Wikipedia:Reference desk/Archives/Miscellaneous/2012 December 13

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December 13

Is it possible to create a digital currency

Is it possible to create a digital currency with its value based on land? — Preceding unsigned comment added by 201.160.110.243 (talk) 00:06, 13 December 2012 (UTC)

Not very easily, because money can only be based on something of which ownership can be easily transferred; but in principle it could be done using the same sort of methods that allow Rai stones to be used as money. Looie496 (talk) 00:27, 13 December 2012 (UTC)

What if the new digital currency is only for regional use?

I can't see what difference that would make. Let me note, for what it's worth, that the basic idea here is pretty old: in 1697, the British Parliament actually voted to replace the Bank of England with a "Land Bank" that would issue notes back by land -- but the scheme turned out to be an absurd fiasco (largely because it placed way too high a value on land). Looie496 (talk) 02:50, 13 December 2012 (UTC)

One of the central problems of economics is the relationship between money and value. Money is the means by which we quantify value. That is, the key issue is "value", that is how much worth people place on something, be it an object, a service, labor, land, etc. Money is the unit of measure we assign to value, but in order to be a good unit of measure, there needs to be some consistent standard of value against which we can measure. If history is any judge, there literally is no universal and permanent standard of value. Compare this to, say, the physical world. A gram is a gram, and a meter is a meter, so we can have a permanent standard that never changes. The meter is the same length every day, because it's based on an immutable quantity (currently, the speed of light in a vacuum). There is no immutable standard of value, so our measurements of value are themselves always pegged to something which is itself of unstable value. There have been many attempts in history to peg the value of currency to something permanent, from the Land Bank scheme noted above to the Gold Standard, and they always fail for failing to realize the central problem: no object, material, or other store of value is capable of maintaining a constant value over time. All value is relative in time and place, and therefore no way of quantifying value can be divorced from the tides of economics, despite the many attempts to do so. In the end, it's why all modern currency is fiat currency. Economists finally came to their senses and realized that money's value is based solely on what the market says its value is; even if we peg the money's value to some external thing, like land or gold, all we're doing is moving the standard from one fickle standard to another. All currency is fiat currency, and always has been, whether it is bits of paper or bits of shiny rocks, or as it is today, mostly entries in computer ledgers. --Jayron32 06:40, 13 December 2012 (UTC)

I have to disagree with your last sentence. Yes, gold or land change in value, but they always have some intrinsic value, unlike paper money. StuRat (talk) 06:48, 13 December 2012 (UTC)

What is intrinsic value? This is not a flippant question, but gets to the heart of the matter. If gold has intrinsic value, then that intrinsic value should be immutable: being intrinsic would mean it isn't based on people's sense of its value, it would be inherent and internal and contained in the gold itself. We could assign an unchanging number to the "intrinsic value" of gold, and we'd have our permanent standard. Physical quantities are intrinsic; the mass of a proton or the speed of light are intrinsic quantities, there is no intrinsic value to gold: it is worth what the market will bear; exactly what every other economic value is. If it has intrinsic value, we should be able to quantify that value in a permanent way. If not, then you have a strange definition of intrinsic... --Jayron32 07:03, 13 December 2012 (UTC)

Perhaps "minimum" would be a clearer term. If the price of gold went too low, we would start making all sorts of things out of it, like electrical wiring, siding on houses, etc. Thus, the price can only go so low. StuRat (talk) 07:12, 13 December 2012 (UTC)

But that's true of paper as well. Don't we make books out of paper? I've got pounds and pounds of paper just lying all around me, and very little of it is money. Indeed, very little of my money is paper: most of my money is an entry in a computer ledger in a bank somewhere. The value of my money has little to do with what it is made out of, or even if it is made out of anything at all. My money exists whether or not I have little pieces of paper saying that it does. I can check on it anytime I want online. --Jayron32 07:41, 13 December 2012 (UTC)

The recycle value of money is so low, it may very well cost more to recycle it than it's final value. Not true of gold. And the fiat value of cash means it can all disappear, as it has for people in some places and times. The Western world has kept it's currency relatively stable in recent years, but that period may be coming to an end, based on record debt levels and the inability to solve such problems. StuRat (talk) 17:27, 13 December 2012 (UTC)

