Can we talk about currency?

The strengthening of the Thai baht against the US dollar is screwing up the fixed income American retirees over here, but fortunately I'm not one of them. Maybe we should turn geckos into money. Lots of those here. And I am no help at all!

larocca said:

The strengthening of the Thai baht against the US dollar is screwing up the fixed income American retirees over here, but fortunately I'm not one of them. Maybe we should turn geckos into money. Lots of those here. And I am no help at all!

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Remind me, it's 4Thai bahts to the homehr, is't it?

I have no idea what you're asking. Maybe rephrase the question?

Are you asking how currency developed?

Currency needs to be pegged to some standard -- period.

That standard should be something that is not readily reproducible, or you end up with insane inflation & Gresham's Law & all that fallout.

Even if the currency issuer has a corner on the market, economic confidence is eroded if there's no way to guarantee the actuality of the reserves backing the currency. That's why fiat money is dubious: you cannot readily turn it into precious-metal coinage.

Some years ago, I sketched a world where there's all sorts of gold & silver & diamonds & stuff, but it's exceedingly poor in iron & bronze. The major coinage resembled an iron washer.

David Gerrold proposed the "casey" as a unit of exchange. It's the common form of "kc" or kilocalorie -- one casey is worth a thousand calories of basic food ration at any government facility. It's an ingenious peg.

Esopha said:

Alright, the biggest problem I'm having with my novels right now is that I have no idea of how to set up a believable monetary system. Not the economic side of it, I took economics, hated it, passed the exam, but the development of money. Mostly the parts that include its name and value in relation to gold.

Does anyone have any good resources for me?

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Hmmm. There's an article I've read somewhere niggling at my backbrain, but so far it doesn't want to come forward and be recognized.

In the meantime, a few of the bits I can recall. Is this fantasy or science fiction? Is the setting medieval, industrial, contemporary, high-tech future, post-apocalyptic future, or what?

The monetary system is going to be a reflection of the kind of society it is. As a broad generality* a lower-tech setting is likely to have a commodity-based monetary standard, but that commodity doesn't have to be gold. A higher-tech society may (or may not) have a monetary system that isn't based in anything tangible, although that can be quite inflationary.

The name for the currency is sometimes a reference to the basis for the monetary system, even if the currency isn't literally made out of that commodity. For example, in a nomadic, herding-based society their currency might be called a 'hide' or a 'head'. Or it could be a historical reference. In an advanced society that originated from a herding-based society, they may still use the same name, even though it no longer has any real basis in their economy. For example, the British pound originated as the value of one pound of silver.

The commodity used as a basis for the monetary system usually works best if it's the kind of thing that can be stockpiled, hence precious metals or jewels, but it can be things like grain or livestock, as well. If you want a completely intangible basis in a futuristic society, it might be called something like a 'credit'.

Alternatively, the name can come from some completely different source. If your society is an empire, the currency might be called the 'imperial'. Or it might be named for the current ruler, and called a 'Rupert' or whatever.

Then there are the obscure names. The US 'dollar' comes (through some interim steps) from 'thaler' which in turn refers to the Joachimsthal silver mines, even though 'thal' literally translates as 'valley'.

*I'm sure economists can cite counter-examples.

Traditionally currency is used as a means of exchange for the purchasing and selling of goods or services.

There are many concepts required for a good money system:

The money must be hard to copy (if you currency is based all on coins, then your coin must be worth something, lets say its weight in gold; otherwise it will be copied.)

Money must be portable (money cannot be too big than no one will be able to carry it around, and it cannot be too small that it will be lost so easily.)

Money must be durable (with coins there isn't a problem, but with paper or shells or something you may run into problems. Money generally must be able to withstand damage, that is why when you stick a bill in the wash, it doesn't get destroyed.)

Money must be divisible (money must be divisible so that the lowest valued good can be purchased. Otherwise poor people would start using their own money system, and the whole structure would fall).

Money must be rare (you cannot have too much money floating around, otherwise you will have inflation, and run into problems later on.)

