# Tag Info

37

But when people pathologically hoard so much cash that they impoverish the entire nation This sentence seems to imply that we should fault the rich not because they are rich, but because they do not spend their riches. Ok, let's scrutinize this assertion, and not go into philosophical and sociopolitical arguments about inequality, justice, etc, which ...

35

Two reasons: history and ability to control the money supply. History: paper-money started by being issued by trustworthy agents from kings/governments, as a way to be able to transfer the ownership of gold without moving the gold physically. This looked something like "This paper is exchangeable for 10 gold coins at this location". This meant you had to go ...

28

I will focus on some economics reasons not mentioned explicitly so far. There are economic benefits to having your own currency. Your question essentially raises the question of so-called "Optimum Currency Areas" (OCAs). There was a lot of interest in the question of what areas should have the same currency. It is in general not immediately obvious that ...

22

The main likely reasons why barter is not more common are: The inconvenience of having to find another party who both offers what you want and wants what you offer. Even if such a party can be found, the possible complexity of negotiating a "fair" transaction (eg I'll do your electrical job if you'll clean my windows monthly for the next 3 months). I don'...

17

In the countries that I am familiar with (such as Canada), using barter to avoid taxes is definitely illegal. You are required to report the dollar value of the exchange as revenue. It is treated as an implicit trade of cash along with the trade of goods. Since I am not going to give tax advice to random strangers on the internet, please consult the tax laws ...

15

In the Stack Exchange reputation "economy", we can think of the reputation points as "money". And the "goods" are: Downvotes — cost 1 point each. Various privileges — zero cost, but unlocked only when the user reaches various thresholds. To my knowledge, these prices (1-point cost of each downvote and privilege thresholds) have never changed. And so, there ...

13

Her position isn't quite untrue. If you define poor and rich relatively, you cannot have "poor" without having "rich." However, this has little to do with hoarding. We often think of money in terms of the medium it is stored. We typically understand a vault full of cash. However, such a vault isn't doing anything. Money does things when it is in motion....

13

There are also many countries without their own currency. For example, Ecuador and Panama both use the US dollar as their official currency. See this list for more examples. There are several reasons why you might like to adopt another country's currency, but common factors are high inflation: the domestic currency loses value against foreign ones. ...

12

"Cash" is an emergent phenomenon of human economic organization. It exists for lots of reasons, as a provider of economic anonymity, a low transaction cost solution to the double-coincidence of wants, a portable medium of exchange, and a tool of economic accessibility for all including those in the informal economy, foreigners, the unbanked, and those with ...

11

You might also want to think about If it's not divided then we can easily use the money anywhere. Is that positive and desirable for everyone in all situations? If you want to control the flow of money and people, different currencies are helpful. JoaoBotelho also pointed to control of the supply and historical reasons, I would also add that everyone ...

10

If you're just trying to understand the volume of electronic transactions generally to an order of magnitude, it's in the quadrillions of dollars per year. According to this document from the US Treasury, SWIFT handles about \$5 trillion per day, or given about 250 business days per year, about \$1.25 quadrillion dollars a year. Similarly, CHIPS handles ...

10

The argument is largely based of the following premise: You have 10 Million Dollars. Say in one case you gave it all to 1 already rich millionaire, and in the other case you gave $1000 to 10,000 poor people, where we define a poor person as someone who does have somewhere to live (not homeless) but lives paycheck to paycheck and to whom even something like ... 9 The only use of money (other than by humans— who, it should be noted, lived for most of human history without it) in the animal kingdom that I'm aware of has been when researchers have taught other primates (Capuchin monkeys) how to use it. While the introduction of currency was apparently successful (there was Capuchin prostitution), the research did not go ... 9 This particular statement posted is actually two separate statements that are being conflated despite not being related: Statement 1: People who collect many newspapers or cats are called "nuts" by "us" Statement 2: People who have a lot of money impoverish the nation, but "we" treat them as role models and put them on the cover of Fortune The ... 9 No, there is no inflation. Inflation is caused by a relative increase in the amount of currency, relative to the amount of scarce goods and services available. As you note, there is a continuous increase in the amount of "currency" here - reputation. However, reputation is not spent on scarce goods and services. There is no meaningful limit on the number ... 8 "...capitalists buy and sell money as though it were a productive economic good." No they don't. They buy and sell currency, because the price of currency fluctuates (due to imagination and/or economic fundamentals) and so there are profit opportunities there. Also, they are after liquidity, (i.e. holding money instead of physical capital), because ... 8 Money is, in essence, debt. More broadly, it's a system of clearing and credit. That entry in the computer means that the bank owes you \$1000, which is worth whatever others are willing to exchange for that sum— one way of thinking about it is that if you have \$1000, you have a general claim on the rest of society for \$1000 worth of whatever society ...

