10 scientific reasons society is like it is and why we can’t fix it

Despite what the media would have you believe, we’re actually living in the most peaceful time in human history. There’s no doubt that the world is in a bit more chaos than it was, say, five years ago, but largely, it’s still way better than even fifty years ago. We’re just more connected than ever, giving us a direct glimpse into global human suffering we’ve never had before.

Read more:

https://listverse.com/2019/12/27/10-scientific-reasons-society-is-like-it-is-and-why-we-cant-fix-it/

So much progress has been made already. Perhaps we can’t fix everything that is wrong in the world but maybe we can improve things somewhat more. I hope you agree.

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 to 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 the car was last filled up. That is curious. 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. Imagine that a remarkable incident is like throwing five sixes. Such a remarkable incident seems very unlikely. 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 almost certainly happens more than once. You should not be surprised to see it happen 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 meaningful coincidences as evidence, this is a big hurdle. A list of strange coincidences isn’t evidence of a script, even if they are very strange. That is because strange incidents like throwing five sixes happen by chance.

A 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 that someone is ‘writing’ history because these events are significant. Even then the argument remains problematic. You may need to answer questions like what are the most important historic events and what are peculiar coincidences?

Probability

And we run into another problem. Humans are good at attributing a cause but bad at guessing the likelihood of an event. The psychologist 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 like to think that some cause makes unusual things happen while these could just be random events.

One might call this the law of small numbers. So if we consider the most important events in history, and use this as a sample to prove a cause like someone ‘writing’ history, we are running into this issue. Perhaps it is not possible to prove that there is a script. It might still be possible to make the case more convincing.

Endless possibilities

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 just 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 required for that particular 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. 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 that it starts and when. 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, presuming that you know it will start not more than twenty years before 1918. But something doesn’t add up here. The assassination succeeded after a series of mishaps, so if it was 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 act being the trigger for World War I.

That’s really, really, 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. The only escape is believing that this really, really, is a coincidence. 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. He 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.

Seeing meaning when there isn’t any

“Everything is just random,” 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 attach meaning to it.” There is a problem with this. This text might be a random sequence of characters too, and yet you think it isn’t. Are you delusional because you read words and see that these words have meaning in the sequence in which they are written? 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. That is, 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, that would be hard to explain as mere randomness. Wellcome to my life!

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, at least 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, then 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]

Now what?

So why did I write The Plan For The Future? And why may it be used? I am not more gifted or deserving than other people. Chief Inspector Jacques Clouseau could solve every mystery, not because of his superior investigative methods or any other personal quality, but because he was a fictional character in a story. This universe might exist for entertainment and we may be fictional characters in a story too. And the story may be that this particular plan is going to be used. That may be all there is to it.

In 2008 the end of civilisation seemed close. The financial system was about to break down. The financial crisis could trigger a new depression worse than the Great Depression that led to World War II. For decades I had an interest in interest-free money as interest would be the cause of the coming collapse. The crisis made me think of that again. And then I did a remarkable discovery. Interest-free money with a holding tax and negative interest rates can prevent a depression and bring peace and prosperity, possibly forever. You can read more about it in Natural Money And The Economy.

From then on things were getting weirder by the day. It appeared that Natural Money could be part of a greater plan and that God is a lady I once met. Over the years there had been peculiar coincidences referring to her. This universe could be a virtual reality created for entertainment by an advanced civilisation. It could have an owner we may refer to as God. And God might be a woman who could have avatars and appear as ordinary human to us. You can read more about that in The Universe As A Virtual Reality and God Is A Woman And Jesus Was Her Husband.

There have been plenty of nutcases believing themselves to be on a mission of God. Perhaps I am one of them but there is some chance that Natural Money might turn out to be useful. The financial crisis of 2008 was halted by central banks but the underlying cause of the crisis, interest on debts, has not been taken away. The next crisis may only be solved with negative interest rates. And that is where Natural Money comes in. Indeed there may be a plan behind Natural Money. Only time may tell.

And so the script could be that humanity is on a suicidal path but that doom can be prevented in the nick of time by some unexpected turn of events. Natural Money may help to prevent a collapse of the global financial system and become the basis of a better future. That’s my guess for what it’s worth. I am not a politician so I am not going to promise you anything. For now the best option seems to prepare for what might happen and to think ahead. So here is the plan in a nutshell:

  • preventing the collapse of the financial system by implementing Natural Money and bringing financial sanity by ending usury;
  • putting human civilisation on a sustainable path (which may require negative interest rates, hence Natural Money);
  • making the world fairer by trying give everyone a reasonable treatment (human civilisation must be on a sustainable path first).

As a teenager I was interested in learning the lessons from history. Perhaps I was even a bit obsessed with that. Most notably, the Byzantine Empire caught my attention. It survived several setbacks and existed for 1,000 years. With the benefit of hindsight, this preoccupation with an empire that lasted 1,000 years is a bit peculiar considering later developments and a prophecy in the Bible. At some point I came to believe that there is no point in knowing so much about the past and learning the lessons of history. For my job in information technology it didn’t seem much of an advantage.

