The Future of Money

Discussion in 'Coin Chat' started by kaparthy, Sep 17, 2019.

  1. kaparthy

    kaparthy Supporter! Supporter

    In the future, we will recognize money created by individuals, rather than by organizations. Individuals such as Taylor Swift, Bill Gates, Warren Buffet, and Oprah Winfrey are certainly in positions of visibility and trust to enable that.
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    (This presentation is based on “The Future of Money “ delivered on August 14, 2019, at the ANA “World’s Fair of Money” Maynard Sundman/Littleton Coin Lecture Series.)

    Third-party trust services such as Paypal could enable everyone to issue their own personal money. We have had reporting mechanisms such as Moody’s and Barron’s for over 100 years. And of course, we now have Equifax, TransUnion, Experian. But they are only the inheritors of the Bank Note Reporters of the early to mid 19th century.

    Money markets could be radically restructured by some new reporting mechanism. In a session that I attended in the audience on the future of law, it was suggested that the blockchain mechanism could allow evolving contracts. So, too, would a blockchain identity manager allow you to always show the spendability of the money you issue.

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    The idea of personal money was explained in two books from the 1930s. A New Approach to Freedom and The Flight from Inflation by E. C. Riegel. They would have remained even more obscure than they are had they not been touted to the libertarian community by Harry Browne, the author of How to Profit from a Monetary Crisis and other books consumed by gold bugs. For that he was the Libertarian Party presidential candidate in 1996 and 2000.

    You all know that we define money as being a medium of exchange, a store of value, and a unit of account.

    Those have become decoupled. The U.S. dollar is not a good store of value, granted that it is better than most of the national currencies around the globe. Gold is a better store of value, but it is not a medium of exchange, at least not on the streets. However, the dollar remains a popular unit of account. Multinational corporations headquartered in Europe and Asia keep their books and report to investors using U.S. dollars as the common measure. By comparison, in the USA, into the 1830s, merchants along the eastern seaboard often kept their books in pounds-shillings-pence of the United Kingdom. Most of their trade was trans-Atlantic. The three attributes that we learned in economics classes no longer apply and perhaps never did. In the future, whatever money is in one context, it may not be in another.

    In a world where money is tied to identity, money will have one or more of the three attributes that information technology uses for personal identity: something you have; something you know; something you are. Those are three different things that can be inter-related but need not be.
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    The future can take many paths, depending on who you are. You might think of colonies on the Moon and Mars, and the big wheel spinning space station. You might consider life on Earth to be a complex, trashy cyberspace frontier. And they are not mutually exclusive. Whatever the future brings to you, personally, it will help to keep in mind the axiomatic truths that define and explain our experiences. In order to understand the future of money, we need to look at the origins of money.

    In The Economy of Cities Jane Jacobs said that contrary to Peter Schumpeter’s theory of “creative destruction” very little is actually destroyed by innovation. Jacobs pointed out that when steam machinery began to supplant literal horsepower, the craftsmen who had been making brass fittings for horse tack put their lathes and hammers to work turning out fittings for industrial machinery. This was supported 40 years later by George Selgin’s book Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821. So, I assert confidently that as much the future will bring unpredictable novelties, many of the structures and functions that we have in our social institutions today—especially money—will continue and will evolve.

    A hundred years from now, people will not be spending uranium coins on the streets of Chicago. But do not be surprised if an asteroid colony begins to issue advertising trinkets made from rhenium, osmium, iridium or whatever it is that they have a lot of and want to sell. But speaking of Chicago and the continuity of commerce, 2500 years ago, cows were money. Today, on the commodities exchanges in Chicago, you can trade cows, and wheat, and gold in quantities unimaginable to our ancestors. Money may take different forms and formats. But we will always have an affinity for tangibles.

    · Something you have.
    · Something you know.
    · Something you are.
    Those are the three parameters of information security.

    Something you have is a token, a key, a card, a coin, a chit, a USB drive, an RFID fob, anything physical, including a biometric scan from your finger or eye. (I must note that many security researchers consider biometrics as “something you are.” I disagree with the taxonomy. Biometrics are just something you have and carry closer.)

    Something you know is your password, of course, including the code sent to your phone in two-factor process. But, today, it is also the ability to recognize a picture block for Captcha, or enter a simple sum. We also have back-ups such as the name of your first pet.

