Monday, March 7, 2011

Money Is Fiction

There was an episode of This American Life that discussed the problem of "What is Money?" (Ira Glass referred to this as the "most stoner question we could come up with"). And one of the folks creating the show suggested the title of my rant. A relative of mine laments the loss of the gold standard and grabs as much gold as he can when the object presents itself, as a hedge against the dollar doing a tailspin beside all other foreign currencies, because, as we've all been told, gold will always hold its value.

One of the subjects of TAL was a small island in the South Pacific called Yap, which uses what are called Rai stones as money. Rai stones look like beads, except for their immense size: generally a foot and a half thick, ten feet in diameter, weighing in around four metric tons (with a hole through the middle, as if some giant was going to make a necklace out of them). Not exactly pocket change. These stones are generally used as dowry money, or ransom (after a battle, you'd want the bodies of your relatives returned, so you'd pay with a Rai stone and the body would be yours to bury or burn). And remember, there is no easy way to transport a Rai stone. So wherever they are, that's where they stay, no matter who owns them. Including the one sitting at the bottom of the sea floor that fell off its creator's canoe.

Even more interesting is the concept of Rai valuation: if no one dies making it or moving it, it's very valuable; if lots of people die making it or moving it, it's very valuable. In other words, if there's a good, juicy story to go along with your Rai, people will give it a greater value than a stone whose creation story is dull. This got further complicated when a westerner gave them steel tools with which to make more Rai - these Rai were then considered low value, because of the relative ease it took to create them - the first recorded Yap inflation. Imagine the inflationary spiral you could set off if you gave these guys a jackhammer and a forklift!

So if someone buys a house, or sells a bride using Rai, it is understood that a particular Rai now belongs to George that last week belonged to Jeff, because George's son married Jeff's daughter. Or vice versa (not sure what the dowry system is like on Yap). The stone doesn't move, only ownership does.

Then there's the wonderful novel by Cory Doctorow, For The Win, about gold-farming and organized labor (and about a hundred other topics, but that's for you to discover). I had vaguely heard about gold-farming through online information clearing-houses like bOINGbOING and so on, but this book made it quite clear what it's generally about, and why it's just damn weird, and oh, those darn kids, and other curmudgeonly noises. For those of you not nerdly enough to know, gold-farming is the act of playing a Massively Multiplayer On-Line Role-Playing Game, or MMORPG (of which World of Warcraft is probably the most famous) in order to amass gold and prestige items which one can then sell in the real world for real money to other people who don't want to do the work of actually playing the game in order to level up. Virtual gold is worth real money. There are people in China who do this for a living.

Really there are.

Anyway, these various threads had coalesced recently into an ongoing argument between my brain. What is money, how do we value it, what's it good for, and how does it change over time? The obvious question (one that people without money often ask): how do I get more of it? But the more important question is how does one make it worth more? Should one even try?

You look at stagnating wages, inflating/deflating home prices, the cost of a gallon of gas or of milk, the economy in general, saying that the country is near broke, or saying the country is the wealthiest in the world (which it technically is), and then you look at Wisconsin, where the man in charge is saying that we can't afford these exorbitant teacher's wages, but we also can't afford to raise taxes.

Again, money is fiction. It's worth what everyone agrees it's worth, just like houses, gas, milk and meat. Supply and demand. They talk of "cheap credit", but no one's loaning. They talk of artificial currency valuation as if it all isn't pretty much entirely artificial. We can buy something with a piece of paper, because we've agreed to do so. If I try to pay for something with Canadian dollars, there are very few places in my neighborhood where they might be reasonably expected to allow it. (meanwhile, Canada is highly accommodating to US dollars - as is the island of Yap)

And that whole thing about gold being some sort of standard? It's metal. It's pretty, certainly. It lasts forever, and doesn't tarnish very easily, this much is sure). And I imagine it's kind of rare. But our concept of gold as some sort of miracle metal that will always hold a certain value at a minimum is just as much a fantasy as exchanging Rai stones. It's a shared delusion. As is the idea that paper money, or any sort of electronic transaction is anything more than symbolic. Everyone worries about stuff costing more money, or some sort of economic collapse, like we're going to raid the homes of the wealthy and carry off their - what, exactly? Their net worth? Their paper liquidity?

Perhaps what is needed is a whole new agreement about money. The Brazilians came up with a simple solution to their horrifying inflationary cycle - the Real Unit of Value. Value based on how much everyone agrees something costs, and then value of labor based on what everyone agrees people should make at a minimum for whatever labor they do. It was kind of a magic trick, but everyone bought into it at once, and their economy stabilized and then flourished. There is still poverty in Brazil, but that's pretty much institutionalized at this point. On the other hand, everyone uses RUVs instead of cruzeros now. The whole country agreed that money wasn't money anymore, but that this other thing was actually money. And prices stabilized.

This rant is not about having some brilliant idea about what to do, how to make things more equitable, or any lofty goal like that. It's more a rumination about the nature of how and what we value and why. I know that money doesn't buy happiness.

Though it does increase one's choices.

1 comment:

Anonymous said...

In US, it's manufactured crises in place of manufacturing bases!