim what was lent, there is no institution of loans. But if this violence is abused, the moral obligation to pay debts weakens.

Part 3 — here the author continues to retell how wretched these debts of yours are, but for the first time disagrees with Graeber and refuses to unequivocally condemn the concept of debt-money itself. He suggests that since the concept of debt led to the emergence of the state, it must have brought some benefit to human communities under its yoke, regardless of how individual people suffered from it.

Part 4 — here the author, following Graeber, mocks Adam Smith and explains that money did not emerge from direct barter, but first took the form of debt receipts for homogeneous goods convenient for storage, such as grain or livestock, while coins made of precious metals appeared much later and were state-issued.

Part 5 — it describes three types of economic relations according to Graeber: communism (within small groups), exchange (for one-off transactions with strangers), and hierarchy (where debt cannot be repaid, leading to dependency). Communists try to prevent hierarchy, but once they increase in number, the transition is almost inevitable. Markets, meanwhile, are created by states so that people sell their goods for a pittance for the sake of paying taxes (this thesis is designed to cause “butthurt” for all supporters of the strict opposition between state and market).

Part 6 — here the author describes how, besides credit-commodity money, symbolic money has also been in circulation since antiquity, used to assess damage to property, life, and honor; the clash of these monetary systems led to the symbolic money system losing. Roughly speaking, life and honor became commodities. The author also persistently calls Irish bards “skalds,” but those are trifles.

Part 7 — describes how the appearance of iron democratized war, mass violence destroyed systems of credit trade, which led to the invention of coins; it is convenient to pay mercenaries with coins, and so that they could spend them, empires required taxes to be paid in coins. The result was the launch of the main engine of all ancient empires: army–slaves–coins. These changes led to revolutions in consciousness, which is why antiquity is now known to us as the time of the birth of almost all great doctrines.

Epilogue — the pace accelerates sharply, and in one post, it covers the entire history from the end of antiquity to the end of cash. Until the next leap in military technology, which led to gunpowder empires, Europe relied again on commodity-credit money, then regained a taste for coins, but soon smoothly transitioned back to credit receipts—first for precious metals, and then to pure fiat, which subsequently rapidly transitioned into cashless form so that the money circulation could, first, keep up with the pace of monetary operations, and second, with the ambitions of states to control the economy. The word “blockchain” was mentioned, but the word “bitcoin” was not, because it does not fit into Graeber’s concepts.

It is foolish to dispute the anthropological material on which Graeber bases his monetary theory. Therefore, it would be far more logical for supporters of the Austrian School of Economics to agree with the erroneousness of Mises’s regression theorem (that today’s demand for money is derived from yesterday’s, and so on back to a commodity with consumer value, which became the first money), especially since the foundation of economic theory does not crumble from this admission. Money has various functions — unit of account, store of value, means of transfer of value, and so on. There is nothing surprising in the fact that at different times, different peoples practiced different ways of implementing these functions. Later, in the course of history, convergence occurred, and now we call various implementations of these functions “money” under one umbrella.

The regression theorem was needed as a justification that the state is unable to create purchasing power for money. Well, let’s discard this doubtful take: it is capable, and very much so. Take a group of ten people, give an eleventh person nine tokens and suggest they distribute them among this ten as they please, while warning them that in a month, whoever among the ten cannot produce a token will be killed. The tokens will have astonishing purchasing power. The distributor of the tokens will receive a huge amount of benefits. And in a month, they will present you with ten tokens, at least one of which will be counterfeit, because people want to live.

It is not so important who created the first money and when. It is not so important who and by what means attempts to endow current money with purchasing power. For a libertarian, the only thing that matters is exactly how people will organize their interaction in the absence of coercion. If they want, they will provide services to each other without a strict fixation of debt. If they want, they will use commodity receipts or tokens backed by a basket of goods. If they want, they will turn to items made of rare materials or to digital rare assets, such as bitcoin. Or they will use different methods for different situations and different counterparties, as has been the case in history.

In conclusion, I will touch upon an important assertion by Sperry that, from the perspective of survival and prosperity of large human associations, the emergence of the state and the improvement of means of state control over the activities of subjects turned out to be very useful. This conviction has a right to exist, however, there are a couple of remarks.

