Me, a few days ago:
Rather counter-intuitively, government issued 'money' does not require any asset-backing whatsoever, all the government needs is a system of whereby people HAVE TO hand those notes back to the government which effectively 'unprints' them again. The mistake that the Weimar Republic et al made was not taxing enough.
There followed a lively discussion where people desperately tried to disprove this truism by giving examples of lots of other things that are used as money.
Bayard finished with this supposed killer counter-argument:
For a currency to have value, it simply has to be generally accepted for the payment of debts.
Correct.
The government doesn't have to be involved.
Correct.
There are loads of examples of this: cowrie shells, cigarettes, Maria Theresa dollars, LETS, C18th private currencies, the ones previously mentioned, etc etc.
Correct. But so what?
We did basic logic at school, as well as Venn diagrams. I remember the teacher saying things like "Milk is a drink. But not all drinks are milk. And milk isn't always used for drinking."
In other words, you can't disprove that milk is a drink by saying that whiskey is a drink. And just because people drink milk doesn't mean it can't be used for other things (like making other dairy products).
So let's go back to Bayard's argument part 1:
For a currency to have value, it simply has to be generally accepted for the payment of debts.
Government printed money (be it paper or electronic) has value because it can be used for payment of tax debts. This is why it has value, which is exactly what I said. Those other things are also used as money for various reasons entirely irrelevant to the discussion.
Take a Bond Bug, they are truly shit cars, but you have to pay about £8,000 for one in good nick. Or you could buy a brand new one of these for about £8,000.
So we have two "cars", both worth about £8,000. The Bond Bug has scarcity/sentimental/novelty value. The other has four seats, airbags and a decent stereo. Same basic thing, same value/price, but for totally different reasons. You can't disprove that Bond Bugs sell for about £8,000 by comparing them with a brand new Kia Picanto or vice versa.
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