Coin hoard

What is money?

Why do we have money?

Money was invented because trade would be difficult without it. For example, if you are a hatter in need of legal advice, then without money, you have to find a lawyer who craves for a hat. That is unlikely to happen. Maybe there is a fisherman dreaming of a hat, but he can’t give you legal advice. Maybe there is a lawyer in need of a hairdo instead of a hat. With money all these problems disappear like magic. You can buy the services of the lawyer so that she can go to the barber. After that the barber can buy some fish so that the fisherman can buy a hat from you.

Despite these mind-blowing advantages humans didn’t need money for a long time because they lived in small bands and villages where everyone depended on each other and everyone helped each other. This meant, for example, that when a fisherman needed a hat, you would make a hat for him, and if you needed anything, someone else would provide it to you. You did someone a favour so that he or she was obliged to do something back. Villagers produced most what they needed themselves. Trade with the outside world was limited and was done with barter.

Uses of money

Later cities, kingdoms and empires emerged. People living in cities, kingdoms and empires didn’t know each other so it became difficult to track whether or not everyone was contributing. Favours and obligations didn’t suffice. They were replaced by a formal system for making payments and tracking contributions and obligations. Commerce and tax collection needed a means of payment as well as administration. It is therefore not a coincidence that writing and money were invented around the same time in the same area. The earliest writings were bookkeeping entries. Money has the following uses:

  • buying and selling stuff (payment) so money is a medium of exchange
  • saying how much something is worth so money is a unit of account
  • keeping track of contributions and obligations (saving and borrowing) so money is a store of value.
catdog
Nickelodeon character CatDog

Money being a medium of exchange as well as a store of value is like your pet being a cat as well as a dog. The result is not really a success. The parts of the pet may often quarrel, for example because the dog part wants to play while cat part wants to sleep. If someone keeps money for a rainy day, and doesn’t spend it, others cannot use this money for buying stuff. And this really can be a big problem. A simple example can explain this.

Imagine that everyone decides to save all his or her money. Nothing would be bought or sold any more. All businesses would go bankrupt and everybody would be unemployed. All the money that has been saved would buy nothing because there isn’t anything to buy any more. This is a total economic collapse.

In reality it doesn’t get that bad as people always spend on basic necessities like tablets and mobile phones, and perhaps food. When people only spend money on necessities there is an economic depression, which is not as bad as a total economic collapse but still very bad. Saving can make you poorer, but only when there are too many savings already. Savings are used to invest in businesses and hire workers to make products and services. Only if there are more savings than investments, money remains unused.

The value of money

Money has no value when there isn’t any stuff to buy or when there aren’t any other people to trade with. Imagine that you get the offer to be dropped alone on a remote and uninhabited island in the Pacific with 10 million euros. Probably you would decline the deal, even if you can keep your mobile phone. It is other people and stuff that give money its value. But how? The answer is remarkably simple. The value of money is just a belief.

People are willing to work for money and sell their stuff for money. And because others do this, you do the same. For example, you may think that euro notes have an appalling design as well as an unpleasant odour, but nevertheless you desire to own them because other people want them too. The value of the euro is based on the belief that other people accept euros for payment.

This is just a belief as the following example demonstrates. Suppose that you wake up one day to hear on the news that the European Union has been dissolved overnight. Suddenly you may have second thoughts about your precious stockpile of foul smelling unstylishly decorated euro bank notes.

Lord of the Rings character Sméagol
Lord of the Rings character Sméagol

You may ask yourself in distress whether or not your precious bank notes still have any value. What is the value of the euro without the European Union? You may find yourself hurrying to the nearest phone shop in an effort to exchange this pile of bank notes for the latest model mobile phone.

And to prove this point even further, suppose that the phone shop gladly accepts your euros. Suddenly they become desirable again and you may start to have second thoughts about that latest model you are about to buy. It may not remain hip for much longer, so you may change your mind again and prefer to keep your precious euros because there may be a newer model next month. So, because the shop wants your euros, you wants them too.

Types of money

At first money was an item that people needed or desired. Grain was one of the earliest forms of money. Everybody needed food so it was easy to make people believe that others accept grain for payment. In prison camps during World War II cigarettes became money because they were in high demand. Even non-smokers accepted them because they knew that other people desired them very badly. For that reason cocaine can be money too.

