On Value, Currency, Money, and Energy
Below is a comment I posted on Michael Krieger’s blog regarding the intrinsic value of bitcoins.
Bitcoin, like gold and silver, is backed by labor (energy, really, when you get down to it). As in mining for gold or silver, there is a labor/energy cost to produce bitcoins. Like gold and silver and dollars and euros and every other currency or form of money in the history of humans, there is absolutely zero intrinsic value to them other than the usefulness that they have to humans.
The problem with fiat currency is not that it is fiat. Any form of money, whether hard or fiat, can work fine as long as there is nobody destroying the value of the currency by producing it without cost. The problem with the dollar is not that it is made of paper. The problem is that the Fed can create new dollars in any amount at any time with no effort (i.e. backed by no labor/energy cost). The dollars created thereby thus have no value backing them.
Gold is just shiny metal. It’s beautiful, but so are flowers. Gold has value simply because humans value it (note that flowers also have SOME value, though they are not generally used to transact with). Gold RETAINS value because there is no way to produce it without cost (labor).
Bitcoins also require cost to produce them. And furthermore, like gold, built into the technical foundation of their production, there is an absolute limit to the number of bitcoins that can ever be produced. If the bitcoin experiment is not destroyed by government meddling or by a loss of confidence (say due to the discovery of a flaw in the foundational algorithms), bitcoins will retain their value specifically because there is no way to produce bitcoins without cost. There is no equivalent to the Fed in the bitcoin universe. The only way to produce bitcoins is by “mining” them, which costs significant effort (value, labor, money, energy, whatever unit you want to measure it in) in electricity and computer processing time.
All money is ultimately a representation of energy. Good money is money that cannot be diluted (counterfeited) by the costless production of more representation than that which is represented.
In What Universe?
A lot of people I speak with make an assumption that money is the same thing as wealth.
It’s not and to fully explain the reason why it’s not is beyond what I want to do here so I will oversimplify a little bit (but not that much) how money comes into being in our world in order to ask a question that seems incredibly obvious, but is completely swept under the rug, aside from us crazy, fringe bloggers.
If you work and get paid $1,200 for that work and you are prudent and decide to put $1,000 of that paycheck into the bank as savings, the bank where you put that money is, from the moment you made your deposit, legally allowed to lend out $9,000 to other people on the basis of your $1,000 deposit.
Where does the other $8,000 come from, you may ask? It literally comes from nowhere. For every $1 you deposit in the bank the bank is allowed to create $8 out of thin air and lend a total of $9 to people, businesses, etc.
Not only are they allowed to create this money out of nothing, they are also allowed to charge interest on the created money that they lend. So you deposit $1,000 and they pay you some nominal interest rate on that $1,000 (extremely nominal these days), and at the same time, they create $8,000 out of thin air and lend it, plus your $1,000 (for a total of $9,000) out to others at an interest rate that is more than nominal. Today a 30-year fixed mortgage interest rate is somewhere around 3.75 % on the low end. Credit card interest rates are in the range of 12% - 20%.
Here’s my question: in what universe is that right?
In what universe does it make any remote kind of moral or ethical sense that an entity can simply create money out of thin air and then produce income off of that money by lending it out to others at interest?
In my reality, the idea of such a scheme is completely insane. It seems like a bad vaudeville sketch; “yo, who’s on first?” And yet, that little counterfeit two-step is more or less the “legitimate” basis of the entire global economy.
All of your money is a lie.
Refuse the debt.
The Fat Thing
I’ve just watched the first two episodes of the 4-part HBO special called The Weight of the Nation and it is pissing me off.
The Genetics of Obesity
The entire first episode was dedicated to telling us how complex a problem the American obesity epidemic is. Expert after expert, scientist after scientist, doctor after doctor all doing these intricate studies, spending millions of public dollars on lab analysis, imaging, computer models; talking about the genetic and evolutionary components of what drives people to overeat.
I hold an advanced degree in biology. I have studied evolution, behavioral genetics, and social evolution with some of the founders of those fields and as an officially certified expert, I am here to tell you that there is no (as in zero) genetic component to the fat problem in America. It is a one hundred percent cultural issue.
How can I say this with such confidence, flying in the face of all the televised experts I just watched? Simple. Look at France. Same genetics, no obesity epidemic. Look at America 50 years ago: same genetics, no obesity epidemic. The genetics does not change over those timeframes. It takes thousands, tens of thousands of years for any kind of significant changes to take place in a genome. As a people, Americans in 2012 are for all practical purposes 100% genetically identical with Americans of 1960.
Rebuttal #1: The fat issue is cultural.
