"And his tail drew the third part of the stars of heaven, and did cast them to the earth."
—Revelations 12:4
According to Christian theology, of the angels created by God, one-third joined with Lucifer (or Satan, the Devil) while two-thirds remained loyal. Bad things happen on earth because some people listen to the devils; there would be nothing but good if we would all just listen to the good angels.
But what could they possibly have argued about, resulting in the split? The Bible does not say. God made them all, but apparently they were not identical. God presumably made Heaven, but apparently 1/3 of his creation thought it was defective in some way.
If earth is a reflection of heaven, if man is made in God's image, then the trouble probably started on a committee. An unimportant committee, like one set up to decorate for an annual event. "Do we have to do all gold again? I mean, everything is gold here. How about a little platinum? Platinum would really liven things up!"
The next thing you know all sort of reform and improvement movements would crop up among the angels. "I call this piece of gold a saxophone." But no, God and his gang of followers have decreed harps are the only musical instruments allowed. Soon angels are having secret, informal meet ups in platinum rooms to listen to saxophonists and watch performance art.
Or it could have started with some angel, not necessarily the eventual leader, Lucifer, being a smarty-pants. Authorities don't like smarty-pants, as I learned from my parents and Catholic School. Smarty-pants have trouble understanding that most angels like the way things are, and prefer stupidity to change. Smarty pants and heresy amount to pretty much the same thing.
"Hey, here's an idea, since this breathing life into clay figurines hasn't worked out very well. Let's start out with building something simple, I call it a protozoa. The protozoa will be able to adapt to the environment (a major reason for clay figurine failure) and have sex, and thereby produce improved protozoa each generation. They can evolve over time to have many cells, be bigger, and differentiate into species to form a mutually evolving ecosystem."
Then again it could have been cosmological questions that set angels against each other and against God. Perhaps that started as a philosophical argument about determinism (fate) and free will. The determinism angels favored the clockwork universe. The free will angels favored introducing chance, in the form of quantum probability waves for the small particles which they argued would make a better universe than just paving the streets with gold.
I suspect that God gave the smarty-pants angels earth because he could not get it to work to his liking. It was just a bunch of clay figurines dancing to his instructions on a globe of solid gold. The lazy two-thirds of the angels just went back to God and their harps.
But the entrepreneurial angels mixed things up. Earth ended up with an iron core and a stony crust with water that could support bacteria and then algae and protozoa and higher life forms.
So here we are. Unfortunately, apparently when God saw how well things were going he got jealous and tried to take earth back. Having perhaps learned a bit from the smarty-pants angels, he decided to invent a dozen or so major religions to compete with each other for the hearts and minds of homo sapiens. If you want a stupid religion to believe in, there are plenty of choices.
Showing posts with label gold. Show all posts
Showing posts with label gold. Show all posts
Sunday, February 16, 2014
Wednesday, October 30, 2013
Churchill's Gold, Rand Paul, and Janet Yellen
Senator Randal "Rand" Paul has threatened to hold up the confirmation of Barack Obama's nominee for Chair of the Federal Reserve Bank, Janet Yellen.
Rand Paul is suspicious of the Federal Reserve, and I don't blame him for that. The Federal Reserve is not very transparent about what it does, and it is not very accountable to Congress or even the President.
Rand Paul, on the other hand, is pretty transparent. He wants to be President, and he needs the Tea Party to support him in his bid for the Republican Party nomination. Like most Tea Party members, Rand Paul seems to be a primitivist with regard to economics. When the economy fails, that is always blamed on Socialism, even though there was precious little socialism to be had in the United States when the economy failed in 1929.
Rand Paul and other primitivist free-market faithful also tend to believe in the Gold Standard, the idea that only the metal gold is real money. Rand Paul's father, Ron Paul, is a famous proponent of gold. Which is to say, he ignores history when it interferes with his ideology.