While technically true, I suppose, the intrinsic 'minimum' value of gold – in the sense of what it's worth for purposes other than simply being shiny, or being a repository of notional 'value' – is so small as to be essentially negligible at anything like current prices. The presence of more-abundant, less-expensive alternative metals for most practical applications imposes an effective maximum on gold's intrinsic value as you've chosen to define it. Copper, for instance, can also be used for wiring, or building cladding – and is arguably better at these things than gold under most circumstances – and right now you can buy it for less than $4 per pound. Gold is trading right now around $1700 per ounce, or over $25,000 per pound; its 'intrinsic' value is therefore on the rough order of 0.02% of its nominal value. In terms of the ratio between residual intrinsic value and current market price, precious metals are probably among the worst investments. As stores of value, one would be better off keeping canned hams or cases of hammers and crowbars.

Even if one assumes that gold can't or won't lose all of its 'shiny awesomeness' premium, it's still problematic. In the last decade it's suffered a four- or five-fold swing in its price; since the purchasing power of all the world's currencies hasn't declined that much (or the cost of commodities and goods hasn't risen that much) it's apparent that there is a significant 'speculative' component to the price of gold. (And there's certainly no guarantee that the early-2000s low is any sort of hard floor.) TenOfAllTrades(talk) 16:54, 13 December 2012 (UTC)

I don't think the recent increase in gold prices is a speculative bubble, it's due to new markets, such as in China and India. Thus, the higher levels may be permanent, unless we find massive new supplies of gold. Also, gold prices will always be higher than copper, since it doesn't tarnish like copper. That's not just an aesthetics issue, it causes the copper to lose electrical conductivity, too. You can coat copper with a lacquer to prevent tarnish, but that will eventually wear off. And, if there's not enough gold to back the money supply, we could use a basket of precious metals and other things. StuRat (talk) 17:29, 13 December 2012 (UTC)

You've missed the whole point of TOAT's discussion regarding the nominal "intrinsic" value of gold. Pretend everything you say about gold being better than copper because it doesn't tarnish is true. (BTW, the copper wires that have been in my parents house for over 60 years? Not tarnishing... but whatever). That doesn't explain the fantastic increase in actual price of gold. The vast majority of the actual price of gold (so much as to make any "utility value" or "intrinsic value" moot) is fiat value, in the sense that it has the value that people believe it to have, with no bearing on what it can be used for. Copper's value is essentially all intrinsic value, it's price is very close to it's utility value. Gold isn't. Here's the kicker: you don't want something really useful to also be currency. Why? Because then speculation drives the cost of it to the point where you don't want to use it for the thing that you need it for. If we used copper as money, it would make copper more valuable as money than as wiring in our houses, and we kinda need it for that purpose. So the think that makes Gold useful as money is that it's value as money comes from not being useful for anything else. Now, here's the kicker: if gold-as-money is only valuable because economics says it is, not because of its utility, then gold's monetary value is purely symbolic. It's value isn't built into the gold, it isn't intrinsic: it's just valuable because it represents wealth. So why do you even need gold? Answer: you don't. Hence fiat currency. Then you need to ask why do you even need a physical thing to represent the wealth; isn't it good enough to just keep track of it all in a trustworthy manner in ledgers somewhere? Yup, which is why that is exactly what we do now. The amount of actual physical currency (called M0 money supply by economists) is so small as to be an insignificant portion of the worldwide economy. Money is just a number, a concept, an abstract representation of value, and really nothing else. --Jayron32 19:09, 13 December 2012 (UTC)

Gold or gold-backed money has a history of thousands of years, while fiat currency has only been universal for the last few decades. That's not much of a track record. When we hit a major depression, I bet you will see the problem with fiat currency. StuRat (talk) 04:50, 14 December 2012 (UTC)

Right, because the gold standard stopped the Great Depression. --Jayron32 14:43, 14 December 2012 (UTC)

It prevented the total collapse of the currency. Deflation was rather modest, actually. And, checking out the graph of historic interest rates, you see that periods of inflation and deflation were rather balanced under the gold standard, whereas, with fiat currency, we've had inflation exclusively (although I expect this all to reverse in the coming economic collapse). StuRat (talk) 01:45, 15 December 2012 (UTC)