It’s not complicated.
All throughout the show so far, doctors keep telling us how complex the overweight/obesity issue is. Interspersed with all the intricate studies, lab-work, and epidemiology, the implication is clear that we are supposed to be seeing the issue of overweight-ness and obesity as some kind of illness with complex causes.
Most of the overweight people who were interviewed in the program were very honest and straight-forward about their over-eating. But the doctors and fat experts seemed to be going out of their way to portray over-eating as an illness and obese people as victims. I don’t want to over-generalize here; I recognize that there are a population of overweight and obese people who really do have a medical problem that is causing their obesity. That is not what I am talking about here; I’m talking about the vast majority of overweight people who are overweight because of choices they are making.
This whole “something happening to me” mindset is the actual cause. To be sure, there are a lot of complex results of overweight and obesity, both at the level of the overweight individual and at the level of the collective healthcare system that is tasked with managing (and paying for) all of the many systemic effects of obesity.
But the actual cause of obesity is fantastically simple: people are eating too much and not exercising enough. Period. And in terms of the epidemic of obesity that is the subject of this special, that is a free choice that people are making.
There was one sequence where the fat experts went after the hypocrisy of the diet providers, saying that the purveyors of diets have no real incentive to solve the fat problem because if they did, they would no longer be able to make a living. True enough. But talk about people in glass houses. Many of these fat experts are getting paid public money to study all the “complex” causes of the obesity epidemic; what happens to their salary if there were no such epidemic? What happens to their salary if the problem is a relatively simple one: people eating too much food and not exercising enough?
Every time the fat experts talked about how complex the causes of obesity are, I wanted to throw something at my TV. Every time they emphasized the evolutionary, and genetic components of obesity I wanted to throw something at the TV.
The fat problem is difficult, but not complex.
Rebuttal #2: The fat issue is simple.
The first episode of the special is all about causes and consequences. I have no quarrel with their characterization of the consequences, but the causes are simple as stated above. The second episode is about what to do, both at the level of society and at the level of the individual.
My prescription is simple (but not easy). Step one is to admit that there is a problem. And for all its flaws, the existence of this series at all is a massive step in that direction. For all my complaints about it, I think it will do more good than harm. So thumbs up on that. I applaud the producers of this special and HBO for putting it out there. The American obesity problem is a serious problem. A simple problem, but a serious one. There are way too many fat people in America, and it’s getting worse.
But I also think that the real underlying cause of the obesity problem (as well as the economy problem, but that’s another post) is the cultural swallowing of unreality that is being promulgated by those relatively few who profit from it to our collective detriment. As long as there is a giant food industry that profits massively from people over-eating and a giant healthcare industry that profits massively from people being overweight, there is going to be an incentive for those industries to do what they can to maintain the status quo. Whatever their public service announcements say, McDonalds and Kaiser want you to be overweight. And they have a lot of money to spend on studies the result of which is marketing that promotes obesity.
Step two is also simple and difficult: fat people have to eat less and exercise more. There really is not anything else to do about it. There is no magic pill, no expensive machine, no surgical procedure that is going to save the day. It’s hard to discipline your addictions, but it’s a simple issue with a simple (not easy) solution: fat people have to eat less and exercise more.
The only thing that is going to motivate fat people to eat less and exercise more is their awareness of the real consequences of being fat. So again, I applaud the producers of The Weight of the Nation for helping to make this problem more visible.
In the infinite mystery of Is, there is no way for a presumed separate point of view (that would be what you and I call ‘I’) to know ultimate Truth. Since the ultimate Truth of any thing (or everything) minimally requires its apprehension from all points of view in space and time, no one point of view, limited to its here and now, can know it. Every point of view is inherently ignorant.
Science is not immune to this limitation on knowing Truth. Science is a method of creating narratives (stories) that describe phenomena. There is good science and bad science.
Good science starts from presuming its inherent ignorance and goes on to methodically create useful narratives. A useful narrative is one which accurately and repeatably predicts the future based on a set of starting conditions.
Bad science creates narratives that describe past phenomena without any predictive value. Bad science is not inherently less (or more) Truthful than good science. Bad science is merely useless.
Conventional economics is a set of narratives about past phenomena which has -- except in the most simple and artificial cases -- no ability to accurately and repeatably predict future phenomena. If conventional economics is any kind of ‘science’, then it is bad science; conventional economics is useless.
Incidentally, because of human proneness to cargo-cultism, many people think that a narrative with the ability to accurately and repeatably predict the future based on a set of starting conditions is the definition of Truth. This conceptual error can be cured by either doing good science or taking some acid. Or both.