Winston Churchill (best known to Americans for his leadership of the British Empire during World War II) was appointed Chancellor of the Exchequer by Conservative Party Prime Minister Stanley Baldwin in late 1924. On April 25, 1925 he proposed that Britain would return to the gold standard, and it did. Unlike many people, Winston was able to learn from experience. In September of 1931, Churchill said:
Even when the Federal Reserve is doing its job, things can go wrong. The main problem with the modern (post-Depression) Fed is that it has been too lenient about asset bubbles. Such bubbles (the Internet stock bubble and the Housing prices bubble) cannot grow to a dangerous size if the Fed keeps the money supply inside of reasonable bounds.
I don't think there is any doubt that the way the Fed is set up favors banks (in particular the banks that it uses for its bond trades), and works on a trickle-down system. As Rand Paul and others (including Democrats and independents like myself) have pointed out, at the very least we deserve transparency.
Holding up Janet Yellen's nomination confirmation as a tactic to pass a particular bill the Federal Reserve Transparency Act is inappropriate. Congress should make sure the act is really about having a full annual public audit of the Fed (changing nothing else) and pass the bill, and Barack Obama should sign it.
The American economy is big and complicated, and many parts of it are rotted to the point that a small-scale collapse should be expected from time to time. The Fed needs to encourage growth while discouraging bubbles. It needs the power and the tools to do that. In my opinion it could use some reforms beyond the Transparency Act. But they should be carefully considered, and should be in the interest of the economic welfare of the citizens as a whole, not the wealthy Wall Street aristocracy.
William Meyer's work in progress is The Accounting: Your Fate is in the Cloud
Rand Paul is suspicious of the Federal Reserve, and I don't blame him for that. The Federal Reserve is not very transparent about what it does, and it is not very accountable to Congress or even the President.
Rand Paul, on the other hand, is pretty transparent. He wants to be President, and he needs the Tea Party to support him in his bid for the Republican Party nomination. Like most Tea Party members, Rand Paul seems to be a primitivist with regard to economics. When the economy fails, that is always blamed on Socialism, even though there was precious little socialism to be had in the United States when the economy failed in 1929.
Rand Paul and other primitivist free-market faithful also tend to believe in the Gold Standard, the idea that only the metal gold is real money. Rand Paul's father, Ron Paul, is a famous proponent of gold. Which is to say, he ignores history when it interferes with his ideology.
Winston Churchill (best known to Americans for his leadership of the British Empire during World War II) was appointed Chancellor of the Exchequer by Conservative Party Prime Minister Stanley Baldwin in late 1924. On April 25, 1925 he proposed that Britain would return to the gold standard, and it did. Unlike many people, Winston was able to learn from experience. In September of 1931, Churchill said:
"I accept my share of the blame for restoring the gold standard in 1925. We were promised reality and stability by our financial experts. We have had neither. The price of gold has increased by 80 per cent. That is as though the foot rule had become twenty-two inches and the pound weight twenty-eight ounces. Think what that means in terms of debt—the extra production demanded to satisfy existing mortgage indebtedness. This financial condition amounts to a hideous oppression." [quoted in A History of England by Goldwin Smith, third edition, page 747]The Federal Reserve may need better over sight by the public, but nothing, like imposing a gold standard, should be allowed to compromise its historic mission. Modern economies need an elastic money supply. We are long past the era of paper money. Money now consists of electronic accounting book entries.
Even when the Federal Reserve is doing its job, things can go wrong. The main problem with the modern (post-Depression) Fed is that it has been too lenient about asset bubbles. Such bubbles (the Internet stock bubble and the Housing prices bubble) cannot grow to a dangerous size if the Fed keeps the money supply inside of reasonable bounds.
I don't think there is any doubt that the way the Fed is set up favors banks (in particular the banks that it uses for its bond trades), and works on a trickle-down system. As Rand Paul and others (including Democrats and independents like myself) have pointed out, at the very least we deserve transparency.
Holding up Janet Yellen's nomination confirmation as a tactic to pass a particular bill the Federal Reserve Transparency Act is inappropriate. Congress should make sure the act is really about having a full annual public audit of the Fed (changing nothing else) and pass the bill, and Barack Obama should sign it.