    “Something you are.” This derives from aspects of personhood that are harder to falsify. DNA is an example. Though false DNA identification is known, instances are rare. Your reputation is your public presentation. Being a member of a social group, a religious order, a military unit is something you are. Today, on the bourse floor, if you want to write a check, the dealer will ask you who you know. You will point across the aisles to one or two others, and with some waves and nods, your paper promise will be validated by your reputation, by who you are. In the age of steam, "when old technologies were new," telegraphers wore union membership buttons that were recognized as an unofficial and unauthorized “pass” by sympathetic railroad conductors. It was solidarity.
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    We commonly believe that pastoralism and agriculture led to surpluses that were traded by barter, my excess chickens for your excess potatoes. Eventually, people figured out that the best barter goods were metals and copper, silver, and gold became money. It just ain’t so.

    In fact, money has its roots in ritual gift exchange. This was presented recently by anthropologist David Graebner in his book, Debt: The First 5,000 Years. As human societies developed, social status came to define the rules of gift exchange. Even today, when we make a purchase, both parties often say, “Thank you.”
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    Starting about 7000 BCE the people of Sumeria invented a system of clay tokens to keep track of gifts to the city temple. These are all about the size of the tokens known from the popular board game Monopoly. The oldest and simplest disks represent basic farm goods such as “A Sheep.” Eventually, new tokens stood for classes of animals – sheep, goats - rams, ewes, kids. Then, metals and grains were differentiated. Tokens stood for bottles of beer and woven textiles. (I point out that today, we have coins shaped like guitars and baseball gloves. This will continue into the future.)

    It took about 4000 years, but eventually, inscribed pictographs and cuneiform writing were developed as ways to represent tokens without actually needing the tokens.

    In parallel with the development of writing was the development of counting. Fred Flintstone could not count to ten. He only counted to three. And the earliest written records we have of large numbers such as five and six and beyond call them two-two-one and three-three. Eventually, over the same 4000 years, shorthand names for big numbers became the words we have for one through ten and beyond.

    We speak today of virtual currencies but the system of pounds-shillings-pence was invented by medieval bankers to come to grips with a huge array a plethora of local coinages whose weights and finenesses changed over time. During the great fairs of the Middle Ages, bankers met to clear their books of assets and liabilities and they reconciled their accounts without ever touching a coin.
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    This was facilitated by a new form of enumeration, so-called Arabic numbers conceptually different from Roman numerals.

    Nothing teaches arithmetic like money. The largest number in Alexander the Great’s experience was the myriad, 100 x 100 = 10,000. We measure our computer processors in gigahertz and memories in terabytes. Consider now that the prime factors of 39903841 are 5039 and 7919. You can almost do it in your head and in the future, many people will do that

    Just about everyone here can speak within one or two seconds how much 17 times 7 is. But 500 years ago, you needed a counting board or an abacus to do that. The point here is that the factors of large primes are one basis for public key cryptosystems that are used to verify and validate communications from international financial transactions to your next phone call. Large prime numbers will continue to be the basis for money in the future. In the future, people will do extremely complex calculations in their heads, perhaps with the aid of embedded silicon, maybe with enhanced RNA.

    Of the many truths established by anthropologist David Graebner is that no society ever transitioned from barter to money. Barter is what people resort to when money fails. In the future (no surprise) money will sometimes fail. Issuers will be discovered to be insolvent. They may lose popularity through scandal—even if other currencies rise by the same process. People (and other entities) who become isolated from the channels of trade will resort to ad hoc media. New forms and formats, procedures, processes, and policies will be invented, of course, but they will have deep roots in the living history of money.
    Last edited: Sep 17, 2019
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  3. GoldFinger1969

    GoldFinger1969 Well-Known Member




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  4. EdThelorax

    EdThelorax Well-Known Member

    There is nothing backing any crypto.

    I believe the technology would have value if there were real world, widely accepted uses. I haven't seen any yet. Crypto today is similar to the advent of the internet where there were start-ups valued in the billions without any revenue.

    One definition of money is:
    Anything of value that serves as a (1) generally accepted medium of financial exchange, (2) legal tender for repayment of debt, (3) standard of value, (4) unit of accounting measure, and (5) means to save or store purchasing power. See also cash.
    Read more:

    Some say that the strength of the US military or it's ability to tax it's
    citizens is what gives value to the US Dollar. I have never heard of anyone having to use force to make someone take their dollars. What gives it value is mandate. It is declared legal tender. Anything that the authorities demand "legal tender" would satisfy 1,2,4.
    Gold worked very well for thousands of years as money because it was quantifiable and standardized which satisfies 3. The limited supply of gold prevents unbridaled and unlimited increase of the money supply and is no one else's liability which satisfies 5.