Wares like grain, cigarettes and cocaine have disadvantages. They degrade over time so  they aren’t a very good store of value. This makes them a great medium of exchange because people won’t save them. An example can demonstrate this. Imagine that apples are money and you want to buy a house. A house costs 120,000 apples but your monthly salary is just 2,500 apples of which you can save 1,000. It takes 10 years of saving to buy a house. Soon you will discover that apples rot and that you will never be able to buy a house. Then you will spend all your apples right away.

Saving is difficult with apples. This is where gold and silver come in. Gold and silver have not much use, but humans were always attracted to shiny stuff. Gold is rare so a small amount of gold can have a lot of value because some people feel a strong desire for this shiny stuff. Gold and silver coins can be made of different sizes and purity so that they are suitable for payment and can be used as a unit of account.

More importantly, gold and silver do not deteriorate in quality like apples, grain or cigarettes. They do not even rust after 1,000 years. This makes gold and silver an excellent store of value. But this should make us suspicious. A perfect cat makes a lousy dog so a perfect store of value can fail the test for being a good medium of exchange. People can store gold and silver so that there is less money available for buying and selling stuff. And this can cause an economic depression as we have seen.

Governments create money too, for example by printing “10 euro” on a piece of paper. Governments require by law that this money should be used for payments and taxes. This makes people believe that others accept this money too. Government money is called fiat currency or simply currency. The authority of a government is limited to the area it controls so in the past government currencies had little value outside the country itself unless this money consisted of coins containing gold or silver.

In fact, another reason why gold and silver are attractive as money, is that the value of gold and silver does not depend on the authority of a government. This made gold and silver internationally accepted as money. In the 19th century most government currencies could be exchanged for a fixed amount of gold. This is the gold standard. The gold standard boosted trade because gold was internationally accepted as money.

Most money is debt

Debts can have value and so debts can be money too. This may seem strange or even outrageous, but money is just a belief. For example, money is the belief that you can exchange a hat for money and then exchange this money for legal advice. Hence, if you believe that the debtor is going to pay, you can accept his or her promise to pay as payment. And if others believe this too, you can use this promise to pay someone else.

So if the fisherman promises you to pay next week for the hat you just made, you could say to the lawyer that you expect the fisherman to pay in a week, and ask her if you can pay in a week too. The lawyer could then ask the same of the barber and the barber could ask the same of the fisherman. If all debts cancel out then there is no need for cash. Most money we currently use is debt. In most cases debts don’t cancel out and there are many more people involved so that it would be complicated to keep track of all debts and savings. That is where banks come in.

Featured image: Close up of coin hoard CC BY-SA 2.0. Portable Antiquities Scheme from London, England (2010). Wikimedia Commons.

Other images: Nickelodeon character CatDog, Sméagol character from The Lord of the Rings [copyright info]

The law of large numbers

Coincidence or not?

On 11 November 2017 (11-11) I went to Groningen with my wife and son by car. While driving I noticed the date and time on the clock. The date was 11-11 and the time was 10:35. “Wouldn’t it be nice when I look at the clock at exactly 11:11 today because it is 11-11,” I was thinking. Then within a second I noticed the distance recorder standing at 111.1. It had been 111.1 kilometres since I last filled up. That is a bit curious but peculiar coincidences can happen by chance. With seven billion people living on this planet, and so many things happening all the time, remarkable incidents happen.

That is easy to see. Imagine you have five dice, and a remarkable incident is throwing five sixes. If you throw the five dice only once, the remarkable incident probably won’t happen. On average it only happens once every 7,776 times. But if you throw the dice a million times, it will almost certainly happen, and almost certainly more than once. You should not be surprised when it happens 120 to 140 times.

Welcome to the law of large numbers. If we intend to make the case that this universe is a virtual reality running a script, and use coincidences in evidence, this is a big hurdle. A list of random coincidences is not evidence of a script. A possible way around it may be to see if the most important historic events are tainted by peculiar coincidences. That may be more telling for two reasons. First, there are only a few major historic events, so the law of large numbers may not apply. Second, if major historic events are tainted with peculiar coincidences, it would more plausibly suggest interference because these events are important. Nevertheless, even then the argument remains problematic, for what important historic events and what are peculiar coincidences.

Probability

Humans are good at attributing a cause but bad at guessing the likelihood of an event. A psychologist named Daniel Kahneman came up with an example. It is about a study of the incidence of kidney cancer in the 3,141 counties of the United States. The research revealed a remarkable pattern. The incidence of kidney cancer was the lowest in mostly rural, sparsely populated counties in traditionally Republican states in the Midwest, the South, and the West.1 So what do you make of that?

