A longer-than-fits-in-the-margin response to a comment on the last post:
How do you make money, the symbol of exchange-value, properly match the actuality of exchange-value?
Have a fully backed currency (eg gold) and do really nasty things to anyone who so much as thinks of the possibility of maybe theoretically devaluing (read: cheating) it.
Not only no, but hell no.
What is a currency? Well, it’s a medium of exchange, a unit of account, and a store of value, each of which has its own requirements. To function as a reliable store of value requires, inter alia, that its value remain stable across time.
This has generally proven problematic for both fiat and commodity (i.e., including “backed”) currencies. But first, let’s look at what that definition actually means. A single unit of currency is nominally a quantum of exchange-value, representing 1/[money supply]th of total exchange-value. So what’s total exchange-value?
Answer: total exchange-value is the production of the entire economy denominated in that currency; all the goods and services which people are willing to trade for using it.
To be a reliable store of value implies that what yesterday’s unit exchanged for today’s unit will also exchange for, and that tomorrow’s unit will exchange for what today’s unit exchanges for. To make this happen, ceteris paribus, the money supply must precisely track total exchange-value.
(There are obvious complications in accounting for this, inasmuch as it should, for example, avoid changing the value of money due to secular expansion and contraction of the economy, but should not attempt to compensate for, for example, decreases in prices due to, say, increased resource availability or improvements in total factor productivity. Which is to say, you have to carefully separate authentic shifts in value from those which are merely caused by your own scarcity mismatching. But let us assume away these complications for now.)
This is problematic for fiat currencies partly because figuring out total exchange-value is a hard problem (we do it, for example, mostly by looking at long-term price changes after the fact and applying a bugger factor by eyeball), but mostly because governments find it very hard to resist the urge to screw around with monetary policy. And inflation is awfully convenient if you get to keep the seigniorage, since it essentially functions as a stealth asset tax.
Aurifer was built to solve the former problem; the latter one? Well, that one is hard unless you happen to have people who really, really love money to put in charge and prevent it from being debased.
This is really problematic for commodity currencies, though, because you can’t control the money supply at all. What you have is what you get, and the value of your currency wanders all over the map just like the price of every other commodity. As Robert Houghton mentioned in the previous post’s comments, the experience of the Spanish post-Mesoamerican conquest is instructive, as their gold-glut-driven hyperinflation is the perfect go-to example for “but though we had plenty of money, there was nothing our money could buy”.
Which is to say: properly-managed fiat (which isn’t really fiat at all, because it is backed by something, just something abstract – which is what really backs all currencies, in the end – but I digress) may not be the best game in town for a reliable store of value, it’s just the only game in town.
Electronic currencies can be messed with, and the only reason the Eldraeverse gets away with it is because the guys obsessed with things like the rule of law, property rights and such also just so happen to be the top dog.
Technically, the Empire gets away with it because they just so happen to have the aforementioned money-lovers and a friendly fiscal god, not to mention the real check-and-balance, a free market in currencies rather than a de jure or de facto state monopoly.
The rest of the Worlds may, and indeed does, vary.
(We shall avoid making jokes about the volatility of the one mercury-based currency out there, or the stability of those based on (radioactive) power metals.
But we shall take a moment to note that the ergcred goes into crisis with every new power-plant megastructure that comes on line, the Bantral labor-hour [back when the People’s State was a going concern] traded externally for rather less than Chthonic Railway tokens, the linobir bloodnote’s worth depends on which clan issued it and what they’ve killed recently – as is its physical makeup, more often than not – the gAu’s value is inversely proportional to distance from the Core Markets, and the Kameqan thal is worth EXACTLY WHAT LORD BLACKFALL SAYS IT IS.)
IRL, gold will probably do just fine if the population keeps growing to keep pace (roughly) with the amount of gold out there (don’t forget, hardly anything reacts with / corrodes it). The Eldraeverse is often just a tad more utopian however.