Firstly, after the appearance of Dawkins’ works, the subject of biological evolution is not the species, the population, or the individual — but the gene. Similarly, the subject of cultural evolution is not humanity, not the community, and not the human — but the meme. The fact that memes about the moral obligation to repay debts and the necessity of hierarchies are successfully passed from generation to generation does not necessarily condition the prosperity of human communities in which these memes are widespread.

Secondly, even if we assume that evolution primarily ensures an increase in the adaptability of a population to current conditions, this in no way guarantees that a useful trait that once appeared through evolution will retain its utility in new conditions. Since the appearance of the first states, the conditions of human interaction have changed significantly, and today the existence of a state that controls the daily lives of people and preaches some debt of every subject to it no longer looks so unconditionally useful for the community. With equal success, it can be viewed as a kind of atavism destined to be displaced by other forms of human organization.

A couple of new social networks and a poll

In the spring, at the suggestion of Alex Kotov (channel Causa Arcana), I started a mastodon account. Then, due to moving, I didn’t have time for it, but now I’ve decided to start using it again. With a limit of 500 characters per post, this network only allows writing in the format of extended tweets, which suits me very poorly. I cannot promise that I will maintain it regularly—at least tweets post themselves and don’t ask for much. Anyway, we’ll see.

I also had to set up an Instagram. The thing is, I help with supplying materials for the Montelibero Instagram, and in this nightmare of a social network, you can’t even look at what someone has posted without your own account. To keep the account from being completely dead, I will post photos with brief remarks there—consider it a free demo version of my channel on Boosty; in that paid channel, posts about my adventures here are much more detailed and comprehensive.

The full list of social networks where my materials are presented is consolidated on the corresponding page.

I am not a great entrepreneur, and I am poor at selling myself. Psychologically, I feel most comfortable doing the work first and then giving those who wish the opportunity to say thanks via a donation. But this model only brings in any money if you regularly remind people of this opportunity, and I interpret that as being pushy. As a result, the project doesn’t bring nearly enough money to live on, which means I must either devote more time and attention to finding other sources of income or more actively monetize my own project. To start, I want to gather feedback on what content you are actually willing to pay for. The survey is open; you can add your own options. A promise is not a marriage contract Participating in the survey does not entail financial obligations. Nevertheless, I would be glad if the answers were sufficiently serious. I would also welcome detailed comments with advice and suggestions.

Нужны деньги. За какой контент вы готовы платить?
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What does the AES offer as a replacement for the Central Bank and the dollar?

Anonymous question

There is no consensus on this issue.

There are hardcore supporters of returning to the gold standard with 100% reserves. The arguments of this camp were well articulated by Javier Vernón Cortés (de Soto) in the book “Money, Bank Credit, and Economic Cycles”. In short: there are time deposits, where a person deposits money for a specific term, and the bank has the right to invest it wherever it deems necessary, paying interest for this; and then there are demand deposits, where a person deposits money for safekeeping, retaining the right to withdraw it at any moment—in this case, the person should pay for the convenient service, and the bank has no right to do anything with such deposits other than store them. If demand deposits are lent by the bank to someone as a loan, then this is fraud, and divine wrath shall descend upon the bank owners. Thus, based on this strictly legal approach, supporters of the gold standard demand the return of monetary gold circulation, as well as gold-backed banknotes and gold-backed settlement accounts—then the credit expansion carried out by central banks will end, and humanity will have a single deflationary currency, as it did for a relatively short time in the 19th century, and developed quite well.

There are supporters of free banking. They argue that the main thing is to abolish central banks and overall regulation of the banking sector; let the banks decide for themselves what money to emit and how to back it, and then let the market decide which currencies are actually more convenient for people. This idea was defended in slightly different forms by Friedrich Hayek in the book “The Denationalization of Money,” and David Friedman also touched upon this theme in “The Machinery of Freedom” (although he does not belong to the AES). The forecasts of free banking supporters also differ slightly. Some argue that everything will eventually come back to the same gold standard with 100% reserves, because those who want to defraud will quickly find that their reserves begin to melt as trust in their currency is lost. Others say that 100% reserves are not needed by anyone, and if a currency offers convenience of settlement and reasonable emission rates, then no one will worry about bank runs.

