Busting money's creation myths

Horse puckey, Steve. Having lived among 'primitive' people, and dealt with some of the most untouched by modern civilization (the San), the issue is simply that barter is unrecorded, debt is recorded (Busting money's creation myths, December 3).
Gold, or silver or copper or bronze or sheaves of wheat have value relating to the effort and skill required to produce them, they have both utility (be it for ornamentation, or conductivity of electricity, or bottoms of pots) and rarity (unlike mechanically produced copies of a picture on a piece of paper, or electronic imagination of the same).
Debt based promissary notes are only really long term viable if they promise goods or services which maintain their value. If a dollar buys a dollar's worth tomorrow and the next day, Fiat can work. In natural systems it bounced between upper and lower values balanced through deflation and inflation. Inflation on its own is a pipe dream.

I don't think Steve argues very convincingly against "gold is money". The Basel Committee on Banking Supervision, part of the Bank of International Settlements [BIS], is considering in its implementation of
Basel III's new capital rules commencing January 1st 2013, making gold equal to cash and sovereign bonds in its proposed liquidity component (Busting money's creation myths, December 3).
However, probably the greatest advocate for "gold is money" is Alan Greenspan's 'Gold and Economic Freedom'. Written in 1966, it can be found at: constitution.org/mon/greenspan.gold.htm

I would like to add a quotation from Alan Greenspan testifying before Congress when he was head of the Federal Reserve on May 20th 1999 (Busting money's creation myths, December 3):
"Gold is always accepted and is the ultimate means of payment and is perceived to be an element of stability in the currency and in the ultimate value of the currency
and that historically has always been the reason that governments hold gold".
I would also like to remind people that 95% of central banks hoard gold in their reserves,including our own
Reserve Bank.The US, Germany, France and Italy each have more than 70% of their reserves in gold.

Anything can be money as long as all parties accept it (Busting money's creation myths, December 3).
Barter is quite obviously at the core of every economic system. I'll trade the fruits of my labour for the fruits of yours.
If that's not barter than I don't know what is.
I was really hoping Steve was going to explore the history around the creation of the private central banks such as the Bank of England and the Federal Reserve, the role of fraction reserve lending and the fact that private banks directly control the amount of money in circulation via their expansive or restrictive lending policies.
For a truly eye opening documentary about money supply I can highly recommend "The Money Masters" which is available via Youtube and Google Video.
It's a conspiracy theorists wet dream, but when it comes to creating money, conspiracy is the name of the game. It's worth a look purely as a history lesson.

For a moneyless economy in recent history eg. Cambodia's 1975-1978 the monetarists' famed quantity identity MV = PT (where M: money supply, V: velocity of maney; P: price level; T: number of transactions) failed pitifully because although V=0, people still have transactions of goods and services (Busting money's creation myths, December 3). Cambodian experiences at the time shows the modified quantity identity should be MV + Gv = pT where G is the sum of all gold in the economy; v is the velocity of gold circulation in the economy;and p is the price level measured in ounce of gold of each transaction.
I think money is created when individuals in society agree that an unperishable subject or material be it man-made or natural should be used in their exchanging of goods and services conveniently, easily kept and changed hands.Silver, gold are examples of money in the past. Paper money and credits are more convenient and speed up transactions but run the risk of bankers' abuses.

I haven't bothered to read all the article. I merely go back to what I was taught in year 9 Commerce. money is a "recognised denomination as a median of exchange". Its value is defined by its denomination by those who use it as a median of exchange (Busting money's creation myths, December 3).
Gold is a form of asset, where gold is more liquid then money, but is not money, being gold can be more easily exchanged in any country in the world. Gold's value is dependent on what a person is willing to pay and what the owner is willing to sell. Essentially, as we know, gold is a commodity.
Why try to over complicate things?!

I think this is a pointless debate. Let's focus on devising a monetary system which produces the best allocation of resources in an economy (Busting money's creation myths, December 3). Whilst I do not believe gold is the answer, a system whereby money can be debased very easily through printing and discourages savings is doomed for failure.