The American economy is big and complicated, and many parts of it are rotted to the point that a small-scale collapse should be expected from time to time. The Fed needs to encourage growth while discouraging bubbles. It needs the power and the tools to do that. In my opinion it could use some reforms beyond the Transparency Act. But they should be carefully considered, and should be in the interest of the economic welfare of the citizens as a whole, not the wealthy Wall Street aristocracy.
William Meyer's work in progress is The Accounting: Your Fate is in the Cloud
Monday, August 5, 2013
Gold Asteroid Frightens Republican Science Committee Members
The vote seemed nearly inexplicable, even to the New York Times [See Plan to Capture an Asteroid Runs Into Politics]. NASA (the National Aeronautics and Space Administration) wants to capture a small asteroid, less than 10 meters in diameter, and haul it back into an orbit around earth where it can be examined closely, perhaps by astronauts. The original unmanned mission was planned for 2018.
Republican members of the Science Committee of the U.S. House of Representatives voted to kill the idea. It was not part of the bill they passed (the Democrats' bill included the NASA-recommendations). They prefer a focus on lunar landings, followed by a Mars mission. There are always arguments about how to use NASA's large but not limitless budget, so this might seem to be just another argument about priorities.
A deeper look depends on knowing what scientists might find if they do capture an asteroid.
Mining asteroids is a science fiction theme from last century. Today it is approaching reality, with at least one private group looking for a way to do it and make money at it. [See Tech Billionaires Plan Audacious Mission to Mine Asteroids]. While platinum is a more likely target, the group certainly would not turn away a gold asteroid if they found one.
Asteroids are believed to be quite varied in composition. They fall into three classes: carbon rich, stony, and metallic. The assumption is their composition is fairly reflected in meteorites (meteoroids that fall to earth). Metal meteorites are less common than stony and carbon rich ones, but they are not rare (about 6% of the total). The most common metallic meteorites are iron mixed with nickel.
There is a subgroup of meteorites which have a percentage of gold in them. It is likely that there are meteorites and asteroids which consist mostly or entirely of gold. In fact a current theory is that most or all of the gold in the earth's crust came from asteroid or meteorite impacts, since the planet's original gold would have sunk to the core of the planet. [See Huge Asteroids Brought Gold to Infant Earth]
It would be possible to select an asteroid that is mainly of the metallic type (M-type asteroids) by studying the spectra of various candidates. With advanced surveying gold bearing asteroids could be distinguished from the more common iron-nickel ones.
Why is this a political problem for Republican members of Congress? Because many (but not all) in the party now want to return to the Gold Standard for money. Many wealthy Republicans, and even middle-class Republicans, have spent the last decade accumulating investments in gold.
They say that Gold is the only real money (despite there being no Biblical evidence for that). But they suspect that if gold were more common, it would behave like other commodities: it would lose value. Behind their outward confidence in gold, they fear change. They fear the laws of supply and demand and free markets.
Suppose NASA captures a 10 meter cube of gold and got it back to earth safely. How much gold is that? Gold has a density of 19.3 grams per cubic centimeter. There are a lot of cubic centimeters in a 10 meter cube. There are 100 x 100 x 100 cubic centimeters in a cubic meter, and 10 x 10 x 10 cubic meters in a 10 meter cube. That is 1,000,000,000, or 1 billion cubic centimeters.
At a price of $1300 per ounce (gold bugs would say we should measure the value of dollars in gold, not the value of gold in dollars), 19.3 grams of gold, which is 19.3/28.35 or 0.68 ounces, is worth $884.
So the asteroid would be worth $884 billion dollars. Which would not pay for the estimated $2 to $3 billion needed to collect the asteroid.
Still, it would be a lot of gold. And it would mean that for all practical purposes, there is all the gold you want in space.
Only it would not be worth $884 billion, because who would buy it? Especially when even more gold goes whizzing by the earth once in a while, just needing a nudge to capture it?
A gold asteroid of very modest size would cause the value of gold on earth to plummet. This is partly because most gold already mined here is not used for anything, not even jewelry. It is in the hands of speculators, who hope it will go up relative to the U.S. dollar, so that they can buy things they really want, like more handguns, bigger mansions, fancier cars, and the more expensive Senators.