Though mind you, the energy cost of stripping a planet / solar system / whatever of all its gold is going to be pretty high, perhaps even to the point where it’s not cost-effective to do so. The highest figure I’ve seen for gold on Earth is ~2.5 million tonnes (the lower figures are under 10% of that however), discounting the estimated 20mt in ocean water (GLHF filtering all that though)… combine that with the likelihood of finding much gold in asteroids (probably low, assuming denser asteroids tend to form / hit planets earlier than lighter ones), and there may not be THAT much [insert rare metal here] available.
This turns out not to be the case.
The best estimates I’ve seen for mined gold through all human history is on the order of 180,000 tonnes, with the USGS estimating that there’s maybe 50,000 more to mine, with some awaiting discovery on top of that. Not counting currently unexploitable sources like ocean water or mining the planetary core.
Let’s look at one particular example right here in our solar system: 16 Psyche. That particular asteroid is a nickel-iron metallic (i.e., probably chunk of the core of a protoplanet), and as such is much higher grade ore for both iron and all the other metals amalgamated into it than anything that exists on Earth now, and probably ever. It’s also about 120 miles across.
The iron alone is worth about $10 quintillion, before we even start looking at the gold and other precious metals. Ain’t no population can fuck fast enough to keep pace with that.
(On one hand, I might be stacking the deck a little since 16 Psyche is by far the biggest metallic asteroid out there. On the other hand, it’s a quintillion-dollar motherlode of the kind of ore that makes smelters do the dance of joy that is sitting right there, right now, just waiting to ruin incautious commodity traders’ whole decade, and there’s no point in pretending it ain’t.)
tl;dr When I wrote that the Age of Space was accompanied by the price of gold dropping to around where the price of iron used to be, and the price of iron zeroed out, I wasn’t just pulling numbers out of my ass.
(In-‘verse, when they want to drive this point home to people from peripheral worlds, they take them to see Celestial Mechanics, ICC’s main gravity tractor. The one that uses about 10% of Earth’s entire historical gold production – or a little over twice the total US gold reserves – neatly divided into kiloton slugs, as ballast.
This is assuming they didn’t get the point when some scruffy free trader filled his hold with exotic native handicrafts in exchange for the spare set of trimming weights that’d been slopping around the ship’s locker since ever, for a cool 10,000% profit margin.)
Fully backed (and crypto-) currencies are also nice in that nobody has central control over them when it comes to policies like printing money. Oh sure, you could have built up a secret stash of gold/BTC/etc, but that’s not nearly as easy as typing a few numbers into a computer to create new money. Plus, someone might (a) realise this, and factor your secret stash into the market prices, (b) steal it, or (c) destroy it (insert Bond reference here ).
That same quality, though, makes them lousy stores of value, because without the ability to match the money supply to the total exchange-value, you end up with either inflation, or deflation, or worse, both. Cryp has its virtues in terms of fiscal stealth, and as an investment, but it sucks as currency, because it fails one of the major purposes of the stuff.
Finally, stuff like gold has the handy trait of working at much simpler tech levels, for want of a better phrase. If that Carrington Event fries an eldrae colony’s electronics and they’re out of touch for a year (I’m sure they have fancy solutions, but it’s the principle not the specifics I’m concerned with), gold will still work just fine.
The solution is called “use the coinage as coinage without verifying it for the moment”. It’s not like the Empire wasn’t using gold, etc., coinage for centuries before anyone invented practical electricity.
But they were also aware that what gave that currency its value wasn’t the metal, it was the little engraving saying “By Our Imperial Word, One Esteyn”. Now that’s a promise you can take to the bank.
But it turns out that creating a liminal hyperintelligence that indwells your currency such that it can regulate its own value from a fiscally omniscient perspective works modestly well
I’m just a bit dubious about how this might work across anything more than planetary distances. Surely lightspeed lag would cause problems if this currency is seeing a lot of use? “Fiscally omniscient” sounds iffy to me.
There is FTL communication available, note (see “tangle channels”), but the important thing to make this work is that the instance-syncing can keep up with the speed of economic transactions. Where there’s light-lag, Aurifer’s instances updating each other is slower, but so is transaction clearing, so it can still keep up.