Money must be accepted by all (if money is only accepted by some people, you will run into problems and eventually the money system will crumble.)

Also, you must note that people outside of the place must have a want for that money, otherwise foreign trade is killed.


Generally for these sorts of fantasy things, weighted gold, and silver, and perhaps copper coins are best. This is because you can give them a distinct value. This was seen in the world up until the sixties where all money was backed by a gold standard. This meant that the actual object had a stable value, and that you knew exactly how much the thing was worth. Now however, in our world, currencies are dependent on users confidence rather then a set value based on the value of gold.

I would recommend thinking of what is the most expensive coin first. Think of it as a 100$ bill. The coin must be portable, so lets say it is around 1/10 of an ounce of gold. From there you move down. You make the next one 1/20, then the one after that 1/50. From there you move to silver and do the same thing, however with silver you must think of the value in terms of breaking up $20. With copper if you get that far, you are dealing with breaking up a dollar.


Hope this helps.


edit: Note that gold silver and copper are used because they are somewhat rare, and because of their abilities to be shaped easily (gold is the easiest metallic mineral to shape). You may use whatever you want; there are places in the world where animals and shells are a means of currency.

Thai Baht

zornhau said:

Remind me, it's 4Thai bahts to the homehr, is't it?

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When I moved here a year ago, a US dollar was worth about 40 baht. Now it's worth about 35 baht, and predictions are it's going to hit 30 real soon. Yay Bush!

larocca said:

When I moved here a year ago, a US dollar was worth about 40 baht. Now it's worth about 35 baht, and predictions are it's going to hit 30 real soon. Yay Bush!

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If that was an attack on Bush, you are completely mis-leaded. His tight money policy to lower the currency was in the long run a smart move. Already the U.S. is outsourcing way too much. With the lower dollar, they won't be killed so badly in foreign trade, and may solve the problem.

You must not always think a high valued currency is the best. What you want, is for it to have a stable value within your country. That way, you can sell goods for more (in terms of purchasing power) than you normally could, thereby jumping your economy.

This is the new money system based on confidence. The confidence allows the money to move on the international market, meanwhile moving in different directions in the domestic market.

If you think this helps the Thai economy by the way, it really wont. the higher their currency, the less tourists from America will come (they have tons from America). Therefore, though it may seem that a high currency is good, in fact, it is not.

Well, there are already many useful responses in there, and I'll try to avoid duplicating them...but then that means I don't really have much to say.

BTW, you picked a rather funny period because the Renaissance/Early modern period is the time when "legal tender" laws were being promulgated in the European states. It was these laws that effectively created the gold/silver/bimetallic standards as we know them--before this, money made out of precious metal (such as gold and silver coins) were really commodity money in the sense that their value depended on the intrinsic values of their materials instead of some state regulation fixing their values at specific levels. Go and search about "legal tender" in Google and Wikipedia if you want to know more.

And then, there's a page that may be a hundred years too early for your setting but might be useful anyway since it deals with the French monetary system in the 16th century. It's particularly useful for the distinction it draws between "money of account" and "money of exchange," and some general information about contemporary views on the relative values of gold and silver. Here it is: http://www.lepg.org/money.htm

Esopha said:

the silver dollar being slightly larger than the gold

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Uh... no. Incorrect.

A hundred years ago, a silver dollar was a fairly big cartwheel. When gold dollars were issued, they were somewhat smaller than a dime (disme).

Lemme check the metal markets -- just a sec...
http://www.kitco.com/market/index.html

Okay. At the moment (literally), gold is about $666 an ounce, which is utterly hilarious, while silver is down to $13/oz & platinum is up to $1,310.

Gold is dense like you wouldn't believe -- go down to the local sporting-goods store (one with a good fishing department) & ask if they have any lead ingots, as gold is roughly the same density. The result is that a one-ounce gold coin is going to be clearly smaller than a one-ounce silver coin, yet worth more than 50 times. I can't remember the actual numbers I learned, but 1:50 strikes me as about typical.

