Relativity In Money

[Injin]

you keep skipping over that you have to receive more on the loan that you gave in order to cover the losses you will eventually entail when someone doesn't repay.

I don't skip over it. Why would I?

What I would say is that those who don't repay owe, those who repay don't.

What your model of interest charging (which I can't help but notice remains constant, though the reasons for it morph) is doing is getting those who repay to pay for those who don't.

It's the lender pushing his risks onto others. Again, I can't see this hanging around in a free system.

if you want to loan your friend a fish, and accept a fish in return, that's your prerogative.

if you want to start a business lending fish, you need to receive more to stay in business, to even tread water.

That's true of all business, and if it can't happen is merely a sign that the business should not exist.

as far as the car, how would you suggest making good for the wear and tear on the car BESIDES money or an asset etc?

Whatever else you value - friendship and so on. This was your original example, I think.

Taking the example as read ( I have a lot of time for it, it is logical and follows from the actions involved) then why would an interest rate be charged?

If I cost you £25 by borrowing your car for a day, why express that as anything other than £25?

Why have it as a %?

[Mr Nice]

I don't skip over it. Why would I?

What I would say is that those who don't repay owe, those who repay don't.

What your model of interest charging (which I can't help but notice remains constant, though the reasons for it morph) is doing is getting those who repay to pay for those who don't.

It's the lender pushing his risks onto others. Again, I can't see this hanging around in a free system.

That's true of all business, and if it can't happen is merely a sign that the business should not exist.

Whatever else you value - friendship and so on. This was your original example, I think.

Taking the example as read ( I have a lot of time for it, it is logical and follows from the actions involved) then why would an interest rate be charged?

If I cost you £25 by borrowing your car for a day, why express that as anything other than £25?

Why have it as a %?

it certainly doesn't have to be a percentage, it could easily be a fee or series of fees, but it is going to come to the same thing in the end.

if you can't see a lender spreading the risk over the whole group of borrowers, then how do you propose that he cover the risk? and making a profit?

[aliveandkicking]

The example being worked through was of a loan of water and what followed after that point.

The loan was the discussion point. You can't look at the example and reject the logical consequences of it by simultaneously accepting and rejecting the example.

If you'd like to look at something else, we can do, no problem.

If you cannot correctly understand the nature of trading then you cannot correctly understand the nature of borrowing money which is just an act of trading money today for money later on.

In the barmans example you kept forcing to take beer as payment.

It is a theme with you.

You talk about only facts while forcing people to deal with the realities you create out of thin air.

You are an intellectual rapist and you enjoy it.

[Injin]

it certainly doesn't have to be a percentage, it could easily be a fee or series of fees, but it is going to come to the same thing in the end.

Right, I have no problem with that.

It's not the same thing, becuse with an interest charge, constant payment is required, over and above total repayment + loss. You can give the car back, and the fee value to cover costs but if you are out of time have to keep paying.

in fact, it's in the interest of the lender that you partially fail all the time, to maximise his profits.

if you can't see a lender spreading the risk over the whole group of borrowers, then how do you propose that he cover the risk? and making a profit?

I don't propose he does.

I think the idea of lending for interest profit based on percentages is fundamentally flawed.

[Injin]

If you cannot correctly understand the nature of trading then you cannot correctly understand the nature of borrowing money which is just an act of trading money today for money later on.

In the barmans example you kept forcing to take beer as payment.

It is a theme with you.

You talk about only facts while forcing people to deal with the realities you create out of thin air.

You are an intellectual rapist and you enjoy it.

The example discussed was a loan and what followed from the loan. If you don't like the loan example that's fine - don't discuss it. Go watch TV or something.

[oktup]

As some of us have realised, economics is the study of human beings trading with each other in the real world, as well as the conceptual world that we all live in but do not share.

That is, the actions that we undertake are primarily derived from our thoughts, feelings, impulses, emotions and memories - which are not bound by much if any physical laws but are also at one and the same time completely bound by those laws when we actually try to express them.

This means that we can have things like bubbles - as our imaginations run away with us about possibilities which lead to busts - where our imaginations meet cold, hard reality and our expectations crash and burn. There are many reasons why our thoughts might not match reality - from imperfect knowledge to being flat out lied to and it's beyond what I want to postulate here in any event so I will leave this topic for now. (I know, I know......)

What I want to discuss here is the relativity of money.

Each and every individuals wants, needs etc are different, so they trade and interact with the real world, but against what?

What do individuals measure their desires against?