    There are only 2 possibilities for the future of the current debt-based system. Inflate to infinity or massive unimaginable defaults. The US and therefore the world almost saw the latter in 2008. "Too big to fail" was referring to the whole economic system. The Abyss is the domino effect of the realization that there is only a fraction of the money that people are purported to have and that there is no way possible that all of the debt can ever be repaid. If I have $10 and loan it to Joe, we do NOT all of the sudden have $20 between us. So I only loan it if the risk of him not repaying me is less than the interest I charge.The inflate to infinity choice requires more and more debt to generate the increase of the money supply. Because the rate at which the debt must increase is parabolic, there has to be continuingly more lax lending standards which just moves everything close to the edge of that abyss.

    Crypto can easily satisfy all 5 of the above requirements of money with nothing more than government making one crypto the new legal tender. If the cumulative interest charged is less than the growth of the crypto then as long as those making loans go back to only loaning to worthy parties, then there will be limited defaults and enough currency to cover all principal plus interest. Of course that would mean that most entities would have to go back to actually being able to afford the things they purchase.

    When we have fallen into the black hole of spiraling defaults there will be an alternative accounting methodology waiting, it will be some form of digital currency. It will be based on all the work that has been going into blockchain. It won't be Bitcoin, or any other current crypto. It will be an un immutable leger system where ever single transaction will be recorded and stored. It will be world wide, and those with real money will be able to lock in the "wealth" they amassed with the current fiat system.

    Until then, I am going to take the opportunities in this new fad to make profits and convert them to physical silver. Dot com, Bennie Babies, brand new quarters for 4000$, baseball cards, multi million dollar condos, tulips, bonds from a country 23 trillion in debt, Enron, a 1913 nickle costing 3+ mil., Bear Sterns or cow poop, there are always things that can be traded to make good money.
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  5. medoraman

    medoraman Supporter! Supporter

    I would disagree with the OP that the USD is not a store of value. Store of value has never meant indefinitely. It was always assumed it was within a timeframe. Even in ancient days, you could not hold on to a coin forever as a store of value, as civilizations changed. If your ruler wanted to debase, he debased. If you took a foreign coin to another country you never got full value in exchange. Even the idea that a US $20 gold piece has maintained its value over 150 years is cherrypicked data. In some ways it has, in other ways it hasn't.

    My other issue is this idea that money will be issued from private people. Why would someone take this counterparty risk? The entire point of "money" is that you can trust the counterparty. To have Oprah issue money, you really are going back to the days of broken bank notes, looking up for every transaction what the current conversion rate between Oprah bucks and Tyler Swift euros. Why? Why risk your money this way. The other issue is any government would never allow this to happen, as this is a huge source of wealth and power to them. Look at what happened to Liberty dollars.

    Edit: Nice post btw OP. Very intriguing and hopefully sparks a lively debate.
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  6. -jeffB

    -jeffB Greshams LEO Supporter

    Great post!

    I recognize the "something you have/something you know/something you are" trinity from information security, but I don't see it as a useful criterion for money. It seems to me that money, most fundamentally, has to be something that can be exchanged.

    You can easily exchange something you have. Give it to another person, and now they have it, and you don't.

    How do you exchange something you know? Give it to another person, and now you both know it.

    Worse yet, how do you exchange something you are? I'm not interested in giving away any fingers or other body parts, and while I can keep producing more DNA as long as I'm alive, I'm not sure I can see it as a medium of exchange. (I guess you could view my kids as some sort of merger/spinoff...)

    And as I think about it, I don't believe the blockchain falls under any of these categories. Maybe "something you know", but it's the aggregate and publicly known information that gives it value.

    Like I said, great post!
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  7. HaleiwaHI

    HaleiwaHI Active Member

    I would definately agree that Crypto's have no financial backing. Why they got to where they did (by value), who knows? Who or what controls their value? Again, who or what knows? As was mentioned above, gold & silver have always (for the last 5,000 years or so) been a staple of value. But who can carry around $$$$'s of gold and silver in their purses to secure their purchases? I did research on this very subject many years ago. This is what I came up with. I imagine some things have changed since i did my research - https://thefutureofmoneytomorrowtod...04/what-do-you-think-what-will-be-future.html
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  8. kaparthy

    kaparthy Supporter! Supporter

    Thanks for the long and thoughtful reply. I really appreciate your time and consideration. Let's just hash out the dialectic here and deal with our disagreements.

    Nothing is "backing" the dollar except that the government accepts it in payment for services. If you issued your own money to buy goods and services and took it back in return for your labor, you would be following the same model. See the books by E. C. Riegel that I recommended.