Platinum is an outlier because it has so many industrial applications -- like in every catalytic converter, though in the 1980s much more was used, & for various reasons it's not easy to reclaim & so ended up in landfills. Gold is useful for relay contacts, but we use ever less of those nowadays; silver is more frangible since it decomposes more readily than the other two main bullion metals, & (again) we don't consume so much in film (photos & X-ray) as in the 1980s & previous, which affects the value.

If you're going to have precious-metal coins, you might want to research the history of rollmarked edges.

JBI said:

Money must be portable (money cannot be too big than no one will be able to carry it around, and it cannot be too small that it will be lost so easily.)

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Heh. During the 17th and 18th centuries in Sweden was used a money called plootu (well, that's what they are called in Finland, I have no idea what the Swedish form of the name is). These were big copper plates which might weight well over 15 kg, I think the heaviest found was close to 20 kg. People were said to carry them the way women in some countries carry water jars, balanced over their heads. And if one meant to buy something expensive he'd need a horse and a carriage for the money...

Kristiina said:

Heh. During the 17th and 18th centuries in Sweden was used a money called plootu (well, that's what they are called in Finland, I have no idea what the Swedish form of the name is). These were big copper plates which might weight well over 15 kg, I think the heaviest found was close to 20 kg. People were said to carry them the way women in some countries carry water jars, balanced over their heads. And if one meant to buy something expensive he'd need a horse and a carriage for the money...

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Must have been in response to a national crisis of impulse buying...

Hey, Douglas Adams had an economy where leaves where the national currency.

It was used because people were sick of the phrase 'money doesn't grow on trees'.

Apparently inflation was a bit of a problem, though ....

Mac

Kristiina said:

Heh. During the 17th and 18th centuries in Sweden was used a money called plootu (well, that's what they are called in Finland, I have no idea what the Swedish form of the name is). These were big copper plates which might weight well over 15 kg, I think the heaviest found was close to 20 kg. People were said to carry them the way women in some countries carry water jars, balanced over their heads. And if one meant to buy something expensive he'd need a horse and a carriage for the money...

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Well, what's a poor kingdom to do with a healthy supply of copper, very little silver and basically no gold? The demand for something else than copper created an insane situation where Sala silver-mine was kept in production yielding less silver than the cost for extracting it.

Currency is all about confidence, the gold standard doesn't matter and the government can issue as much as it believes the market will bear or more in some cases. I read recently about inflation during the American Revolution and Ben Franklin thinking it a wonderful thing because it made debt disappear.

Kentuk said:

Currency is all about confidence, the gold standard doesn't matter and the government can issue as much as it believes the market will bear or more in some cases. I read recently about inflation during the American Revolution and Ben Franklin thinking it a wonderful thing because it made debt disappear.

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Only modern economies since there is no gold backing. Traditional economies relied on the value placed in such objects as gold in silver coins as a means of reference. The value of a currency in a traditional economy was actually fairly stable, and the real determinate of cost was the price of production/transporting a good and the rarity/demand for it.

Here's something else to add to the mix. Money represents work. It represents life energy. It represents how much service you have provided to others in your community. What it physically is can vary depending on the world but what it represents does not.

You could also think of money as a battery. Every day you are given a certain amount of mental and physical energy. You can either make a thing or think a thought with that energy. When you do that you begin to capture that energy and transform it into something else. (You can also refuse to use it by staring at the wall all day. But in that case, it is gone forever.) Now that you have those things or thoughts in a transferable form you have to have some way of representing it when it is actually transferred. That's where money comes in.

Ah. Ben Franklin's fallacy. Yes, continuing inflation would reduce the real (as opposed to nominal) value of debts, but this can be a strong disincentive for economic development because it discourages people from doing transactions by credit--which in turn sharply reduces the viability of large-scale transactions.

another good idea is to steal the monetary system of an older society. *grin* think ancient Rome and Greece