What is the point upon which values are measured against?

I would think the largest part of this is due to the strength of our animal instincts combined with our human intelligence/imagination.

I think people almost always desire 'more', 'better', etc, which is (arguably) quite logical. Even if I only need object x once every 10 years, it's still better to have it, rather than hire or borrow it, because otherwise there's an added uncertainty as to whether I'll be able to obtain it when required, an extra inconvenience in sourcing it, etc - a bird in the hand, and all that. Even if I can't see much reason to acquire object y right now, I might just be lacking some information which would show to me that I'll definitely need it tomorrow. So it makes more sense to acquire objects than not acquire them. On top of that, there are 'illogical' factors such as 'status', and internal biological reward mechanisms, which are probably just culturally/evolutionarily hardwired shortcuts manifested from the more 'logical' reasons. This is, of course, driven from an instinctive, animalistic sort of a place, but there are plenty of psychological experiments to prove how strongly we are still under the sway of our animal reactions, rather than our higher reasoning.

So, our desires are measured against our conception of 'more/better'.

Value is a bit more tricky. Ultimately, deep down inside, it might be that 'value' is the cut-off point between our desire for happiness via obtaining object x, and our willingless to put up with disappointment at not having object x because we realise that the cost is too great. By which I mean that Caveman Og's beads are very nice, but if I try and take them, I know he's going to beat the crap out of me, so I'll reluctantly not bother. Whereas if I'm very hungry, Caveman Og's sausages are the only game in town, and que sera sera. In a way, perhaps 'value' as a concept meaning "I'm happy to trade x for y, therefore I accept that is its value" isn't really true - instead it is "I want y, and however much I'm willing to risk in acquiring it, is its value". Even if I'm not risking my physical well-being in the trade for a new cloak, I'm risking that my 10 chickens/dog's teeth aren't going to turn out to be more valuable after all. Ideally, of course, I would prefer to own a cloak and 10 chickens/dog's teeth...

Money is a great and useful abstraction, but it removes us further from our trade-off analysis of 'would I risk getting attacked by Og for this item'. It's less visceral. Our 'desire' motive is still as strong as it ever was, but our 'fear' counterbalance has been offset - even if we logically know that having 0 dog's teeth left in the middle of winter is not a great idea, it's not firing up the adrenal gland, so yeah, let's do the trade! And more so today; a person who spends 10 hours at the coalface, then comes up and is given 10 shiny metal circles in exchange, every day, probably still has something to anchor the 'value' of those physical coins, and what it's worth trading them for. A person who sits in an office for 8 hours, and gets nothing at all in return, except that every 30 days a number on a small screen has enigmatically changed, probably has less 'animal instinct' of value than ever before. Especially when they are now not even having to hand over a countable number of metal circles, but instead just perform a simple handtap ritual in response to a string of words (as when a cashier recently told me the total was a monotone "six nine five", rather than "six pounds ninety-five" (the "pence", of course, having already long become archaic)).

And, of course, our 'desire' sense has in recent times been augmented by a powerful targeted psychological manipulation known as 'advertising', while any negative feedback signals have been dampened. Our standard of living has apparently increased in the face of profligate consumption; our squirrel-brains would quickly learn it's a bad idea to go on an acorn-binge in september, but we are isolated (or cushioned, at least) from the negative effects of our actions. We don't see (or yet see the effects of) the kids in the sweatshops, the deforestation or the extinction, the chemicals in the rivers, the empty oil wells. But we get some transient pleasure from the new nanophone xl, the patio heater, the half-pound burger. We have a massive imbalance, where our animal brains are being massively overstimulated on 'desire', while the 'value' compensators have been thoroughly aneasthatised. Thus far, we haven't quite realised this because we've been feasting on our supplies all through the summer, happy days. As we move into autumn with a bare pantry, we might find our desire/value circuits get a rapid recalibration. Because really, our animal desire always was, and always will be, 'more'. And we've always been happy to satiate that until it hurts us - in the animal sense - not to try. So therefore we probably haven't really been measuring the value of things since some time after 1945.

</melodramatic rambling>

[Mr Nice]

Right, I have no problem with that.

It's not the same thing, becuse with an interest charge, constant payment is required, over and above total repayment + loss. You can give the car back, and the fee value to cover costs but if you are out of time have to keep paying.

in fact, it's in the interest of the lender that you partially fail all the time, to maximise his profits.

I don't propose he does.