No, the gold standard did not prevent any collapse of US currency, which was not going to happen anyways. The reverse, deflation was happening. What remaining on it did was cause the continuing collapse of the banking system, and the continuing collapse of the real economy, massive unemployment and enormous misery and lost production and wealth. It is generally explained backwards, especially in the books of the current dark age of economics since the end of the "Age of Keynes" - but there is really no such thing as a "gold-backed" or "commodity-backed" currency. A gold standard is better thought of as making gold a currency-backed commodity. State intervention into the economy to get people to exchange their intrinsically valuable fiat money for a worthless commodity, gold. :-) It is fiat money which is ancient, dating to Sumeria and Egypt, perhaps before - antecedents which have been seriously argued to be 40,000 years old! - not the gold standard. That fiat money was sometimes measured in weights of metal may be confusing at first. But as Keynes noted, when the state gave itself the right to write the dictionary of money, the age of state money, modern money, had begun, 4000 years ago by his count. And money was never a vague concept, but always a specific one: credit=debt; a relationship, not a thing. Essentially, out of credit, the truly primeval thing, the state created money, which eventually created markets. The reverse of the sequence of the otherwise generally correct German Historical School & most textbook economics. The US dollar's 19th century stability was caused by a rather unique combination of small government, low taxes, unstable finance with frequent panics, more rapid technological progress than today linked with higher private investment, and overall tight fiscal policy, with long deflationary government budget surpluses in peacetime balanced by inflationary deficits during wartime. Not really the gold standard, except to the extent it enforced this regime. John Z (talk) 11:03, 15 December 2012 (UTC)

Small bits of land aren't necessarily worthless. You can't really build a house, farm, or building on just, say, 1 square meter, but you could rent it out to somebody who does something more productive with many such lots. For example, solar panels could be put on them, which would work well with gaps in the array here and there for those who refuse to rent out their land parcels at a reasonable rate. However, one thing which makes land less suitable is that it's value depends on it's location, unlike gold (other than tiny variations). StuRat (talk) 06:44, 13 December 2012 (UTC)

You wouldn't, say, offer a specific square meter of land. Instead, you would offer a share of a productive plot of land. So, for example, if the government had title to 1,000,000 hectares of land, it would offer as currency 1,000,000,000 "landbucks", each worth 0.1 hectares of land, but having a landbuck doesn't mean you have title to a specific patch of that land, merely that your landbuck is worth what 0.1 hectare of that land is worth. FWIW, this is basically how mortgage backed securities worked, roughly speaking: you don't own a specific house when you buy such a security, you own a share of a block of mortgages. Even if there were 100 mortgages in the block, and it was divided into 100 shares, each share wouldn't corresponded to any specific mortgage in the block. Same with "land-based" currency. --Jayron32 06:55, 13 December 2012 (UTC)

That would have advantages, but you'd lose the ability to say "See that patch there ? I own that !". Just as with gold purchases, you don't need to have it in your hands, they will store it for you, but there are many who want the tangible asset. Also, if everyone puts their name on their parcel, that's one check on unscrupulous sellers who might otherwise sell the same portion over and over again. StuRat (talk) 07:03, 13 December 2012 (UTC)

Yeah, but that's not what money is. Money is not "I'm going to give you this specific thing of worth for some other specific thing of worth". That's barter. Money is a number we give to value, no more and no less. It allows us to exchange goods and services in an abstract way, without having to find someone who wants a specific thing. If I offer you a specific patch of land for, say, a loaf of bread, what if you say "I don't want that patch of land. You can't have the bread" What then? --Jayron32 07:07, 13 December 2012 (UTC)

One problem with using land as a peg for a currency instead of a commodity like gold is that land is not a uniform commodity. Every little piece of land is unique in terms of location, soil quality, drainage, climate, and other variables. So a square meter here could easily have 100 times the value of a square meter there. Marco polo (talk) 16:55, 13 December 2012 (UTC)

It doesn't have to be a one to one pegging (1 unit of currency pegged to a concrete 1 square meter). It could be a share on an amount of land. Each share would be equal. OsmanRF34 (talk) 20:10, 13 December 2012 (UTC)

You could create a fund that invests in land. People could buy and sell shares of this fund through an exchange platform digitally. OsmanRF34 (talk) 20:08, 13 December 2012 (UTC)

But what is the value of the peg if it is never redeemable? To be redeemable, it would have to entitle the bearer to a specific plot of land with the same value as the unit of currency. Otherwise, how is this really different from a fiat currency? Marco polo (talk) 21:06, 13 December 2012 (UTC)

And you're now within spitting distance of a publicly-traded real estate investment trust. (Though typically REITs hold developed, income-generating land, there's no particular requirement that they do so.)