Who exactly voted for the bill [H.R. 2687] that left out the asteroid capture mission? Lamar Smith of Texas, Paul Broun Jr. of Georgia, Larry Bucshon of Indiana, Cynthia Lummis of Wyoming, Steven Palazzo of Missouri, Chris Steward of Utah, Jim Bridenstine of Oklahoma, Mo Brooks of Alabama, Thomas Massie of Kentucky, Kevin Cramer of North Dakota, Ralph Hall of Texas, Randy Hultgren of Illinois, Frank Lucas of Oklahoma, Michael McCaul of Texas, Randy Neugebauer of Texas, Bill Posey of Florida, Dana Rohrabacher of California, David Schweikert of Arizona, James Sensenbrenner Jr. of Wisconsin, Steve Stockman of Texas, and Randy Weber of Texas. Lots of Republicans from Texas on the Science Committee.
And for those of you who love details, here is the Text of H.R. 2687
Republican members of the Science Committee of the U.S. House of Representatives voted to kill the idea. It was not part of the bill they passed (the Democrats' bill included the NASA-recommendations). They prefer a focus on lunar landings, followed by a Mars mission. There are always arguments about how to use NASA's large but not limitless budget, so this might seem to be just another argument about priorities.
A deeper look depends on knowing what scientists might find if they do capture an asteroid.
Mining asteroids is a science fiction theme from last century. Today it is approaching reality, with at least one private group looking for a way to do it and make money at it. [See Tech Billionaires Plan Audacious Mission to Mine Asteroids]. While platinum is a more likely target, the group certainly would not turn away a gold asteroid if they found one.
Asteroids are believed to be quite varied in composition. They fall into three classes: carbon rich, stony, and metallic. The assumption is their composition is fairly reflected in meteorites (meteoroids that fall to earth). Metal meteorites are less common than stony and carbon rich ones, but they are not rare (about 6% of the total). The most common metallic meteorites are iron mixed with nickel.
There is a subgroup of meteorites which have a percentage of gold in them. It is likely that there are meteorites and asteroids which consist mostly or entirely of gold. In fact a current theory is that most or all of the gold in the earth's crust came from asteroid or meteorite impacts, since the planet's original gold would have sunk to the core of the planet. [See Huge Asteroids Brought Gold to Infant Earth]
It would be possible to select an asteroid that is mainly of the metallic type (M-type asteroids) by studying the spectra of various candidates. With advanced surveying gold bearing asteroids could be distinguished from the more common iron-nickel ones.
Why is this a political problem for Republican members of Congress? Because many (but not all) in the party now want to return to the Gold Standard for money. Many wealthy Republicans, and even middle-class Republicans, have spent the last decade accumulating investments in gold.
They say that Gold is the only real money (despite there being no Biblical evidence for that). But they suspect that if gold were more common, it would behave like other commodities: it would lose value. Behind their outward confidence in gold, they fear change. They fear the laws of supply and demand and free markets.
Suppose NASA captures a 10 meter cube of gold and got it back to earth safely. How much gold is that? Gold has a density of 19.3 grams per cubic centimeter. There are a lot of cubic centimeters in a 10 meter cube. There are 100 x 100 x 100 cubic centimeters in a cubic meter, and 10 x 10 x 10 cubic meters in a 10 meter cube. That is 1,000,000,000, or 1 billion cubic centimeters.
At a price of $1300 per ounce (gold bugs would say we should measure the value of dollars in gold, not the value of gold in dollars), 19.3 grams of gold, which is 19.3/28.35 or 0.68 ounces, is worth $884.
So the asteroid would be worth $884 billion dollars. Which would not pay for the estimated $2 to $3 billion needed to collect the asteroid.
Still, it would be a lot of gold. And it would mean that for all practical purposes, there is all the gold you want in space.
Only it would not be worth $884 billion, because who would buy it? Especially when even more gold goes whizzing by the earth once in a while, just needing a nudge to capture it?
A gold asteroid of very modest size would cause the value of gold on earth to plummet. This is partly because most gold already mined here is not used for anything, not even jewelry. It is in the hands of speculators, who hope it will go up relative to the U.S. dollar, so that they can buy things they really want, like more handguns, bigger mansions, fancier cars, and the more expensive Senators.
