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WHAT IS MONEY?

WHAT IS MONEY? . Claire Ingram PhD Student and Researcher, Stockholm School of Economics. The Classic Narrative. Before there was money , there was barter. Alternative theory. State and C redit theories of money (Mitchell- Innes )

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WHAT IS MONEY?

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  1. WHAT IS MONEY? Claire Ingram PhD Student and Researcher, Stockholm SchoolofEconomics

  2. The Classic Narrative • Before therewasmoney, therewasbarter

  3. Alternative theory • State and Credit theoriesofmoney (Mitchell-Innes) • Money as the promise to paysomethingofequivalentvalue • Relies on trust – trust that the person willpay the IOU

  4. Calculated in ”money” • Butpaidin whateverwashandy • In Sumeria, denominated in silver shekels (by templebureaucrats) • Based on trust – communitykneweachother

  5. Goods as money TobaccoVirginia Colony, USA, 1600s Cowry ShellsChina, from 2000 BCAfrica, up to ca. 1850

  6. Interest-bearingloans • Sumerian Temples (2700 BC) collectedlocalproduce (grain livestock etc) • Lent to merchantswhotravelled and sold thesegoods to obtainwood, metal and silver • Chargedinterest as a wayofsharing in profits

  7. Amnesty and Kings • In the face of bad harvests, system breaks down • Amnestiesgranted by Sumerian and, later, Babylonian Kings • Enforcementalsoincreasinglydone by centralisedauthorities National Portrait Gallery, London: NPG 4980(2)

  8. Armies, trade and taxes • Taxes on exports and imports (called portoriaunder the Roman Empire) • Taxes on inheritances • Taxesimposed on local populations whowereconquered • Taxesalsoimposed on own populations to financewars Chinese army in India-Burma campaign pictorial - http://cbi-theater-1.home.comcast.net/~cbi-theater-1/cai/cai.html

  9. Characteristicsof Money

  10. Money =Fiat Currency Fiat Currency • Derives value from government • Fiat money as country’s main currency

  11. Centralisation http://students.brown.edu/ai/aboutus.htm • Interest-bearingloans • Lawsand authorities • VariousTaxes • Fiat currency

  12. Decentralised, local solutions

  13. From Ricajomarie on Flicka https://www.flickr.com/photos/junipermarie/4422514124/

  14. A New Wave From “How Bitcoin Works, Under the Hood” by CuriousInventor https://www.youtube.com/watch?v=Lx9zgZCMqXE

  15. Benefits of Cryptocurrencies • Improved transaction security • Trust in cryptography rather than institution(s) • Transparency (for those who understand) • Lower transaction costs • Cross-border, faster transactions • No outside intervention • No inflation (although market volatility)

  16. Drawbacks • Tax concerns • Security issues • Consumer uncertainty • Market volatility (commodity or currency?) • Potential for illicit use • High electricity consumption to “mine”/verify • No ”chargebacks”

  17. Decentralisation and Innovation

  18. Increasing pressure due to variety of new financial instruments • Forces for change • Cryptocurrencies • Community currencies • Crowdfunding • Microfinance • P2P lending • Sharing • Forces for stability • Governments • Central banks • Multinational financial actors • Legal system • Mindset The status quo

  19. Whatdoes it mean?

  20. Will there be a tipping point? Bitcoin accepted here Depends on…. - Switching costs - Network effects http://coinmap.org/ http://mercatus.org/sites/default/files/Luther_CryptocurrenciesNetworkEffects_v1.pdf

  21. Easier to crowdfund Accumulation of small investments in individual projects by large number of individuals (the “crowd”) via or with help of Internet and social networks (De Buysereet al., 2012)

  22. Distributed problem-solving

  23. Convergence • People • “Net generation” • 24x7 “mobile” workforce • Social entrepreneurship • Open Source • Software • Hardware • Physibles Value creation • Technology • Broadband access • 3D printing • Robotics • Finance • Microlending/microfinance • Crowdfunding/equity • Digital, non-fiat currencies

  24. Claire.Ingram@hhs.se @Claire_EBI Thank You!

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