I think the idea of lending for interest profit based on percentages is fundamentally flawed.

then why would a person loan money to a small business that is looking to startup or expand?

the goodness of their hearts?

[aliveandkicking]

The example discussed was a loan and what followed from the loan. If you don't like the loan example that's fine - don't discuss it. Go watch TV or something.

If you cannot correctly understand the nature of trading then you cannot correctly understand the nature of borrowing money which is just an act of trading money today for money later on.

In the barmans example you kept forcing to take beer as payment.

It is a theme with you.

You talk about only facts while forcing people to deal with the realities you create out of thin air.

You are an intellectual rapist and you enjoy it

Edited May 26, 2009 by aliveandkicking

[aliveandkicking]

then why would a person loan money to a small business that is looking to startup or expand?

the goodness of their hearts?

Obviously they are hoping the buyer defaults so they can earn more money

[Injin]

then why would a person loan money to a small business that is looking to startup or expand?

Because they are getting the money back later on and someone else is taking on the burden of responsibility.

the goodness of their hearts?

Cost saving.

[Injin]

If you cannot correctly understand the nature of trading then you cannot correctly understand the nature of borrowing money which is just an act of trading money today for money later on.

In the barmans example you kept forcing to take beer as payment.

It is a theme with you.

You talk about only facts while forcing people to deal with the realities you create out of thin air.

You are an intellectual rapist and you enjoy it

The example discussed was a loan and what followed from the loan. If you don't like the loan example that's fine - don't discuss it. Go watch TV or something.

[aliveandkicking]

Because they are getting the money back later on and someone else is taking on the burden of responsibility.

Cost saving.

Welcome to the wonderful world of idiot lending where you take huge risks and get cost savings by allowing strangers to store your money for you when your money is entirely useless to you and you are clueless what to do with it

Edited May 26, 2009 by aliveandkicking

[Mr Nice]

Because they are getting the money back later on and someone else is taking on the burden of responsibility.

Cost saving.

unfortunately in your economy I couldn't recommend to anyone to lend money except as acts of charity.

there is a lot of unnecessary drama that goes along with lending that really isn't worth taking on if you aren't going to make a profit from it.

I personally think that people are more than entitled to earn a profit for risking their money, and any society that disallowed that is going to see lending come to a skreetching stop.

[Injin]

unfortunately in your economy I couldn't recommend to anyone to lend money except as acts of charity.

there is a lot of unnecessary drama that goes along with lending that really isn't worth taking on if you aren't going to make a profit from it.

I personally think that people are more than entitled to earn a profit for risking their money, and any society that disallowed that is going to see lending come to a skreetching stop.

Well of course.

The whole problem being what money is - which is where we came in.

If we were to assume that money creation, issuance etc was available to anyone who wanted to have a pop at it, it would follow that it wouldn't be well paid work. A few sums, some basic math and keeping your word are stuff that a 6 year old can master.

It only gets complicated when a few bump up their profits by creating a monopoly, a cabal, get the state involved etc

[Methinkshe]

It seems to me that if we are to understand the role of money with respect to desires and value, it is necessary first to examine what occurred in early human history BEFORE the existence of money.

There is a story in the Bible about Jacob who lived approx 2500 BC. He desired to marry Rachel, the daughter of Laban and agreed to work looking after Laban's sheep for seven years in return for Rachel's hand in marriage.

Thus, the value he put on fulfilling his desire was seven years of his life.

I don't think things have much changed with the advent of money except that the issue is clouded through the remove that occurs when money is inserted as a medium of exchange. Value still relates to the quantity of time an individual is prepared to sacrifice to achieve a desire and/or the quantity of another's time that he can purchase through accumulating more money/goods than he requires to satisfy his personal needs.

Thus money is simply a facilitator of trading man-hours which are the ultimate standard against which desires/values are measured. Or, to reduce the concept even further, human life itself is the ultimate standard against which humans measure value.

The addition of interest to loans is a function of money, not of desire or value and, as such, is a red herring as far as this debate is concerned, imho.

[Where is my pen?]

As some of us have realised, economics is the study of human beings trading with each other in the real world, as well as the conceptual world that we all live in but do not share.

That is, the actions that we undertake are primarily derived from our thoughts, feelings, impulses, emotions and memories - which are not bound by much if any physical laws but are also at one and the same time completely bound by those laws when we actually try to express them.