Who exactly voted for the bill [H.R. 2687] that left out the asteroid capture mission? Lamar Smith of Texas, Paul Broun Jr. of Georgia, Larry Bucshon of Indiana, Cynthia Lummis of Wyoming, Steven Palazzo of Missouri, Chris Steward of Utah, Jim Bridenstine of Oklahoma, Mo Brooks of Alabama, Thomas Massie of Kentucky, Kevin Cramer of North Dakota, Ralph Hall of Texas, Randy Hultgren of Illinois, Frank Lucas of Oklahoma, Michael McCaul of Texas, Randy Neugebauer of Texas, Bill Posey of Florida, Dana Rohrabacher of California, David Schweikert of Arizona, James Sensenbrenner Jr. of Wisconsin, Steve Stockman of Texas, and Randy Weber of Texas. Lots of Republicans from Texas on the Science Committee.
And for those of you who love details, here is the Text of H.R. 2687
Wednesday, May 15, 2013
#8. Eureka: Reserve Banking
previous: #7: Virtualization in Early Banking
Consider a small city served by a single banker-merchant. He has built a safe room to store coins and has a clerk to keep accounts. He has lent out all his own money and, it being a prosperous era, in the past his loans have always been paid back on time and with interest. There are all these coins, really a lot of the coins of this city, sitting in his safe. He can't help thinking that if he could lend them out not only could he earn interest on them, but it would be good for the community. One client wanted a loan for a second fishing boat, which would surely be paid back, since the demand for fresh fish is high. The banker thinks of other clients who would be helped if only he could make loans to them.
Then it strikes him! Like a jolt of lighting, like a burning bush, like Christ speaking to him from the crucifix of the local church. Every day a client or two comes in and deposits or withdraws money. Over time the pile of coins has grown. On no one day do enough clients come in to withdraw all the coins. Eureka! He calls his clerk Big Data and says: go back through the ledgers and find out what the lowest count of coins we've had on deposit in the last five years.
A week later Big Data says: in the last five years we have never had less than 4,000 gold coins on deposit. And how many are on deposit today, our banker asks. 5,282, says Big Data. The banker sends out his clerk to get another blank accounting book.
The new account will record loans to clients that are made using the coin in client deposits. The fisherman borrows 50 coins to buy a new boat. He takes it to the boat builder, who is worried about having 50 gold coins sitting in his workshop or house. So … he takes the coins to the banker and deposits them. The banker will make, perhaps, two gold coins in interest on the loan. The same number of coins are back in the safe as there were at the start. The two gold coins paid in interest along with the original fifty are not even new coins. They are from the banker's stash of depositors' coins. The fisherman has a new boat, the boat builder a small profit, the men who cut timber for the boat have made wages, and the banker is richer.
The banker sees that the system is a closed loop. Most of the coins he loans out come back as deposits. As long as the town is prospering, as long as the total goods owned and services provided continue to grow (as they did in many Italian towns during this period, until the Turks cut off the trade routes to the East and the Portuguese and Spaniards gained monopolies in the West), the Banker can loan out the same coins over and over again. Sometimes coins are traded to outside his loop, but other times coins come in trade from other regions. The coins left in the vault, the ones that are not loaned out because they may be demanded by their owners, are what we call a reserve.
The accounting system is now critical to the banker's success. He has to know who owes him principle and interest, as well as how much he owes depositors. He sees that while he does not have coins to pay all the depositors at once, he does have loans out that will cover the deposits.
Of course, sooner or later, the banker will find that due to a series of withdrawals, he is running out of coins. He knows he'll be okay over time because the loans are still good, and he expects them to be paid in coin. Perhaps his friend who started as a fisherman comes in wanting to make a large withdrawal of coins that will break the bank.
The banker enquires why such a large sum of money is required. The depositor is buying an estate so that he can retire from managing his fishing fleet, leaving it to his son, and enjoy life as the owner of a country estate known for its fine grapes and wines. It so happens that the current possessor of the estate, Luciano, has borrowed a sizable sum from the bank. The banker suggests that it is dangerous to carry such large sums around. He can facilitate the transaction by giving Luciano a note cancelling his debt along with the coin needed to make up the difference. The fisherman accepts this, and the bank is saved.