    Cows were money because they were useful. You cannot eat gold. It has no use -- except as money. Even Ayn Rand said that the only value in gold is that other people will honor it in exchange for their productive effort.
  9. kaparthy

    kaparthy Supporter! Supporter

    The standard definitions of money from Econ 101 and your citation to BusinessDictionary dot com say that to be money, the object must have all of the attributes.
    A token good for a drink is not "money" because it is not a unit of account. We don't keep our books in ounces of whiskey or bottles of beer. In our home we have about $20 stored in value as little cans of organic cat food (happy kitty). But they are not money, even if we could trade them for something else, because they are not a unit of account and not a "generally accepted medium of financial exchange."

    My point in "The Future of Money" is that those authorities are wrong. Money must have at least one of those attributes and can have more than one. But, in context, media that are units of account need not be generally accepted in trade or stores of value. The merchants in the USA of the post-colonial era kept their accounting ledgers in pounds-shilling-pence but accepted a wide range of moneys, mostly Spanish dollars, but also Islamic/Arabic gold, and much else, in which they did not keep their books.

    I cite my my authorities to show where I get my ideas from. Most people use "dictionary definitions" to beat each other over the head. Long ago, as the international editor for Coin World, I discovered - which I should have known - that the Battle of Lake Erie was reported differently in the Encyclopedia Britannica than in Grolier's American Encyclopedia -- just a spot of bad luck and a sticky wicket versus brave and plucky homeboys.

    The business dictionary dot com is no more an authority than we are, and perhaps less. Most of us here know more about money than most bankers today. The Secret Service sends agents to the ANA Summer Seminars.
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  10. kaparthy

    kaparthy Supporter! Supporter

    Other possibilities exist. Going back to the origins of money and to its long history, money is essentially a debt and the medium of ritual gift exchange. That was why I cited Graebner: no society ever went from barter to money; barter is what happens when money fails. What we see as the exchange of things - potatoes for clams - is the exchange of gifts. They need not be of equal "value" (in units of account) but represent appropriate recognition of social status.

    At a Libetarian Party convention, I "bought" a six-pack of homemade beer for a one-ounce silver bar. They were about equal in value but no one was counting the difference. The exchange felt right. It was a social interaction.

    Precise economic calculation is a consequence of a monetized society. It is wonderful. Profit pushes the grave farther away. Money can just as much be a matter of social gifting. The Japanese do it.
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  11. kaparthy

    kaparthy Supporter! Supporter

    Thanks for the reply. We have different ways of looking at it and my perspective is clearly not the view you have. For one thing, just to get to the root of this, some of your assertions are not facts.

    We know of many hoards of coins that were old in their time, from fallen cities, that continued in trade. In the history of Julius Caesar's rise and fall, Athenian tetradrachms circulated as valued gifts. The coins of Antony's legions are so common and so well known in circulated graded because they passed on the streets for decades after his defeat. Roman bronze in medieval Europe is another example.

    I do not know what you mean by "full value" but clearly the Spanish dollar was accepted in the United States long after Spain lost the New World colonies. It was a problem - supposedly - that the post-colonial US silver dollar was readily accepted in the Caribbean because of its weight and fineness, not because people there wanted to buy things from here.

    The UK gold sovereign is another example.

    In the 19th century the US Treasury printed booklets showing weights and finenesses of foreign gold and silver coins, down to the fraction of a US cent.

    I could go on... but I have to go to work...
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  12. GoldFinger1969

    GoldFinger1969 Well-Known Member

    "Full faith and credit" means something. The dollar is the reserve currency for trade, central banks, and most businesses.

    If you need to park $30 billion over the weekend or for a few days, you can't do it in Euro-denominated paper, or Chinese or Russian paper, or even British gilts or notes.

    ONLY the U.S. Treasury and MBS markets have the size and liquidity to handle that type of institutional purchase (and it happens all the time). If you parked that amount or even a fraction for short-term investing and Russia or China imposed capital controls, you'd be updating your resume. :D
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  13. medoraman

    medoraman Supporter! Supporter

    Antony's coins circulated because they were debased. Check the hoard records, they were never hoarded until after Nero's debasement at the earliest, and most were hoarded after further debasements, which is why they are all so worn.

    We both could go on and on debating this, (and I will if you like), but the POINT was "store of value" for money never meant generational really. The idea was that you were a chicken farmer, but needed to buy an ox. Its very hard to "store up" enough chickens, and then find someone with an ox who wanted 500 chickens to trade. By having money, you could sell each chicken to someone who wanted a chicken, saving up enough money after 500 sales, to buy an ox. That is what a "store of value" for money entails, not what many "hard money" people here believes it means. They believe your money in 1780 should buy the same amount of goods in 1880 of 2019. Sadly, THAT is not true either. Because of the US gold rush, your 1780 gold devalued by 1880, but now those massive finds have dissipated, (as a percentage of world GDP), it is true today. In the future it may or may not be true, depending more on the gold commodity market than the USD. See how this works? The USD is the MONEY, the gold is the COMMODITY, worth relatively more or less in adjusted USD terms due to commodity factors, just like sugar, coffee, or pork bellies.