Thanks Steve, you have a laid an important foundation (Busting money's creation myths, December 3).
I might add that the Egyptians, who valued gold highly, also valued ostrich feathers equally.
The Spartans used iron for their coinage. Iron can be melted down and made into swords. That implies resource(s) backed money.
Early cuneiform, developed as a form of quantifying available resources, used by the scribes (accountants).
In pure science, what is a ledger? A ledger is a balance between positive and negative. This is Einstein's explanation of relativity, that is - that energy and mass are interchangeable. The entire universe runs on this dynamic.
However, accountants (scribes), never understood this principal, until the number zero was invented. Positive plus negative equals zero, therefor a balance is achieved.
The universe according to Einstein, is based on the principle that negative and positive, interchange to achieve balance.
Steven Hawking goes to the next phase and states that the big bang was created from nothing and wavelengths create all mass until gravity causes the mass to collapse, compress then explodes (like a supernova).
So, getting back to bonds (the origins of modern banking). Bonds allowed trade for difference. Just like FOREX trading.
It was the Yuan Dynasty (Kublai Khan), that produced the first paper money (promissory note).
It was the Kublais son, Ghenkis Khan, that produced the greatest trading empire, that the world has ever seen and it was all based on promissory notes (credit).
China are now reclaiming, their trading patent.

Isn't one of the criteria of money that it be a "store of value" (Busting money's creation myths, December 3). Fiat money fails this test due to inflation eroding its purchasing power while an ounce of gold remains an ounce of gold (for what its worth).
Barter systems are feared by governments because avoiding fiat money makes collecting taxes far too difficult.

Milton Friedman notes several examples of different commodities being used as money (Busting money's creation myths, December 3).
Also, it's probably quite true that government helped gold become money at different times. Even if so, the value in a gold standard is to stop money expansion or unproductive/destructive counterfeiting of the monetary unit.
Also, it is correct to say that most of gold's value can come from the monetary value and not the industrial value. In the same sense, fiat money is not "inherently worthless" if it has monetary value. It's just easier to expand for short-term political reasons.

These are separate matters, whether money arose out of barter, and whether money facilitates barter. The historical evidence is for “no” (Graeber, Hudson, etc) and “yes” (witness today). Though Graeber thoroughly establishes that interpersonal debts preceded money, he fails to explain why (he merely *describes* these more primitive societies) (Busting money's creation myths, December 3).
A natural explanation is simply that, in these primitive societies, there was not much to barter (no variety of goods and services), except the same good from one time to another (“You give me some wheat today, that I am short, and I owe you wheat in the future”), which is precisely the meaning of interpersonal debts denominated in the few commodities extant.
Only once a society has more specialized skills and production processes, to generate a variety of goods and services, does there arise a need for a facilitator of barter – i.e. a need of money (whatever its material). That's why money postceded interpersonal debt contracts, because societies usually add, rather than forget, specialized skills and production processes. Simple enough, Mr. Graeber!

These seems to me to be some blurring in the distinction between three quite separate areas: the means of exchange (currency); 'tariffs, tax or tribute'; and credit (Busting money's creation myths, December 3). 'Money' seems to have originated as a form of tribute or taxation and a means of forcing individuals into an economic system or exchange that they probably would otherwise not have chosen to enter by forcing them to acquire some form of scarce and controlled currency ... there are plenty of examples of this throughout history, Jesus in the temple highlighting one and the English 'poll tax' colonial scam being another of the more obvious examples. One form or another of 'currency' - the supply of which is pretty much always controlled by exploitative forces - is used to force indivuduals into an interaction or system for the purpose of extracting tribute or 'tax'. As this is usually a government or monarch - or international bankers today - this currency is seen as secure and therefore safe to horde or hold wealth. But it is still only 'money', not credit. Exchange doesn't need to involve money nor credit and credit need not be money, or any other medium of exchange. And tariffs, or tribute, are neither. The controlling power may well demand a large chunk of your crop, or your first born instead. The current system of exploitative, predatory financial interaction uses credit and fiat currency, but neither credit nor fiat currency is the cause of the exploitation, only the means. It is the greed and desire for control at the core of the system that creates our modern predicament of scarcity and hording. 'Money' was created for the purpose of exploitation and, as a byproduct, its relative security resulted in its use as a medium of exchange. Credit also has been hijacked via currency to become an exploitative system, but it certainly does not need be. This is just my reading of history and I hope it doesn't come across as being too naive.