As Marco Polo and Jayron32 have both alluded to, land makes a lousy currency base because it tends to lack liquidity and fungibility. As an investment vehicle against which a currency could be pegged it's probably even worse, since there are all kinds of problems with valuation. TenOfAllTrades(talk) 21:31, 13 December 2012 (UTC)

It would also be worthwhile to read Assignat for a cautionary tale about land-backed currencies. eldamorie (talk) 14:50, 14 December 2012 (UTC)

You don't even need to talk about RETIs... or even speculation... just imagine land full of oil before oil was seen as particularly valuable. Now your land's valuable overnight. How would you compared that to currency? Currency's primary value is its sameness. One dollar is equal to one dollar, with almost no exception.

But, probably to the chagrin of a few people here, let me point out that the original IP's one sentence question was about digital currency tied to land, a question almost nobody's bothered actually trying to answer since about the 2nd reply. Shadowjams (talk) 01:03, 15 December 2012 (UTC)

I disagree. The issues raised apply equally to any currency whether using digital or other media. A digital currency tied to land would have the same problems as any other kind of currency tied to land. Nothing about the digital medium mitigates those problems. Marco polo (talk) 23:50, 16 December 2012 (UTC)

As for whether an all-digital currency would be feasible: a large and growing share of transactions are already carried out electronically, and, in fact, a majority of the money in the United States exists only as number in a computer. As far as what the value is based on...Economists agree that money is what money does. The "value" of money is the value of anything and everything that can be purchased with it. So long as the issuer is trustworthy and the supply remains relatively stable, it doesn't matter what the value is based on. ----Mattmatt1987 (talk) 06:22, 18 December 2012 (UTC)

Is there a space prob called prog going to pluto in 2016?

==Is there a space prob called prog going to pluto in 2016?== Venustar84 (talk) 03:55, 13 December 2012 (UTC)

What happened when you googled the term? μηδείς (talk) 04:32, 13 December 2012 (UTC)

I was about to ask the same question. So I second that! ←Baseball Bugs ^{What's up, Doc?} carrots→ 04:33, 13 December 2012 (UTC)

When I did it, I found the same question in Yahoo Questions with the same answers as here. OsmanRF34 (talk) 20:17, 13 December 2012 (UTC)

The OP may have had limited success from Googling "prob". Sometimes spelling is important. HiLo48 (talk) 20:40, 13 December 2012 (UTC)

You're probs right about that ;) 163.189.217.40 (talk) 04:39, 14 December 2012 (UTC)

Actually you're most likely both wrong. For me, "Googling" 'space prob' by default just shows results for 'space probe'. For me "Googling" 'pluto space prob' just finds the results for 'pluto space probe' of which New Horizons is mentioned or in most cases the main focus of all 10 results. The first 3 for me are [1] and New Horizons, both highly useful results. Bing gives more or less the same results except they include the results for space probe (i.e. they are showing both), and wikipedia and NASA are reversed and the third result is [2], arguably more useful than [3] from Google. I tried a few other search engines, the only one where it may have been a problem is wikipedia itself where 'space prob' does suggest 'space probe' but 'pluto space prob' does not suggest 'pluto space probe' and the results aren't that useful. Really with most modern general purpose search engines, poor spelling is often not a barrier to searching, particularly not minor errors like 'prob' vs 'probe' and where the resulting search term makes little sense. In fact, it can often be less of a barrier than here. So I don't think we should be discouraging people from helping themselves when they clearly can. Nil Einne (talk) 06:10, 14 December 2012 (UTC)

So spelling doesn't matter. Now I'm depressed :-( HiLo48 (talk) 06:34, 14 December 2012 (UTC)

There is a spacecraft headed there, called New Horizons, due in 2015, not 2016, but I suppose you might have heard somebody talking about it say "I've been working on the prog to go to Pluto for several years now...." (where "prog" is an abbrev for the New Horizons program). StuRat (talk) 06:34, 13 December 2012 (UTC)

==Thank you!== Venustar84 (talk) 19:08, 13 December 2012 (UTC)