Brief History of Money's Misrepresentation and "Credit" V2.0 (revised)

By Marc Gauvin

Copyright © 2/10/2018
Reproduction expressly granted provided attribution is given and original link is provided. Edited and extended April 2021


"...we came full circle from a commodity being conferred properties of a universal abstract measure of all value, to a record empty of any intrinsic value being conferred the attributes of a commodity."

If money is a measure of value then it cannot also be a commodity including what is called "credit" or "trust". That is, while money may measure the amount of value that parties concede in a spirit of credit/trust, it itself is not the trust but just a measure of the amount of value being entrusted. Every "seller" forfeiting value to the community is an issuer of trust to the community and every buyer whose balance falls below zero is a recipient of trust again from the community.

The first step was the intuitive realisation by humans of the properties of fungible vs non fungible assets, i.e a fungible asset is one that can be divided whereby its divisions maintain the properties of the whole and thus retain proportional value to the whole, e.g. a kilo of salt can be divided into grams each retaining 1/1000 the value of the kilo.  This property is essential to facilitating the diversification of one's holdings from high value non fungible assets to arrays of different assets of (roughly) equivalent value through a commonly accepted fungible asset (salt, grain, dates, and silver). This practice evolved to its ultimate logical consequence where the most desired fungible asset became the most desired medium of trade.   Ultimately, for their durability, gold and silver became the universal standard.

The next step was to attribute to gold and silver the role of universal standard measure of value as posited by Aristotle i.e. that money's purpose is to "measure all things". This last step would historically correspond to the first manifestation of money's core logical misrepresentation i.e. the conflation of the notion of money as a commodity in trade with that of money as a standard measure, that while intuitively compelling it was nonetheless an error for not noticing how those two notions are logically mutually exclusive.

This error has persisted from before Babylon throughout the advent of fiat money 11th century in China and late 15th century Europe, that then evolved in close association with real fungible assets (gold and silver) up until 1970 and to the present,  where money has essentially taken on the form of mere unit/record/note of value.  That is,  money now is nothing more than multiples of currency units ($. €, ...etc.) although as it has since before Babylon, money's logical misrepresentation (conflation of the notions of commodity and measure)

Thus, while it appears that money has taken on different forms and has so evolved, the effect of its logical misrepresentation as defined herein, has been with us since millennia.  That is, we came full circle from a commodity being conferred properties of a universal abstract measure of all value, to a record empty of any intrinsic value being conferred the attributes of a commodity. In both cases, the same erred conflation of interpreting money as both a measure of value as well as a commodity persisted as an intuitively compelling logical error that mathematically destablises money's necessary function as a stable record (measure) of universal value, affecting the  development of society for that long. 

Indeed,  there is a strong argument that the need to manage, protect, validate and certify standard "fungible assets" was at least logically a basis if not the basis of many of what have become to be known as "nation states" i.e. public administration of common interest requiring protection and enforcement (armies) over territories (nations), evolving from services of
intermediaries entrusted by many with the safe keeping of the standard fungible assets. These intermediaries being compensated with percentages of those same commodities not unlike the practice of charging interest today.

Once such practices became common, it was easy to fall into the intuitively compelling but erroneous notion of assuming that the universal desire for such fungible commodities somehow conferred on measures of these commodities the properties of a universal measure of all and any value.  Erroneous, because being subject to supply, the measure of value became susceptible to corruption via the manipulation of the supply.  Only once that misrepresentation had taken root,  was the issuance of trust disassociated from the delivery of goods and services to that of the delivery of society's most desired commodities i.e gold and silver.  The practice of marking the gold and silver, initially to authenticate its purity, gave rise to coins and then as an extension to the issuance of bills representing amounts of coins,  for maintaining both the purity as well as reducing the risk of loss or theft in transport.

Subsequently, the idea of manipulating the quantity of bills to match the required levels of trust in trade rather than the actual gold, became irresistible not just for illicit ends, but legitimate ends too. But the link to the gold model and 'most desired fungible asset' model maintained the general erroneous notion of requiring relative scarcity of the bills and the idea of a just proportional retribution for the administration in terms of the bills themselves and proportionately to the amounts of the scarce underlying commodity (gold/silver).  This is what gave rise to what is known as "fiat" currency.

Finally, in the 20th century the link between these bills (money) and gold was abandoned yet the same operative model of money as a circulating commodity paid for itself in terms of itself and proportionally,  as well as the disassociation of trust from the provision of goods and services to that of money instead were maintained.

The (il)logic of that error is what the MSTA and projects point out in unequivocally conclusive formal logical, scientific and legal terms,  as well as demonstrating how correcting that error allows for maintaining the use of money as a means of "liquidity", without divorcing the issuance of trust from the delivery of real value (goods and services) in each and any instance and independently, but pursuant to a common standard stable measure of value as laid out in "A Systems Engineering Approach to Formal Monetary and Financial Stability Without the Vagaries of “Austerity” " as well as  Money vs Credit.




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