The Metaphysics of Money – Trustnodes

The Metaphysics of Money


Marco Polo paper money

There is hardly a topic more important, and less spoken of, than the nature of money. Nor is there anything more misunderstood and less looked.

Digitization, however, has brought this topic to the fore of even mainstream politics.

“Turkish President Tayyip Erdogan sacked the governor of the central bank on Saturday as differences between them deepened over the timing of interest rate cuts to revive the recession-hit economy,” says Reuters.

Both presidents want lower interest rates. In the case of Trump he appears to have further shifted his tone from wanting a rate cut to focusing more on this chart:

Fed balance sheet, July 2019
Fed balance sheet, July 2019

The base monetary supply was gradually and slowly increasing until mass defaults led to mass printing in 2008, with then another huge jump in 2013 presumably during the euro crisis.

Some normality finally returns in 2014 with stability until 2018. At that point, it can’t be seen very well in the chart but mass base money burning begins at about $10 billion a month.

Trump does not like that tightening, or the speed of it, so he took the microphone to say so. The timing of him doing so, around when the central banker’s sacking news came out, is of course a complete coincidence.

Yet what exactly is money and what exactly is it meant to do and how should it operate?

The Money Tree

It is probable someone at some point made a metaphor about money growing on trees, with folklore keeping alive that analogy to today because it is largely correct.

Money is an abstract human created unit of measurement that unlike say miles or kilometers, contains with it certain fundamental subjectivity which makes it a very complex instrument and a very difficult task to improve upon its design.

Earth has blessed us with plentifulness and from nothing do come many things. Apples, for example, just appear as if by magic. A little rooster mixed with a bit of chicken and you get so many egg producing cuties pretty much out of nothing.

A slightly more complex example might be some ground soil turned into the shapes of bricks which make a very nice house. Or we can have “useless” metal in the shape of an airplane which is now very useful indeed.

Not to mention human intellect and its boundless ability to pretty much create something out of nothing, with nothing here used in an exaggerated sense for of course technically there’s plenty that goes into making that “nothing.”

Money is meant to measure all this something that keeps being created every second and subsecond as it is in return for money that it is exchanged.

Previously they used gold as such method of measurement, but while a fixed unit of measurement is desirable for fixed aspects like distance, the fluid nature of trees and roosters requires a fluid method of measurement provided the aim is to keep this moving unit of measurement as fixed in that $1 buys you an apple today and next century.

Hence the current debt system, an advancement for its time, showed its superiority when some centuries ago there were major wars between the newly debt system and the old fixed money system.

It showed superiority because like the apple so too money comes from nothing, as arguably do the little baby chickens.

The advancement in this case was that instead of money being a lagging indicator, that is a measurer of value already created, money could be causative, it itself could cause or create value.

A simple example here would be giving you 100, with that you buy so many chickens, and now hopefully you have a nice business where you sell eggs and get roosters to make more chickens with it all possible only because you were given this 100.

The problems here, however, are many fold because there’s a very subjective element in who exactly you give this 100 and who exactly is the one giving it.

Usury, The Devil’s Bargain

The old thinking must have been that in order for this created from nothing to keep up with the many other created from nothings that derive from it, that being that the bought rooster and chickens will now create new chickens, the amount of new money must keep up with such creation from nothing through interest.

That is interest becomes new money, and interest is to come from these new chickens made by the rooster. Thus money would be dynamic and would grow in line with the growth of from nothing.

That’s how the current system works and it does generally work, but with a very fundamental flaw due to the complexity of figuring out how many apples will be created.

The management of this complexity in a very centralized way leads to the sucking of value which now and then ends up in outright war with sometime the peasants removed to sort of “write off” the interest and some time the elite removed to “write off” the debt.

This concentrated system leads to sophisticated value theft which eventually is seen by the people, and thus leads them to rise up usually with tragic consequences.

Yet generally there is some sort of truce because both sides realize there was no alternative, with the struggle being more about keeping the lines, than about solving what is an extremely difficult problem: a moving unit of measurement with imperfect information.

The Genius

Let us suppose we have a tree and this tree made five apples and each apple costs $1. How much more money should be created and how?

That’s the question FED and other central bankers are currently trying to answer with almost no information, including imperfect information on just how many apples did grow.