Of course in reality the system evolved over time and with many participants, but the idea of the reserve system was a major extension of the accounting system and the beginning of the end for coins. Over the centuries large numbers of banks have failed, some because of fraud but most because they did not keep sufficient reserves. It happened to a few American banks last year and it will happen again next year, and continue as long as the system is used. But on the whole the system of keeping small reserves of coin, and later paper money, and now electronic money, to back a larger accounting of loans and deposits, has worked rather well.
Next: #9: Virtualization with Checking and Credit Cards
[The Accounting System, Your Fate is in the Cloud, is a work in progress by William P. Meyers, ©2013]
Consider a small city served by a single banker-merchant. He has built a safe room to store coins and has a clerk to keep accounts. He has lent out all his own money and, it being a prosperous era, in the past his loans have always been paid back on time and with interest. There are all these coins, really a lot of the coins of this city, sitting in his safe. He can't help thinking that if he could lend them out not only could he earn interest on them, but it would be good for the community. One client wanted a loan for a second fishing boat, which would surely be paid back, since the demand for fresh fish is high. The banker thinks of other clients who would be helped if only he could make loans to them.
Then it strikes him! Like a jolt of lighting, like a burning bush, like Christ speaking to him from the crucifix of the local church. Every day a client or two comes in and deposits or withdraws money. Over time the pile of coins has grown. On no one day do enough clients come in to withdraw all the coins. Eureka! He calls his clerk Big Data and says: go back through the ledgers and find out what the lowest count of coins we've had on deposit in the last five years.
A week later Big Data says: in the last five years we have never had less than 4,000 gold coins on deposit. And how many are on deposit today, our banker asks. 5,282, says Big Data. The banker sends out his clerk to get another blank accounting book.
The new account will record loans to clients that are made using the coin in client deposits. The fisherman borrows 50 coins to buy a new boat. He takes it to the boat builder, who is worried about having 50 gold coins sitting in his workshop or house. So … he takes the coins to the banker and deposits them. The banker will make, perhaps, two gold coins in interest on the loan. The same number of coins are back in the safe as there were at the start. The two gold coins paid in interest along with the original fifty are not even new coins. They are from the banker's stash of depositors' coins. The fisherman has a new boat, the boat builder a small profit, the men who cut timber for the boat have made wages, and the banker is richer.
The banker sees that the system is a closed loop. Most of the coins he loans out come back as deposits. As long as the town is prospering, as long as the total goods owned and services provided continue to grow (as they did in many Italian towns during this period, until the Turks cut off the trade routes to the East and the Portuguese and Spaniards gained monopolies in the West), the Banker can loan out the same coins over and over again. Sometimes coins are traded to outside his loop, but other times coins come in trade from other regions. The coins left in the vault, the ones that are not loaned out because they may be demanded by their owners, are what we call a reserve.
The accounting system is now critical to the banker's success. He has to know who owes him principle and interest, as well as how much he owes depositors. He sees that while he does not have coins to pay all the depositors at once, he does have loans out that will cover the deposits.
Of course, sooner or later, the banker will find that due to a series of withdrawals, he is running out of coins. He knows he'll be okay over time because the loans are still good, and he expects them to be paid in coin. Perhaps his friend who started as a fisherman comes in wanting to make a large withdrawal of coins that will break the bank.
The banker enquires why such a large sum of money is required. The depositor is buying an estate so that he can retire from managing his fishing fleet, leaving it to his son, and enjoy life as the owner of a country estate known for its fine grapes and wines. It so happens that the current possessor of the estate, Luciano, has borrowed a sizable sum from the bank. The banker suggests that it is dangerous to carry such large sums around. He can facilitate the transaction by giving Luciano a note cancelling his debt along with the coin needed to make up the difference. The fisherman accepts this, and the bank is saved.