Finally, there are the prophets of hyper-bitcoinization, among whom I mention Saifedean Ammous and his book “The Bitcoin Standard.” He argues that due to the gradual growth of the network effect, as well as the stock-to-flow ratio, Bitcoin will become the global measure of value. Further, again, there are options. The first—there will be nothing but Bitcoin, the great and luminous, except that it will operate in different protocol layers according to several different rules. The second option—alternative means of payment will persist, but the basis of their value will be backing by Bitcoin reserves. The reserves might be 100%, or they might not. The main argument in favor of this particular scenario is that here, no one is abolishing central banks by any decrees; they will supposedly wither away on their own.

Catallactic Theory of Money, a brief review

While a vast number of readers watched as election commission employees in neighboring Belarus performed dangerous pirouettes on step ladders and other feats for the glory of the current dictator, a truly important event took place in this country. Alexei “Kamendant” Tereshchuk published an essay Catallactic Theory of Money. By internet standards, it is, of course, a long-read, but overall the text is quite concise, and despite the roughness of the presentation, the work deserves to be read by anyone who is even slightly interested in economics. Although, of course, those unfamiliar with Mises’s monetary theory will find the essay quite difficult to read, as it is a direct development of it, using Mises’s own conceptual framework.

For Mises, money is a special category of goods used as a medium of indirect exchange. This good acquires its value through a historical process that can be mentally traced back to the time when money was an ordinary consumer good (the so-called regression theorem).

Kamendant generalizes the concepts of indirect exchange and money. He defines indirect exchange as interpersonal exchange in which goods are acquired for their exchange value. Thus, money becomes just one of the possible goods used for indirect exchange. What is its fundamental characteristic that distinguishes it from other goods? Or put this way: what properties allow a certain good to become money?

Kamendant provides a definition of money that contains the answer to this question. Money consists of goods used to reduce costs in indirect exchange. It is precisely about the reduction of costs. If the exchange of one good for another is carried out directly with lower costs than when using some intermediary commodity, then the need for money does not arise.

Mises derived indirect exchange strictly from direct exchange. However, there is rich anthropological material showing that in primitive societies that do not use money, the economy is nonetheless not barter-based. Instead, there are usually various forms of mutual obligations, which gave rise to the debt theory of the origin of money. Kamendant points out that the only condition under which the demand for money as such could disappear is the equality of costs when exchanging any goods for each other. However, it is quite difficult to imagine such a society; that is exactly why societies with a pure barter economy do not exist.

Also quite interesting is the part of the essay dedicated to the so-called functions of money: scarcity, durability, divisibility, and so on. Kamendant indicates the role of these functions. From his point of view, these are simply different aspects of saving when using money. At the same time, only part of the saved costs relates to exchange itself. But beyond that, there are savings on storage costs, change, and so on.

Perhaps I will not try to briefly summarize Kamendant’s entire essay in one post; it turns out muddled and unclear. Read it yourselves.

My only complaint about the text is that it is written in rather poor language and needs editing. The author claims that this is only part of a future treatise on economic theory, and I hope that before the publication of the treatise, it will be proofread a bit better.

Nevertheless, I am terribly glad that Austrian economic theory remains alive and evolving, rather than being reduced to a retelling of treatises from the middle of the last century.

Money, a continuation of the discussion

I am grateful to Grigory Bazhenov for continuing the discussion about the future of money. Cross-posting on Telegram is a somewhat autistic format for conducting a conversation, but what can you do—it’s a quirk of the platform.

Consumer inflation in the USA.

Here is my quote from our discussion in the YouTube comments:

If people are sitting at home in quarantine, then the production of consumer goods and services will decrease one way or another. Meanwhile, governments are proposed to subsidize people’s lost wages, meaning they will have money to go to the store, but goods will appear there in smaller quantities. In other words, either the government regulates prices, as already announced in Russia, and gets a shortage, or it doesn’t regulate, and gets price increases.

After some time, I read in a post by the authoritative Americanist Dudakov:

The forecasts of economists, who predicted that after the epidemic the USA and other Western countries would experience a jump in consumer inflation for the first time in 40 years, are coming true.