They walk blind because there is an incredible amount of concentration and because the sheer amount of information is far too much for mere mortals.

With digitization, we can extend our abilities by limiting the task to mathematical algorithms, something that sounds easy but it’s the purview of geniuses to first simplify all that complexity.

Two of them have thankfully done so. Nakamoto with digitizing money, and Hayek with expressing his insight that money itself should be a competitive product in a free market where many, through the profit motive, are incentives to come up with the best way to marry the unit of measurement with the out of nothing apple.

This leads to a very radical idea. That we should put trust on the machines. That money itself should be a machine. Code, a digital self moving thing where we merely tinker with the edges of the algorithm.

Designing this complexity is a task for gods not men, but thankfully in this century gods do walk and they probably find little else more interesting than what can be an explosion in experimentation in arguably the most complex problem facing man.

With algorithmic designs, money creation and its increase or decrease in supply can be a moving fixed scientific measurer that keeps up with the fluidity of nature.

Due to no barriers whatever in such endeavor save for intellect, from the jungle of the free market you should expect some objectivity to be reached whereby the abstract measuring unit does in fact reflect reality rather than the desire to fatten banker’s pockets.

With these constrains and the clear tools in its foundation, we should expect within our lifetime for money to evolve considerably towards a far more equitable objective design that reflects reality and reflect the inherent human desire of doing things better and to the benefit of all.

For this tool of digital money is a coordinating mechanism that should lead to an intellectual leap that may well transform fundamentally our society and its capability of tackling even harder problems, like becoming a multi planetary species as we must.

For we are at the dawn of the space age, and we are on the brink of a digital revolution that will reshape every single aspect of current reality by simplifying complexity considerably, and thus giving the human mind more power and ability to do a lot more with a lot less.

The extension of thinking intellect itself through code will necessarily transform money and inter-relations to the point arguably there has been no better time for striking optimism and for the will to think.

The young as we are, expect those that follow to take this formidable challenge of the highest prestige and see what god has brought to offer and turn it to reality.

We shall lead, but depending on speed millennials are arguably to facilitate what we will hopefully enjoy at old age for the task of building on the laid foundations necessarily rest on those who are right now coming out of university.

May they find our dreams as pleasant and their courage hardened by angels for man must evolve or man is no more.

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Comments (2)

  1. What a fantastic thought provoking article! I’d like to know who wrote it?

    My comment is that Nakamoto set the future supply of bitcoin to ever decreasing but well known amounts which are hard set in code. There is no market ‘feedback’. Would you say that this goes against the main premise of this article? Because even once well established, the bitcoin unit of currency will buy different amounts of goods and services over time. i.e. it will predominantly be deflationary.

    Although you did say that Nakamato showed there is a way to digitize money–and this has opened the door for some very interesting Decentralized Finance (DeFi) solutions, especially on the Ethereum network.

    Anyway, keep up the high quality articles. Very enjoyable. Thank you.

    1. Hi,

      That was written by Andrew Quentson.

      In regards to bitcoin, it depends on your aim. As the first coin, Nakamoto probably wanted to bootstrap it and mainstream it with the fixed limit having a clear use case as a very rare thing.

      Not sure you’d want to buy your pizza with bitcoin, however, instead of falling fiat. You might do in niche cases say if the credit card malfunctions or if you don’t have a credit card at all and want to buy something digitally or internationally or obviously if you want to take your savings out of Venezuela with plenty more reasons why you’d want a fixed unit.

      If we think of day to day usage, however, according to Hayek the aim of money should be for 1 to buy an apple today and next century. Achieving that is pretty hard. An easy way would be linking something like DAI to CPI and so track the increase or decrease of prices with some sort of algo accordingly increasing or decreasing supply.

      The question there would be who gets this increasing supply and from whom it is taken out with CPI further not a great measure, but it’s a start.

      Such money has never existed so whether the market would like it is theory, but you should think they would certainly over current money. However, in a world where there is no such thing as legal tender and assuming tech is not a constrain, it may well be that bitcoin does rise as the most accepted money even for buying pizza.

      We can only guess, hence all this experimentation with a lot of it going on in ethereum, but really the entire crypto space is all sorts of different monetary policies from highly deflationary bitcoin to stupendously inflationary dogecoin which still has a lot of value because markets clearly like memes a lot.

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