Of course in reality the system evolved over time and with many participants, but the idea of the reserve system was a major extension of the accounting system and the beginning of the end for coins. Over the centuries large numbers of banks have failed, some because of fraud but most because they did not keep sufficient reserves. It happened to a few American banks last year and it will happen again next year, and continue as long as the system is used. But on the whole the system of keeping small reserves of coin, and later paper money, and now electronic money, to back a larger accounting of loans and deposits, has worked rather well.
Next: #9: Virtualization with Checking and Credit Cards
[The Accounting System, Your Fate is in the Cloud, is a work in progress by William P. Meyers, ©2013]
Monday, May 6, 2013
The Accounting System #6: Coin, Counting, and Crashes
previous: Physical Money as Portable Accounting
If the money value bids for a particular set of assets can crash in a bubble, then if almost everyone decides to cling to their money, all asset classes can crash. That is what happened in the depressions of the 1800s and the Great Depression between 1930 and 1932, and came close to happening in the Great Recession of 2008-2010.
Cash and coin are not magical stores of idealized value. Nor is gold. The sense they created during the Coin Age was due to their countability and their portability. Coins are easy to count. You don't need any higher math to do it. Countability also equates to accountability. Is the bank's accounting right? Then the count of the coins in the safe should match the cash balance in the ledger.
Portability, however, was not exactly perfect. Gold is heavy. Paying for a chicken and some turnips in a local market is not a weight issue, but what if you want to buy a shipload of silk in China? The coin required would be heavy, but at least it went by ship. Overland transfers of large sums required pack animals and soldiers to guard them.
During the great expansion of global trade between 1400 and 1900 a lot of gold ended up at the bottom of the sea. Better systems were already available. They were extensions of the commercial accounting systems of that era, and they would evolve into The Accounting System.
Keep in mind that physical money, either coins or cash, amounted to a local, physical, and (except in cases of fraud, like gold-plated lead coins and counterfeit notes) undeniable accounting. If you had cash you could buy whatever was for sale despite your credit rating, criminal record, or cultural preferences.
During the Coin Age, the coins were the key physical part of accounting system. People could forget that the ultimate basis of human economy is real goods and services. Accounting systems track who has rights to real goods and services. Coins were a primitive accounting system. Today they are disappearing along with paper money. They have lost their utility for accounting. But accounting has grown, evolved, and absorbed many new functions, to become The Accounting System.
next: Virtualization in early banking
[The Accounting System, Your Fate is in the Cloud, is a work in progress by William P. Meyers, ©2013]
If the money value bids for a particular set of assets can crash in a bubble, then if almost everyone decides to cling to their money, all asset classes can crash. That is what happened in the depressions of the 1800s and the Great Depression between 1930 and 1932, and came close to happening in the Great Recession of 2008-2010.
Cash and coin are not magical stores of idealized value. Nor is gold. The sense they created during the Coin Age was due to their countability and their portability. Coins are easy to count. You don't need any higher math to do it. Countability also equates to accountability. Is the bank's accounting right? Then the count of the coins in the safe should match the cash balance in the ledger.
Portability, however, was not exactly perfect. Gold is heavy. Paying for a chicken and some turnips in a local market is not a weight issue, but what if you want to buy a shipload of silk in China? The coin required would be heavy, but at least it went by ship. Overland transfers of large sums required pack animals and soldiers to guard them.
During the great expansion of global trade between 1400 and 1900 a lot of gold ended up at the bottom of the sea. Better systems were already available. They were extensions of the commercial accounting systems of that era, and they would evolve into The Accounting System.
Keep in mind that physical money, either coins or cash, amounted to a local, physical, and (except in cases of fraud, like gold-plated lead coins and counterfeit notes) undeniable accounting. If you had cash you could buy whatever was for sale despite your credit rating, criminal record, or cultural preferences.
During the Coin Age, the coins were the key physical part of accounting system. People could forget that the ultimate basis of human economy is real goods and services. Accounting systems track who has rights to real goods and services. Coins were a primitive accounting system. Today they are disappearing along with paper money. They have lost their utility for accounting. But accounting has grown, evolved, and absorbed many new functions, to become The Accounting System.
next: Virtualization in early banking
[The Accounting System, Your Fate is in the Cloud, is a work in progress by William P. Meyers, ©2013]
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