The spike in meat prices served as an illustration there, but the problem is much broader. I had not read the economists’ forecasts mentioned by Malek, and I made my own forecast based on the simplest logic. To be fair, I thought governments faced a dilemma—regulate prices or accept their growth. It turned out that Trump resorted to a third option—direct directive management of production.

However, the assumed rapid recovery of developed economies will most likely lead to the fact that prices for temporarily underproduced consumer goods will return to values close to pre-crisis levels. So, on this relatively unimportant issue, I see little sense in debating for long.

The role of Bitcoin

My original question to Grigory was formulated as follows:

How will an economy behave in which money created in a fractional reserve banking system and money that does not provide for fractional reserve circulate in parallel on comparable scales?

I am not an economist, and I was interested to know the opinion of professionals about how the behavior of a system with the proposed parameters would look. Alas, instead of an answer, I received assurances that Bitcoin’s capitalization today is too small, its volatility is too high, it cannot be used as money, it is poor as a hedge asset, and so on. In short, I was told about today’s Bitcoin, not about a hypothetical situation in which its capitalization has already reached values comparable to the money supply of global reserve currencies, or at least gold.

Well, for now—yes, I fully agree that Bitcoin is more volatile than gold, that it is a poor hedge asset, and that its liquidity is lower than that of the dollar (although on the global market, Bitcoin’s liquidity is much higher than that of the Russian ruble). Today, the role of Bitcoin is less an instrument for short-term speculation and more an instrument for long-term investment. For someone who bought Bitcoin five years ago, it doesn’t matter much how much today’s rate jumps, because they have been firmly in the green for a long time. Similarly, for today’s buyer, it doesn’t matter much at what price they buy if they intend to hold Bitcoin for at least five years. They will be in the green anyway. If Grigory disagrees with this statement, it would be interesting to read his arguments.

However, even in that unlikely situation where the long-term trend of the BTC/USD currency pair turns from growing to horizontal or even falling, Bitcoin retains its significance as digital peer-to-peer cash—that is, value that can be passed from hand to hand via communication channels without using unreliable intermediaries such as state-regulated banks or transfer systems. However, my question to Grigory concerns only that hypothetical situation where the capitalization of BTC and the volumes of trade in it have already grown significantly—not the current picture, which we already know.

Unsecured obligations and fractional reserve

Separately, there is a post by Artem Seversky stating that money is an anti-commodity, and that issuing loans from own savings is inefficient, and it is much more sensible to issue loans with money created out of thin air. I see no reason to forbid anyone from giving others unsecured obligations; it is quite enough for me that secured and unsecured obligations cannot be confused, and beyond that, let market mechanisms work.

For example, I can use Bitcoins in settlements, and if I receive a Bitcoin loan, it is only because the lender actually had those Bitcoins on hand before kindly lending to me. Or I can issue my own ancap-tokens, tie their price to a single commissioned article—and sell tokenized obligations for creating texts to anyone willing in exchange for consumer goods. This would be an unsecured obligation, but what does fractional reserve have to do with it? Fractional reserve is if someone buys a hundred of my tokens and issues a thousand of their own, with an obligation to exchange them for mine upon first demand.

Franklin looks at the gypsy physical Bitcoin as an unsecured obligation

Three short announcements

I recently published a selection of interesting quasi-libertarian channels, and among them was Artyom Seversky’s channel Life with Others. I specifically recommended checking out the series of posts on monetary policy, but digging through a Telegram channel’s history can be inconvenient. Fortunately, the author was kind enough to compile these posts into a single article and post it on the website. At the same time, you can browse the site; there are some interesting things there as well, for example, an article on classical liberalism and libertarianism by the same Eric Mack, whose book we are currently translating.

The Libertarian Band channel, where I write scripts for a series of educational videos, has started its own separate news section and today released a pilot episode with a new charismatic host. Please take a moment to leave a comment about what you think of the presentation to help improve it.

I have also posted the translation drafts of five new chapters of Practical Anarchy by Stephan Molneux. With this, my budget for incentivizing volunteers has completely run out, so I think the flow of drafts will now stall, and I can calmly focus on editing what has already been sent. However, you can contribute more money, and the volunteers will perk up. As a reminder, here is the wallet for financing the translation project: 1AFkD2bazCs5YZBBrSD7HsRMWLmRbg6QBo