    The main reason the USD depreciates it because we WANT it to. Being a primarily consumer based economy, human psychology works better if everything is a little more expensive tomorrow. This encourages purchasing, which leads to more wealth overall. We also benefit by others being able to be rewarded for saving with interest, (which is why I am bewildered by the last 10 years and what the Central Bankers are doing). Look at Japan from 1995-2015 to see how well negative interest works with consumer economies.
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  14. HaleiwaHI

    HaleiwaHI Active Member

    The future of money all boils down to this: If there is a buyer and a seller and they agree on an exchange using whatever means that exchange becomes, this is what becomes "money" for the moment. To my knowledge, there's nothing backing any currency in today's world. And silver and gold only have value because someone is willing to offer some of their non-backed currency for it and someone then accepts it. So the principle will remain the same for the Future of Money. As long as someone accepts what is offered, the transaction is complete, but it is my opinion that the Future of Money will be digital, paper & coin (or physical) currency will only be a thing on the shelves of collectors.
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  15. Prez2

    Prez2 Well-Known Member

    Who knows? God knows we need something transformative for sure. I cannot comprehend crypto though and I can't wrap my head around algorythymns.
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  16. medoraman

    medoraman Supporter! Supporter

    I would say, if governments lose trust with the people, and some other organization worldwide gains more trust that governments do, it could be attempted. I do feel, though, that most governments would fight their loss of sovereignty due to how much power they would give up, and money to be made. It boils down to either legal enforcement or trust, though. Without people trusting the issuer and specie, no one wants to accept as "money" something with counterparty risk. Bitcoin can only work if everyone believes it is innately valuable, (same as pm). If it relies on the guarantee of someone else, there has to be ZERO doubt as to that entities ability to back it up, or it will fail as money. That is why OprahBucks would fail. I would not trust them, since what if she dies? What if she did something to make everyone hate her? Too many unknowns and risks for me to trust "money" she backs, (insert any person here for Oprah).

    It would be interesting if attempted. I am not saying I didn't like the OPs post, or it was not interesting, I was just disagreeing with a couple of postulates he had.
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  17. EdThelorax

    EdThelorax Well-Known Member

    What a pleasure it is to discuss such topics with people that keep an open mind and have such extensive knowledge.
    I feel the key point is that the world is going digital. How the world will implement that is questionable. It seems logical to me to assume that at some point, there will be a single world wide, stable method of accounting and medium of exchange.

    One of the biggest problems I see with an individual based money would be the rate at which a person's "credit score" can change. I would hate to be holding a Weinstein Dollar for example.

    Honestly, for all the complaining I may do about the management of the current system, I am NOT looking forward to the time when it has to be replaced.

    Gold does have intrinsic value. If nothing else, we would be using it as a paint replacement so nothing would rust. It's anti-oxidizing properties is what has made it so special for so many millennium.

    HaleiwaHI, great work, I posted a link on my forum. Thank You.

    kaparthy, Organic cat food and Libertarian? You must be as smart as your writing suggests. That is meant to be a compliment of the highest degree.
  18. HaleiwaHI

    HaleiwaHI Active Member

    Actually, now that I think about it, it's very likely that the future of money will be three-fold. 1) I think we can all agree that a lot of it will be digital so that the governments can track us for tax purposes. But 2) there may also be a local need for some form of person to person currency such as People paying with their own printed cash for their resturaunt signed by management. Much like a discount coupon from the company who honors the currency it made for itself. Then there might even remain the 3) Crypto currencies and their next generation. Whatever turns out, it is certain to be interesting. I wonder whatever happened to the SDR's that were being discussed behind closed doors some years ago?
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  19. Prez2

    Prez2 Well-Known Member

    I don't know. God knows our system is corrupt as all Hell but too many criminals hold too many interests to have it completely crash...yet. I keep hoping hough.
  20. TheFinn

    TheFinn Well-Known Member

    Every fiat currency or token has gone to zero in recorded history. Big difference between money and currency. Gold is the only money I know of now.
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  21. Prez2

    Prez2 Well-Known Member

    Fiat currency being the operative phrase. Total fiat currency based on endless amounts of debt representing a house of cards. That is our currency and sooner or later, it will fail.
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