I’m not aware of too many things
I know what I know, if you know what I mean
Philosophy is a walk on the slippery rocks
Religion is a light in the fog
I’m not aware of too many things
I know what I know, if you know what I mean, d-doo yeah

Choke me in the shallow water
Before I get too deep

What I am is what I am
Are you what you are or what?
What I am is what I am
Are you what you are or what?

– Edie Brickell, What I Am

Writing The Plan For The Future suddenly seemed to make learning the lessons from history important again. History is an unwieldy pile of people, ideas, conflicts and dates, and it is hard to see the bigger picture. More data can blur your view and prevent you from seeing what really matters. But there is help. The historian Yuval Noah Harari wrote a book, Sapiens: A Brief History of Humankind. It is a good read and it is brief like the title suggests. It was of great use. It can also help you to get a proper perspective. This plan leans heavily this book and most notably the idea of collective imaginations.

Human civilisations are based on collective imaginations. Collective imaginations don’t exist in objective reality but only in the minds of groups of people. For instance money, ideologies, nationalities, corporations and laws are collective imaginations.1 People imagine that euros and dollars have value but they are just pieces of paper or digits in a computer. Euros and dollars only exist in the imagination of humans. They believe that euros and dollars have value. Humans also imagine they live in nation states and that they have rights and obligations. Gods and religions are collective imaginations too.

Collective imaginations aren’t mere delusions. If you are the only one imagining something like human rights, others may think that you are delusional. But if you can convince others to share your belief, it becomes a collective imagination. Collective imaginations can be useful as they facilitate cooperation.1 For instance, to produce a mobile phone, you need the assistance of strangers working for several corporations, and money to make them work together. Humans imagine corporations and money to make a mobile phone. That’s what makes humans so successful as a specie.

That’s also what this plan is about. It aims at making you work together on changes to the social, political and economic order by proposing a collective imagination about the nature of reality and the identity of God. Success may depend on you believing the imagination or at least considering it to be useful. In other words, you may need faith. Your survival may depend on it. Proof may be hard to come by but the proposed collective imagination could be the most plausible explanation of our existence. The proof of it may be that the plan is going to work. It is not going to work if you keep on pretending that this is only my personal delusion. It is up to you to believe it, spread the news, and make others believe it too.

1. Sapiens: A Brief History Of Humankind. Yuval Noah Harari (2014). Harvil Secker.

NASA mission control celebrating successful return of Apollo 13

History’s oddities

Thomas Jefferson and John Adams

US Presidents Thomas Jefferson and John Adams were both involved in drafting the US Declaration of Independence that was signed on 4 July 1776. Henceforth, the forth of July became Independence Day in the United States. Jefferson was Adam’s Vice-President until he himself became President in 1800. They were the last surviving members of the American revolutionaries. They had been bitter enemies but were also friends for many years. Both died on 4 July 1826, fifty years after the Declaration of Independence.1

Napoleon Bonaparte and Adolf Hitler

Napoleon Bonaparte and Adolf Hitler were the only two persons that ever conquered nearly all of Europe. There is a series of parallels between them. Napoleon and Hitler both came to power by a coup ending an unstable republic. They both turned Europe into a battlefield. They both ventured into Africa and both were repelled in Egypt. They both waged a war on two fronts because they both attacked Russia while England had not been defeated.

Napoleon was born on Corsica, an independent island that became part of France. Napoleon became the leader of France. Hitler was born in Austria, an independent country that became part of Germany. Hitler became the leader of Germany. Napoleon came to power after a coup to overthrow the government on 9 November 1799. Hitler was involved in a failed coup to overthrow the Weimar Republic on 9 November 1923.

The Titanic

The Titanic was the tallest ship in the world. It had compartments that could be sealed remotely. For that reason it was deemed unsinkable. Nevertheless the Titanic sank on its maiden voyage. In 1898 Morgan Robertson wrote the novel Futility. It described the maiden voyage of a transatlantic luxury liner named the Titan. Although it was touted as being unsinkable, it struck an iceberg and sank with much loss of life. In the book the month of the wreck was April like in the real event.2

The similarities between the Titanic and the Titan are striking:

  • similar names of the ships
  • both were described as the largest craft afloat and the greatest of the works of men
  • the sizes were similar: the Titan was 45,000 tons and the Titanic was 46,000 tons
  • both were deemed ‘unsinkable’
  • both had a triple screw (propeller)
  • both had a shortage of lifeboats
  • both struck an iceberg: the Titan, moving at 25 knots, struck an iceberg on the starboard side on a night in April, in the North Atlantic, 400 nautical miles from Newfoundland while the Titanic, moving at 22½ knots, struck an iceberg on the starboard side on the night of 14 April 1912 in the North Atlantic, 400 nautical miles from Newfoundland.
  • both sank and most of the passengers and crew died.2