You probably came up with a few reasons why kidney cancer is less likely to occur in these counties, such as a healthy rural lifestyle or low pollution levels. But you probably didn’t think of randomness. Consider then the counties in which the incidence of kidney cancer is the highest. These counties were also mostly rural, sparsely populated, and located in traditionally Republican states in the Midwest, the South, and the West.1

The apparent contradiction can be explained by the fact that those counties all had small populations. And with smaller populations greater deviations from the average can be expected. Our intuition easily makes connections of causality but our reason doesn’t come into action to check whether or not it could just be randomness. We are inclined to think that some cause makes unusual things happen while these could just be random events.

In the summer of 1913 the ball fell on a black number twenty-six times in a row at the roulette wheel at the Casino de Monte-Carlo. Some people lost a fortune by betting that the ball would fall on a red number the next time. They didn’t realise that the chance of the ball falling on a red number never changed. The ball doesn’t remember where it fell the previous times. If we represent black with a B and red with an R, and assume for simplicity’s sake that there is no zero, it is possible to represent falling twenty-six times in a black number like this:

B B B B B B B B B B B B B B B B B B B B B B B B B B

The probability of the next twenty-six numbers being black is one in 67,108,864. That’s a long shot. What might surprise you is that the following combination of black and red numbers is exactly as likely to occur:

R B B R B R R B R B B R R B R R B R B B R R B B R B

You wouldn’t be thrilled if that happened unless you became a millionaire by betting on this particular sequence of twenty-six. And even then you didn’t think of the 67,108,863 sequences that didn’t materialise. We tend to consider only the things that did happen, but we rarely think of all the things that could have happened but didn’t. That might explain why events like the ball falling on a black number twenty-six times in a row impress us. And I am even more impressed because twenty-six happens to be my lucky number.

Try to imagine all what could have happened but didn’t happen. Imagine the probability of you sitting here and now reading this page on a tablet or a mobile phone, but as a prediction from 3,600 years ago. Imagine Joseph telling the Pharaoh: “I see (your name comes here) reading a pile of papyrus pages, not real papyrus pages, but images of papyrus pages appearing on something that looks like a clay tablet. It is named The Plan For The Future. But don’t be afraid, dear Pharaoh, for it will happen 3,600 years from now. But if we don’t set up this grain storage, there will be no Natural Money based on this storage, and this money is needed for the plan, so we must do it. And by the way, Egypt will starve when we don’t.”

The odds for this prediction to come true weren’t one in 67,108,864, and also not one in 1,000,000,000,000,000,000,000 either. Even if you add considerably more zeroes to that number, the odds still remain far smaller. The probability is so close to zero that nobody can tell. Nevertheless you are sitting here reading this text. So how could this happen? The answer to this mystery is that so many things could have happened but didn’t happen, but something had to happen, and that’s what happened. It would have been impossible for Joseph to make this prediction unless the future is predetermined.

The licence plate on Franz Ferdinand’s car

So what to make of the reference to the end date of World War I on the licence plate number on Franz Ferdinand’s car? There are not many events in history as important as the start and end of World War I so the law of large numbers may not apply. It could still be a freak accident however. A chance event helped the perpetrator. Franz Ferdinand’s chauffeur took the wrong turn after three conspirators had already failed. This gave the assassin the opportunity to strike. He was hindered by the crowd surrounding him so he couldn’t aim well. Nevertheless he managed to kill both the archduke and his wife with just two shots. This sequence of events is already remarkable.

The licence plate number makes it even more inconceivable. It might be possible to guess the end date of World War I by chance if you know when it starts. If you assume that the war wouldn’t take longer than twenty years, a random guess of the end date would be right one in 7,305 times. But something doesn’t add up here. The assassination succeeded after a series of mishaps, so if it were a prediction that accidentally turned out right, it would also imply a prediction of the assassination succeeding, Franz Ferdinand being killed in this particular car, and this being the trigger for the first world war.

That’s hard to do. And so Mike Dash in the Smithsonian noted: “This coincidence is so incredible that I initially suspected that it might be a hoax.”2 And because it isn’t a hoax, investigative minds could have probed other options. Conspiracy theorists didn’t take notice either, even though this incident fits into their schemes perfectly.

There is a story about a Freemason named Alfred Pike, who allegedly disclosed a secretive plan of the Freemasons to bring about the New World Order and predicted both world wars with uncanny precision already in 1871. Alas, nobody ever heard of this plan before 1959. It is hoax. In the Netherlands they call it a monkey sandwich story. The licence plate number could have added some credibility to it. But then again, the truth is overrated. It matters more what people believe. It could still be chance, but the aim of this argument is not to prove that it isn’t, but to plausibly suggest that it isn’t, and the argument isn’t over yet.

