On Currency And Mediums Of Exchange

 So a big round of thanks to everyone that participated in yesterday' discussion of Cryptocurrency.  I am somewhat comforted by the fact that the takeaways from the conversations are similar to my own thoughts:

1) It seems complicated.

2) It seems interesting.

3)  It has possibilities.

4)   It could be a limited for investment, like many others.

5)  You could lose everything.

The other question - the more interesting one, the more I thought about it - is the nature of currency, the market, and mediums of exchange.

One of the concepts from yesterday's discussion is the fact that an underlying economic system - one that somehow involves a government - has to exist.  It is odd that when I think of the "economy", this is not something that I consider as I am thinking only of the buying and selling of goods between individuals and businesses - but "the government" seems to underlie the whole thing.  Yes, in maintaining the system, but also in a sense continuing to allow it to exist.

Perhaps it has always been so and I have never considered it as such; but it certainly seems to me that any economy or mechanism that relies on the government allowing it to be used as an economic medium of exchange is really all and only dependent on the government allowing it to exist at all.

Which brings up currency and mediums of exchange.

A currency is, per Merriam Webster, "something which is used as a medium of exchange" and only dates to this use in English back to 1624 - which is not very long at all, if you think about it.  The fact that it could be "something" implies it could really be anything to be used as a medium or exchange, although traditionally it was precious metals as they had value - now, of course, virtually every nation uses bank notes and to a lesser or greater extent coins which are magically linked (to Ed's comment yesterday of dark matter and black holes) to the country's repository of precious metals or (more alarmingly) its "ability to pay".

So now, really, paper and electronic currency is really a medium of exchange on a theoretical value that we all choose to believe in and accept, even though we can neither see it nor take hold of it.

Now, to be fair I use this system as much as anyone else.  My "check" goes into the back:  taxes are withdrawn, retirement withheld, and various forms of payments made without me ever seeing or touching this "currency".  Nor does anyone that receives these payments question them:  the government does not write me an ugly letter, my electricity continues to be on, and my retirement account to continue to be funded. 

But all of this presumes that we use the official currency, the government's decreed medium of exchange - in my case, the U.S. Dollar (your mileage may vary).

An interesting historical note is that in the U.S. constitution (Article 1, Section 8, Clause 5), only the U.S. government has the power to coin money and determine the value thereof - and that it is a violation of federal law for individuals or organizations to create currencies to compete with the official currency system.  This supposed to preserve the value of the currency and give everyone a level playing field; in point of fact it does create a bit of a monopoly as well.

A medium of exchange can be anything, of course; that is whole point of the barter system.  Barter can be difficult to manage for larger amounts of goods (one ton of wheat, for example, is not very portable), which is a major reason that currency exists.  Barter is also limiting in the fact that it only allows me to trade what I own.  If everyone needs carrots I am in luck; if no-one needs carrots I will either have to find something else to trade or eat a lot of carrot soup and carrot cake.  So currency has its practical place.

Is there a way for currency to exist without overall government control?  I really have no idea - in theory cryptocurrency is an example of something filling this niche, although it could be declared illegal for use by any or all of the world's governments - and while they may not control the systems this currency exists on, they do control the world in which it operates.  Which would limit its usefulness to the small items not easily traced or electronic bits and bytes that exist only on your electronic devices (neither of which is very practical for daily living). 

I have no solutions of course, only more questions.  But given this considerations, the whole system certainly seems rife for abuse and with a high potential for failure as soon as someone - a person, a nation, a world system - declares another country's currency to be "worthless.