What is Money? (Part 5)
Asking yourself "What is Money?" is the 1st step into a philosophical rabbit-hole that could prove to be the most fascinating intellectual journey of your life…
The question “What is Money?” is deceivingly simple. One would expect the answer to be abundantly clear given its prevalence in daily life, but upon further reflection, most find money to be mysterious. Money is an all-pervasive economic ether, an interpenetrating field influencing human perception, thought, and action. Yet despite the “everywhere and nowhere” nature of money, its deepest truths remain hidden in plain sight. Here, we explore yet another answer to this question, money is…
A Token of Territoriality
“Several hundred million years of biological evolution have altered not at all the psychological tie between proprietor and property.”—Robert Ardrey
“Humanity and the soil—they are the only real basis of money.”—Thomas Edison
Homo sapiens, like many others in the animal kingdom, are a territorial species. Staking out property, chasing off trespassers, and defending our homelands are all expressions of the deeply seated biological impulse known as the territorial imperative. Observations in the paleolithic record of widely dispersed hunting cultures confirm that utilization of exclusive land rights was a common occurrence among ancient humans. Similarly, many predatory species form “land-owning” groups: lions, eagles, and wolves all violently guard exclusive hunting grounds. Although land ownership is not a human invention, the proclivity to represent this ownership in a symbolic form that is exchangeable with others is a uniquely human concept called property.
Property is not any particular good. Property is the socially acknowledged, exclusive right of an individual to control and render benefits from a good. County land records, stock certificates, and UCC filings are all examples of property ledgers. Historically, the utility of these lists was limited by the trustworthiness of (corruptible) list-keepers: centralized entities that proprietors were forced to trust to guard the integrity of the list entries from error, duplication, and falsification. As the most marketable good in any economy, money is the most important private property right. Money is a “meta-property” that lays claim to all other pieces of property on the market. Since all property is a derivative of either a good (market actor time and the capital it produces) or a territory (the space controlled by a market actor), money is an icon of exchangeable spacetime. Territoriality is the tendency of life to forcibly seek dominion over specific regions of spacetime. Money is therefore a token of territoriality expressed in meta-property form.
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Since property is a relationship, it is just information. According to Natural Law, the benefits of property ownership accrue to the individual who performed the work to make the underlying asset useful. Such accruals are the proverbial “fruits of labor.” As meta-property, money is an informational tool that indicates who performed the work necessary to satisfy wants for market actors and has thus earned the right to redeem commensurate satisfactions from services rendered by other market actors. In this sense money is an information-bearing instrument that communicates to market actors who worked and what resultant property claims accrued.
To be effective as money a good must be divisible, durable, recognizable, portable, and scarce. Divisibility is necessary to quantify property exchanges of different sizes. Durability prevents money from physical degradation over time. Recognizability means the veracity of the money is verifiable by unbiased means. Scarcity occurs when the demand for a good is greater than its supply, which is always true for money in a conceptual sense. As Aristotle said: “all men engaged in wealth-getting try to increase their money to an unlimited amount.” The human appetite for money is insatiable, a hunger which has induced authorities across history to monopolize and violate money supplies in pursuit of selfish aims. Game theory, not government decree, caused gold to be promoted into the role of geopolitical money. Gold remains irrepressibly significant in worldwide socioeconomic affairs precisely because it is the only money governments have been unable to fully master.
Throughout history, the superior production difficulty of gold guarded it from supply manipulations, which imparted it with superior monetary scarcity. For money, scarcity is directly related to its supply inelasticity. If a money supply can be arbitrarily increased, then it will succumb to the shadow-tax of inflation and cease functioning as a reliable store of value across time. As a result, all else equal, the monetary good with the most inelastic supply tends to outcompete all others and become money. Historically, precious metals were the most divisible, durable, recognizable, and portable monetary goods available. Of the precious metals, gold exhibited the most inelastic supply, meaning that no matter how much energy was allocated towards its production, its supply inflated the least, making it the best store of value available on the free market. Alas, because it is physical, gold cannot perfect the five properties of money.
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Due to its portability shortcomings, gold traded alongside silver for centuries in a bimetallic free market standard, however once precious metals were abstracted into paper (and later, electronic) currencies, gold’s portability was positively augmented. The introduction of gold-backed currencies diminished silver’s relative advantage as a more easily transactable medium and caused its demonetization. The problem with the implementation of any gold-backed currency is that it requires trust in the custodian not to issue more currency units than its gold reserves can justify. No trust relation has been more often broken than this: virtually every time a gold supply has been centralized and monopolized, the currency issuer has soon started running a fractional reserve operation. In many instances, this operation skews increasingly fractional, eventually reaching a zero-reserve fiat currency standard. Stated simply: although currencies fix the portability of money, it often comes at the cost of scarcity. The latest iteration of the repeatedly failed fiat currency experiment is now in its 50th year—this time at a global scale and in a catastrophically synchronized geopolitical fashion.
Fiat currency supply inflation is a violation of private property rights by central banks. When a legally insulated group can arbitrarily amend the meta-property of the world, the social cooperation of capitalism is jeopardized. Seeing money as a token of territoriality clarifies not only the encroachment of inflation on the property of others, but also the impetus of central banking as an institution. Conceived with the intent of steadily siphoning away wealth from productive market actors over time, central banking treats its private shareholders to a perpetual “free lunch” of stolen territory. In a biological sense, central banks are parasites.
Like all other enterprises, central banking exists to execute on the territorial imperative of its shareholders. It accomplishes this by expropriating property from market actors at the expense of externalized uncertainty in the form of inflation, legal complexification, moral degradation, and warfare. Such externalities are unavoidable due to the nature of money itself. Which brings us to the next answer, money is...
In Part 6, we will see how money is used as an insurance policy for uncertainty…
Thank you for reading What is Money? (Part 5).
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