8

Yes, there is inflation. StackExchange was created in 2008. Anybody who had 5,000 (arbitrary value) reputation points in 2009 would have been perceived as an outstanding member. Now, having accumulated 5,000 points in ten years of participation on a much expanded site looks less impressive. Thus, achieved respect per reputation point has decreased. The ...

7

It stands for I-Owe-You. As in a promise.

6

While many general equilibrium models do not need to model money to approach the questions that they would like to answer, there are many models that do include money to address questions that need money to be a relevant feature of the model. These models do it in a variety of ways -- some might be more relevant than others. I will try and describe two of ...

6

Double entry book keeping. If we take the example given here, of the Greek Central Bank (bank nerd trivia - interestingly the GCB is a commercial bank, listed on the Greek Stock Exchange), arbitrarily adding 000's to its deposit account. This cannot be done as stated. The double entry book keeping accounting system on which all banking is based, requires ...

6

Unfortunately, economists have no consensus definition of money. However, I do think the definition given by Ryan-Collins et al. (2013, Ch. 1.2.1) in Where Does Money Come From? strikes the right balance between generality, common sense, theoretical considerations, and history (emphasis added): Defining money is surprisingly difficult. In Where Does ...

5

Your get the basic intuition, but real-life situation is a bit different. First, I didn't really understand what you meant by "try to catch some 'fool'", but what you are calling foreign exchange bank is actually called the Foreign Exchange (market), and consist of buyers and sellers that are basically ready to buy and sell any currencies (almost all ...

5

A bill with an expiration date does not become worthless suddenly. Clearly its value would decrease over time until, just before the expiration date, it was next to worthless. Think about it: how much would you pay for a \$1 bill that expires in 5 minutes? Certainly a lot less than you would for one that expires in 6 months. This constantly changing value ...

5

If I'm to give a single reference on learning six years of economics by yourself, it would be MIT Economics Course http://ocw.mit.edu/courses/economics/ The MIT has the best graduate economic program, and its undergrad program is definitely in the top 3. The faculty is technical-oriented, which means a lot of math, so you'll be well prepared. The list of ...

5

It would seem logical that this would result in reverse-inflation or lower prices, but this is actually not the case (at least over time). The banking system has a "supply and demand" market for reserves. When say 1 million dollar is withdrawn and not redeposited, the banking system in the aggregate will bid more for current reserves to replace the ones ...

5

Printing money causes inflation because someone (or some institution) will get the money and will spend it somehow. This increases demand for goods, but the number of goods, the supply was not affected by printing money. Hence demand at the old price level is larger than supply at the old price level. Prices will rise until a new equilibrium is reached. The ...

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Here are three types of money: Commodity money: goods of value are used as money (e.g. gold in your example, or cigarettes in a prison), Representitive money: money is still based on a commodity but, instead of actually using that commodity in exchange, they use pieces of paper that can be exchanged for the commodity (e.g. the gold standard), Fiat money: ...

5

Not sure an economist can answer this particular question about Escobar's wealth and not only because all the given estimates are uncertain. A more interesting question for an economist (or at least for me) would be: What is Escobar's (a drug firm) mark-up? Or what is the economic size of the international market for cocaine? The most serious source of ...

5

When people hoard cash they actually increase the value of everyone else's cash. Why? Because if they didn't hold it then some of it would instead be sold to the investors who support the price of the currency using different currencies. When it was dumped in this manner, everyone else's currency would be decreased in value on a per unit basis, yet most ...

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