The Changed Nature of Money: From Gold to Digital

What is money? In the Middle Ages and before, money was a physical entity. Something you either had in your pockets, or not. Whether it was cows or gold, it was something you could touch, something of which you knew it couldn’t just be created “from thin air”. Although gold coins could be made by the government, the government still needed gold to make the coins. And since getting gold wasn’t easy, you could trust that the amount of money in a society – whose value was based on the amount of gold being in circulation – wouldn’t fluctuate that much. You had certainty, just like you could be certain that the tree in your backyard couldn’t grow new apples every day. It was a gradual, natural process. And this was a calming thought, ensuring you that the value of your money would be rather stable of time.

But now – a couple of centuries later – we’ve got the internet, and everything has changed. Money no longer is gold, but is replaced by a string of digital numbers on your computer. We no longer pay the butcher by handing him over a few tangible units of gold, but we put our plastic card into a digital machine and our digital string of numbers gets digitally reduced. The comfort that this brought us is enormous. We don’t even have to carry gold around anymore.

But although the “digital era” brought us many comforts, it also brought uncertainty – and vulnerability – into our lives. Because who ensures us that the amount of digital money that is in circulation will be a stable amount of money over time? Who ensures us that, whenever the government feels it’s losing in popularity, it cannot just put an extra zero-digit behind the digital number on its bank account? Who ensures us that – like cows and gold – the value of money is based on stable, natural entities that cannot be created from thin air, and not merely upon our perception of the value of money, which is an entity susceptible to the whims of those with monetary power? In other words: who guarantees the value of our money? Who besides ourselves, besides our perception of money? And if the value of money is merely dependent upon our perception of it, then how easily can this perception – and thus the value of our money – be adjusted by means of external intervention? How much certainty do we have regarding the value of our future money?

Because what is the value of money if we can just hand over an 8-digit number to Greece, knowing that it will never come back, and not even worrying about it never combing back because we know we can create more money whenever we want to. Who can ensure us that the money we’re working for is really worth the value we expect it to be worth over time? What is the value of money if new money can just be printed over and over again? Or even worse, when it requires nothing but the adding of an extra digit in the server space of the government. Is that still money? Or is it a 21th century substitute for money, created as a logical consequence of our fetish with digital technology and its “benefits”?

Let’s stay realistic. One thing we can reasonably say is that money – instead of possessions like gold and cows – has become more of a means for exchanging rights and less of a means for exchanging property. Rights of obligation, rights of someone to do something for another person in change for an increase in that someone’s right to legitimately claim something from others. I know it sounds abstract, but that is because it is abstract. The non-abstract gold- and cow time is over. Mutual obligations are all that remains. A problem? Maybe. A change? Definitely.

But what do you think?

Written by Rob Graumans

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