A Brief History and Understanding of Money (and Gold)

“Money is one of those things that’s completely familiar and completely mysterious” – James Surowiecki, “The Financial Page” column for The New Yorker.

With that thought in mind, here are two well presented posts on money and its history, found via Kotte. The first post is reply on reddit in response to someone wondering where all the money in the world has gone. The result is an enlightening walk-through of how we got to money and what money is.

From www.reddit.com:

It’s hard to explain this to a five-year-old, because there are some fairly abstract concepts involved, but here goes…

All actual “money” is debt. All of it, including monetary gold, etc. (Don’t argue with me yet, I’ll get to that.)
Imagine a pretend world with no money, some kind of primitive villiage or something. Now let’s invent paper money. You can’t just print a bunch of paper that says people have to give you stuff, because nobody would honor it. But you could print IOUs. Let’s walk through this…

  • Let’s say you’re an apple-farmer and I’m a hunter. You want some meat but haven’t harvested your crops yet. You say to me, “hey, go hunt me some meat and I’ll give you 1/10th of my apple harvest in the fall”. Fair enough, I give you meat, you owe me apples. There’s probably a lot of this kind of stuff going on, in addition to normal barter. In time, standard “prices” start to emerge: a deer haunch is worth a bushel of apples, or whatever.

The second article comes from one of my favorite magazines, IEEE Spectrum1, by way of the afore quoted James Surowiecki who gives a brief history of money and some of its effects:

From spectrum.ieee.org:

Money’s decline in feudal times is worth noting for what it reveals about money’s essential nature. For one thing, money is impersonal. With it, you can cut a deal with, say, a guy named Jeff Bezos, whom you don’t know and will probably never meet–and that’s okay. As long as your money and his products are good, you two can do business. Similarly, money fosters a curious kind of equality: As long as you have sufficient cash, all doors are open to you. Finally, money seems to encourage people to value things solely in terms of their market value, to reduce their worth to a single number.”©

These characteristics make money invaluable to modern financial systems: They encourage trade and the division of labor, they reduce transaction costs–that is, the cost incurred in executing an economic exchange–and they make economies more efficient and productive. These same qualities, though, are why money tends to corrode traditional social orders, and why it is commonly believed that when money enters the picture, economic relationships trump all other kinds.”©

It’s unsurprising, then, that feudal lords had little use for the stuff. In their world, maintaining the social hierarchy was far more important than economic growth (or, for that matter, economic freedom or social mobility). The widespread use of money, with its impersonal transactions, its equalizing effect, and its calculated values, would have upended that order.”©

Both of these articles got me thinking about an episode of NPR’s Planet Money I listened to a while back on why we use gold as a de facto base unit of currency. It boils down to this: of all the basic elements on the periodic table that meet these basic requirements:

  • Not a gas
  • Doesn’t corrode
  • Doesn’t burst into flames
  • Doesn’t kill you
  • Is rare, but not too rare
  • Easier for pre-industrial people to forge

…gold is the element that fits the bill best.


  1. Fair Disclosure: I am a member of IEEE 

Operation of Hydroelectric Facilities and the Boulder Canyon Hydroelectric Generating Plant

A while back I posted some picture on Flickr of the Boulder Canyon Hydroelectric Generating Plant. At one point, I was going to write up a little post here explaining what they were and why I had picture of such a cool (albeit old) facility.

Instead, I decided to write the paper for my class and post that in lieu of writing an actual post.
The downside, though, is that posting my paper creates about five pages of technoblable that most readers will turn away from in utter disgust. However, posting my paper does have the effect of pushing forward my “long standing desire post my school work online” and I think the latter serves the purposes of this blog better then trying to remedy the former.

I generally detest posting things on here in the PDF format, however the IEEE format for publication is rather odd and doesn’t it lend itself to online publication very easily. However, I will include the abstract and index terms for the benefit of those who are at least a little curious but do not necessarily want to read the entire paper:

Operation of Hydroelectric Facilities and the Boulder Canyon Hydroelectric Generating Plant (April 2008) [PDF]
Andrew J. Ferguson, Member, IEEE

Abstract – Boulder Canyon Hydroelectric Generating Plant has been in continuous operation since 1910. While the technology behind the operation has seen some upgrades, the infrastructure is mostly the same as it was almost a century ago.

Index Terms – Breaker, Hydroelectric generators, Synchronization, Transformer, Water.

Update: Received 95/100 on this paper.

Tattoo

I was having a conversation with my flatmate Ben about tattoos. We were talking to Amie, a girl in our climbing class about her tattoos. Ben expressed interest in getting a the outline of the Periodic Table. That made sense because Ben is a Chemical Engineer/Chemistry double major.

This got the gears turning in my head. Why EE related tattoo would be neat and interesting?

The idea of getting a tattoo has been in the back of my head for a number of years now. Originally, it started out as (naturally) some sort Star Trek related design: the Vulcan IDIC or Star Trek Command Insignia.

The IEEE (Institute of Electrical and Electronics Engineers) has a pretty spiffy logo:
ieeelogo.jpg

I think the arrows are particularly spiffy since they represent the right-hand rule which is so often used in electrical engineering.

With that all this in mind, I mocked up the following tattoos:
tattoo-star-trek-idic
The original IDIC

tattoo-star-trek-insignia
The original Star Trek Command Insignia

tattoo-ieee
Right-hand Rule arrows (IEEE)

tattoo-ieee-star-trek
Combined Star Trek/IEEE

In any event, it’s not something I would get before graduation. I’m also not set on the getting it on my wrist. It was just a convenient place to mock it up.