This means that we can have things like bubbles - as our imaginations run away with us about possibilities which lead to busts - where our imaginations meet cold, hard reality and our expectations crash and burn. There are many reasons why our thoughts might not match reality - from imperfect knowledge to being flat out lied to and it's beyond what I want to postulate here in any event so I will leave this topic for now. (I know, I know......)

What I want to discuss here is the relativity of money.

Each and every individuals wants, needs etc are different, so they trade and interact with the real world, but against what?

What do individuals measure their desires against?

What is the point upon which values are measured against?

In short, they measure them against other desires.

Our desires are placed thus 1st, 2nd, 3rd. This is an ordinal list and there is no means of measuring other than knowing A is preferred to B.

[Methinkshe]

In short, they measure them against other desires.

Our desires are placed thus 1st, 2nd, 3rd. This is an ordinal list and there is no means of measuring other than knowing A is preferred to B.

Does it not follow from this that personal preference is the standard against which desires are measured?

And if that is the case, how does that facilitate valuation and thus trade? If the measure of desires is self-referential, i.e. is arrived at versus another desire, then how is valuation achieved with the introduction of a third party? His preference will not necessarily accord with your preference.

So there must be something other than, or more than, or preceding personal preference which everyone, consciously or sub-consciously, agrees as a base from which to launch personal preference and hence valuation and trade.

[frozen_out]

Well of course.

The whole problem being what money is - which is where we came in.

If we were to assume that money creation, issuance etc was available to anyone who wanted to have a pop at it, it would follow that it wouldn't be well paid work. A few sums, some basic math and keeping your word are stuff that a 6 year old can master.

It only gets complicated when a few bump up their profits by creating a monopoly, a cabal, get the state involved etc

Wow. There's a lot of semi-philosphical BS in this thread.

The whole system and principle is quite simple, and really doesn't need to be theorised or philosophised to within an inch of it's life.

Money is a proxy for energy.

People act to maximise the return on the energy they invest.

All object values are ultimately derived from the energy required to either produce or replace said object.

[Methinkshe]

Wow. There's a lot of semi-philosphical BS in this thread.

The whole system and principle is quite simple, and really doesn't need to be theorised or philosophised to within an inch of it's life.

Money is a proxy for energy.

People act to maximise the return on the energy they invest.

All object values are ultimately derived from the energy required to either produce or replace said object.

I wouldn't disagree with that; all that differs from my conclusions is nomenclature. What you call energy, I call man-hours, or to reduce it further, life itself.

[Methinkshe]

Btw, Injin, care to tell us whether after 24 pages of debate you are any closer to finding thye answers to the questions you posed in your OP.

Or has it been one humungous waste of time?

[Stars]

I wouldn't disagree with that; all that differs from my conclusions is nomenclature. What you call energy, I call man-hours, or to reduce it further, life itself.

Or effort - ease, discomfort - comfort.

Waiting to have what we want is a discomfort for humans because we are only around for a bit, hence we will pay others not to have to wait.

I agree with you (in case the above is ambiguous)

[Methinkshe]

Or effort - ease, discomfort - comfort.

Waiting to have what we want is a discomfort for humans because we are only around for a bit, hence we will pay others not to have to wait.

I agree with you (in case the above is ambiguous)

Yippee - I think we have found some kind of agreement - even if only between thou and I!

I think the salient point you make is: "we are only around for a bit". Within that comprehension lies the answer.

[Injin]

Wow. There's a lot of semi-philosphical BS in this thread.

The whole system and principle is quite simple, and really doesn't need to be theorised or philosophised to within an inch of it's life.

Money is a proxy for energy.

People act to maximise the return on the energy they invest.

All object values are ultimately derived from the energy required to either produce or replace said object.

Nope.

That's a long since dismissed theory.

[Injin]

Btw, Injin, care to tell us whether after 24 pages of debate you are any closer to finding thye answers to the questions you posed in your OP.

Or has it been one humungous waste of time?

Getting there, I think.

[Methinkshe]

Yippee - I think we have found some kind of agreement - even if only between thou and I!

I think the salient point you make is: "we are only around for a bit". Within that comprehension lies the answer.

Just adding to my own thoughts:

The ultimate "commodity" for want of a better word, is human life itself. Without it, gold has no value, technology has no value, land has no value, there is nothing of value unless measured against human life.

Thus, life in general, and man-hours in particular, is the standard against which we measure value.

As an aside, I keep thinking "slavery" but my mind has grown lazy and dull so I've not yet integrated the concept into my general thesis. Nevertheless, it seems to me to have a place.

Anyone care to pick up where my dulled brain sighs at the exertion?