What is Money? - George

In Eugen Rosenstock-Huessy's, The Origin of Speech, Rosenstock postulates a significant difference between pre-formal, informal, and formal speech.

He calls pre-formal speech the type of speech along the lines of "showing a man the direction to the next farm on the road, or stopping a child from crying." Pre-formal speech is the same as animal speech, the human version.

Of informal and formal speech he says, "Informality is a rebellion against formality. Never can 'informal"be called pre:-formal. To be informal means to neglect forms which exist." He illuminates these differences to show that the progression of language is NOT pre-formal to informal to formal. Rather, pre-formal is a different thing altogether, and formal speech must exist before informal.

So what does language have to do with money? Maybe nothing. But maybe money works the same way. What if currency is the formal language of exchange? Language itself is an exchange between multiple parties through a shared context. So it is not so far-fetched to see money belonging to the same category.

The Native American tribes did not have money. They valued things, they had trade, but they did not have money. For century upon century their economy would be described as pre-formal. We might wonder why they never developed a formal currency. But if Rosenstock is right then pre-formal cannot develop into formal. Formal comes first. The history of wampum currency in northeast America suggests a formalization upon the arrival of Westerners in the 1600s.

Rosenstock asserts that for formal speech to exist first, as he contends it must, formal speech must be spoken into the world that doesn’t have it from outside. He would contend that formal speech was initiated and taught to humans by God, and I would agree. If formal money works the same way then this too would have to be initiated and taught to humans by God. The Bible doesn’t explicitly describe this moment. Money isn’t referenced until after the flood. But Genesis 2 does mention lands of precious metals and stone in a curious way.

Speech is not static. It evolves and transforms over time. Yet it would be without meaning if it also wasn’t fixed. Formal speech is much more fixed than informal speech. Two ways of guarding speech is through ritual and through the written word. Ritual speech and writing makes speech exists in history in a tangible and reference-able way. These become the foundations upon which more formal speech, and the other forms of speech develop.

What is money then? What are the formal foundations that formal money exchange, and the other forms of exchange develop upon? We know that money, like speech is not static, that it evolves and transforms over time. There has always been inflation and deflation. But what is the formal money that exists in history behind it all, the thing that keeps it stable, the tangible money that exists in time and space and is the foundation for economies?

Modern economies have developed a formal currency upon mutual agreement. The elastic nature of money is artificially (and some would say nefariously) managed by authorities and institutions so that the everyone keeps to the mutual agreement. It is tempting to deny this as being true money. It might be best described as an informal currency masquerading as formal. As such it is true money, but fundamentally temporary. Our money today is much like a language once rich in the written word that has burned all its books. Eventually it will become meaningless and smaller groups will rebuild formal structures upon new foundations.

What is Money? -Matt

Unless you are Les Stroud or Chuck Norris, no man is an Island.  And because we are not islands it is necessary to exchange goods and services with other to assemble the provisions needed to live.  On the most basic level this could be achieved with a barter type method.  I’ll give you two chickens for a gallon of milk.  While this may work in a simple exchange scenario it is less than desirable when used in barters of substantial value.  How many eggs does it take to trade for a car?  Even if I were able to assemble that many eggs, would the person with the car even want or need that many?  The impracticality of trying to find common value in uncommon items necessitates the creation of a standardized method of exchange.  This is what money is. 

Rothbard stated it best in Supply of Money when he said that “money is the general medium of exchange, the thing that all other goods or services are traded for, the final payment for such goods and services on the market.” 

The notion that money is the medium of exchange is what I hinted at earlier.  It is the standardized conduit of value.  A car may not be worth a million eggs, but a car may be worth 20,000 dollars and a million eggs might be worth 20,000 dollars.  The commonality is the medium of exchange.  Money is the link between these two items.  When compared against each other they may not be equal in value, but when money is inserted into the transaction common value may be determined.  How this determination is established is the most important aspect of money.

Money is the final payment for the exchange of goods and services.  Money has imbued value that is able to act as a full exchange of value for a good or service.  Money is not simply the facilitator of a transaction, it expunges the debt wholly.  It is the end of the transaction, not simply the facilitator of exchange.  This is why debt (credit cards, IOU’s, traveler’s checks) is not money.  Debt is unable to be the final payment of exchange.

Because money is the final method of payment, it must have inherent value.  In order to have value it must be both desirable and finite (or constrained).  Something that is not desired has no value and something that has no limits has no value.  This desire and restraint is the difference between diamonds and sand, between gold and quartz, between a Ferrari and a Corolla.  It is because of this we must be wary of fiat currency as it has no characteristics of true money.  Its value comes from government decree not out of desirability or constraint.  It, in the truest sense is not money.

Lastly, money must be able to be a diversified storage of wealth (wealth = potential buying power).  This harkens back to the notion that money must be desirable, but expanding on desirable it must be timeless.  Cellular phones, when they first came out, would have met the criteria for money (desirable and finite), but they quickly became obsolete and worth less.  How many bag phones sit idle on the shelf of thrift stores?  A silo full of bag phones may have looked like a good investment in 1989, but they lacked the timeless qualities that make money a storage vessel of wealth. 

True money must be desirable, finite, able to expunge debt wholly, be versatile and have the ability to be standardized.  It is because of this items like gold and silver act as good money.