Seeing meaning when there isn’t any

“Everything is just random,” some pundits are eager to explain, “but because your mind is wired to see meaning, you see meaning. AIII 118 is just a random sequence of characters, but you attached meaning to it.” There is a problem with this argument however. This book might be a random sequence of characters too, and yet you think it isn’t. Are you delusional because you see words? Others might argue: “The language of Austria is German. Armistice in German is Waffenstillstand, so why doesn’t it read WIII 118, or even better, W1111 1918?”

If someone gives you a message, you don’t quibble about such details. If I say “hello” to you, you are not going to discuss with me why I didn’t say “hi” instead, unless you are a philosopher with a lot of time on your hands. Great Britain, the United States and France, which were all major participants in the war, all use the word armistice. It might be better to ask yourself how many sequences of characters with a length of six to eight are possible, and how many of them could refer to date of the armistice ending the war? That’s only a small portion for sure.

The law of small numbers

Everything is random and weird coincidences happen by chance. This is the law of large numbers. Pundits use the birthday problem to demonstrate that weird coincidences happen more often than we think. If you happen to share a birthday with another person in a small group, it might strike you as odd, but the chance of someone sharing a birthday with another person is already 50% in a group of 23. What they don’t tell you, is that the chance of you being one of those persons is a lot smaller. Weird coincidences are likely to happen, but less likely to happen to you. So if they happen to you all the time, it would be hard to explain that as mere randomness.

And the law of large numbers may not apply to the licence plate number on Franz Ferdinand’s car. It applies to large numbers. How many historic events are out there that equal the importance of the assassination of Archduke Franz Ferdinand, the Armistice of 11 November 1918 or D-Day? The answer probably is not many. It is less likely that meaningful coincidences happen to such major historic events. To make it even harder to believe, the licence plate number coincidence may not only imply a prediction of the end date of the war, but also the success of the assassination attempt, and this event being the trigger for the war, if it isn’t chance.

Only a few historic events equal the importance of the assassination of Franz Ferdinand and the end of World War I. Perhaps this is just randomness like the incidence of kidney cancer varying wildly in small population samples. There are only a few historic events of similar importance. D-Day is one of those events, and the scheme surrounding D-Day is even more puzzling. This is a bit like four people out of a population of six suffering from kidney cancer and this population being the royal family of the country. Perhaps it is just randomness, but an experienced physician would consider other options.

The fall of the Berlin Wall in 1989 was predicted. The coincidences surrounding the terrorist attacks of 11 September 2001 are truly dumbfounding. So if you are God, and you want your minions to notice, then what are your options? Framing the question like this makes the answer appear obvious. Indeed, there are countless other options, but asking why this particular path is chosen is as meaningless as asking why I said “hello” instead of “hi”. If you took a certain course of action to a certain aim, there are countless others you didn’t take. So if God wants us to take notice, we live in interesting times.

1. Thinking, Fast and Slow. Daniel Kahneman (2011). Penguin Books.
2. Curses! Archduke Franz Ferdinand and His Astounding Death Car. Mike Dash (2013). Smithsonian. [link]

Cover of a BBC book on D-Day

History as a script

 

The assassination of Franz Ferdinand

On 28 June 1914 the Serb nationalist Gavrilo Princip shot and killed Archduke Franz Ferdinand in his car. This act triggered World War I. World War I ended with the Armistice of 11 November 1918. 11 November is a peculiar date because it can be written as 11-11. And indeed, the assassination was beset by some strange coincidences. Franz Ferdinand had premonitions of an early death and the assassination succeeded after a series of mishaps.1 But the most peculiar coincidence proved to be the licence plate number of the car in which Franz Ferdinand was killed, which was A III 118. It can be seen as a reference to the Armistice of 11 November 1918 (11-11-18) that ended World War I. So is history a script? Is everything planned?

The car in which Archduke Franz Ferdinand was killed
Gräf and Stift Double Phaeton ridden by the Archduke Franz Ferdinand at the time of his assassination

D-Day

The date of D-Day 6 June 1944 (6-6-44) is peculiar like 11 November because of the double digits. The Allies had chosen 5 June 1944 for their invasion because there was a full moon. They postponed it one day because of an expected improvement in the weather. There is no agreement on the commencing date of World War II while the Battle of Stalingrad took more than two months, so D-Day probably was the most important single date of World War II. D-Day means Decision Day. D is the fourth letter of the alphabet so Decision Day (DD) can signify 44, a number that refers to the year D-Day happened.