In April 1935, the cargo vessel Titanian sailed in the North Atlantic. A sailor claimed that he had an uneasy feeling because of the similarity of the ship’s name with Titanic. That caused him to sound a warning. He claimed to have done this before ice was seen and that the vessel stopped just in front of an iceberg. Reports showed that the Titanian was slightly damaged on the voyage.3

One hundred years later a luxurious Italian cruise ship, the Costa Concordia sank after hitting a rock. The accident was on Friday 13 January 2012. The ship had thirteen decks. Some passengers claimed that the Titanic theme ‘My Heart Will Go On’ was playing in a restaurant when the ship hit the rock.4 On 27 February 2012, another cruise ship of the same parent company, the Costa Allegra, ran into trouble near the Seychelles.5

The John F. Kennedy assassination

“We’re heading into nut country today,” President John F. Kennedy said to his wife on the morning of 22 November 1963. She had just seen an advertisement of the John Birch Society in the Dallas Morning News suggesting that he was a communist. The advert was bordered in the black of a funeral announcement. “But, Jackie, if somebody wants to shoot me from a window with a rifle, nobody can stop it, so why worry about it?”6

A few hours later he was killed by someone shooting him from a window with a rifle. The date of the assassination, 22 November (22/11), consists of two multiples of eleven. There are some parallels between John F. Kennedy and Abraham Lincoln:

  • Lincoln was elected to Congress in 1846. Kennedy was elected to Congress in 1946.
  • Lincoln was elected President in 1860. Kennedy was elected President in 1960.
  • Both Presidents were concerned with Civil Rights.
  • When Lincoln became president in 1861, one of the persons that worried about his safety was John Kennedy, Superintendent of Police in New York. When Kennedy became president in 1961, one of the persons that worried about his safety was Evelyn Lincoln, his personal secretary.
  • Both presidents were shot in the back of the head in the presence of their wife.
  • Lincoln was shot in the Ford Theatre while Kennedy was shot in a Ford Lincoln.
  • They were both shot on a Friday.
  • Both assassins were killed and not brought to trial.
  • Lincoln’s successor was Andrew Johnson, born in 1808, while Kennedy’s successor was Lyndon Johnson, born in 1908.7

It has been suggested that these similarities are a coincidence and that there are similar similarities between other US Presidents.7 Perhaps there is more to it. Some coincidences are more peculiar than others. That both were shot on a Friday is less remarkable than that Lincoln was shot in the Ford Theatre while Kennedy was shot in a Ford Lincoln.

These coincidences may be part of other schemes of peculiar coincidences too. Kennedy’s brother Senator Robert F. Kennedy was shot a few years later. He died in 1968 on June 6 (6/6), just after Martin Luther King was murdered on April 4 (4/4). That is a bit odd because of the coincidences surrounding D-Day (6/6/44). There is a series of tragedies related to the Kennedy family called the Kennedy Curse.

The Lincoln connection

The son of President Lincoln, Robert Todd Lincoln, had his share of coincidences too. A few months before John Wilkes Booth murdered his father, he was rescued by Edwin Booth, the brother of John Wilkes. The Booth family and the Lincoln family were not neighbours, which makes the incident remarkable. Robert Lincoln was in the vicinity when his father was shot. He was also present at the assassination of President Garfield in 1881 as well as the assassination of President McKinley in 1901.8

From William Henry Harrison through John Kennedy, every President elected in a year ending in zero died in office. The presidencies of Abraham Lincoln, James Garfield, William McKinley, Warren Harding and Franklin Roosevelt all ended prematurely. The pattern has been called The Zero Year Curse. It ended with Ronald Reagan who survived an assassination attempt. First Lady Nancy Reagan reportedly had hired psychics and astrologers to protect her husband from the curse.9

Apollo 13

The number 13 is often considered to be an unlucky number. The voyage of Apollo 13 was haunted by accidents. The launch was on 11 April 1970 at 13:13 CST from the Kennedy Space Center in Florida. The departure time combined with the number of the spacecraft appears to be an attempt to challenge fate. The lunar landing was aborted after an oxygen tank exploded on 13 April. The crew made it back alive.10

Featured image: NASA mission control celebrating successful return of Apollo 13. NASA. Public Domain.

1. Thomas Jefferson and John Adams die. History.com (2009). [link]
2. Futility, or the Wreck of the Titan. Wikipedia. [link]
3. Titanian – Echo of Titanic. Encyclopedia Titanica (2004) [link]
4. Costa Concordia disaster. Wikipedia. [link]
5. MS Costa Allegra. Wikipedia. [link]
6. Three surprising details from the JFK assassination – and why they matter. James L. Swanson (2013). The Globe and Mail. [link]
7. Lincoln–Kennedy coincidences urban legend. Wikipedia. [link]
8. Robert Todd Lincoln. Wikipedia. [link]
9. Curse of Tippecanoe. Wikipedia. [link]
10. Apollo 13. Wikipedia. [link]

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]