It just happens to be that Normandy invaded England in the year 1066 as D-Day was on the 6th of June, hence 6/6. In the ensuing Battle of Hastings on 14 October 1066, King Harold II of England was killed while trying to repel the invasion. This happened a few days after he had killed King Harold III of Norway, who also had invaded England. On 14 October 1944 the German General Rommel committed suicide after having overseen the construction of the German defences intended to repel the allied invasion.

According to Roman de Rou, which is a verse chronicle made around 1170 by Wace covering the history of the Dukes of Normandy, Roger the Great de Montgomery commanded parts of the invading forces in 1066. Other sources do not confirm this account.2 During the 1944 invasion Bernard Montgomery commanded portions of the invading forces. Now follows a very peculiar twist.

On 11 March 2010, the principal founder Hans van Mierlo of the Dutch political party D66 died. The name stands for Democrats 66 as it was founded on 14 October 1966 by 44 people. The name of the party can be seen as a reference to D-Day. D-Day was on 6-6-44 so D66 may refer to D-Day 6-6. Hans van Mierlo died 44 years after founding D66, which was 66 years after D-Day. Hans van Mierlo had just married a few months earlier on 11 November 2009 (11-11).

You may have noticed the recurring numbers 66 and 44 as well as the date of 14 October turning up three times. And 11-11 was there too. It was the day Hans van Mierlo married. 11-11 could be a sign of thought control and it is the date of the Armistice ending World War I. To add insult to injury, 911 was the year Normandy was founded. This number is closely related to another major historic event. On 9 November 1989 (9/11 in European notation), the Berlin Wall fell. Perhaps, you were thinking of another event related to 9/11. That makes it even more remarkable.

The fall of the Berlin Wall

The fall of the Berlin Wall was the hallmark event of the collapse of the Soviet Empire. The wall fell on 9 November 1989. This is remarkable because the terrorist attacks of 11 September 2001 (9/11 American notation) were the hallmark event of the war on terror that ended the period of relative peace after the fall of the Soviet Empire. On 11 September 1989, thousands of East Germans started to cross the Austrian-Hungarian border to emigrate to West Germany. This was the direct cause of the fall of the Berlin Wall. This date also being 11 September is quite remarkable.

The historian James P. O’Donnell unwittingly predicted the year the Berlin Wall would fall. In the German edition of Reader’s Digest he wrote ten years before it happened: “Not long ago I dreamed of Berlin. The year was 1989. The Wall was coming down. All along its hideous 165 kilometres East West Berliners were pouring out to dismantle it. … Canny merchants were weaving through the happy crowd selling souvenir bricks.”4

Perhaps this is not as curious as it may seem at first glance. He made his prediction in 1979. If you were thinking in 1979 about the Berlin Wall falling, and making a guess when that might happen, 1989 is a year you might have picked. It is not unusual to think of the end of the next decade at the end of a decade. There is an ABBA song from 1979 named Happy New Year that does the same. But then again, O’Donnell was thinking about it in 1979 so that he was likely to pick 1989, and that is a bit odd.

It’s the end of a decade
In another ten years time
Who can say what we’ll find
What lies waiting down the line
In the end of eighty-nine
– ABBA, Happy New Year

There is another peculiar twist to his prediction. O’Donnell became Newsweek Magazine’s German bureau chief in 1945. He came to Berlin on 4 July 1945 to investigate Hitler’s death and gather information about his wife Eva Braun.5 Braun died at the age of 33 and Hitler died at the age of 56, while 33 +56 = 89. Hitler was born in 1889. And the erection of the Berlin Wall was a consequence of Hitler’s defeat. And it fell in 1989. And what about the terrorist attacks of 11 September 2001? The peculiar coincidences surrounding this event are so numerous that they justify a separate story.

Featured image: Cover of the BBC book “D-Day: The Dramatic Story of the World’s Greatest Invasion” written by Dan Parry in 2004 [copyright info]

1. Curses! Archduke Franz Ferdinand and His Astounding Death Car. Mike Dash (2013). Smithsonian. [link]
2. Roger de Montgomerie, 1st Earl of Shrewsbury. Wikipedia. [link]
3. Hans van Mierlo. Wikipedia. [link]
4. Reader’s Digest, Geman Edition, January 1979
5. James P. O’Donnell. Wikipedia. [link]