Credit is money - there's literally no distinction between the two. Precious metal currencies are only money because it takes way less systemic trust to believe that the bearer of precious metal coins can get things for them later. Gold-backed paper currencies are an interesting intermediate, basically adding trust that you can exchange them for the actual metal at banks.
But my point was that there is an, admittedly polemic, abstraction that match all the human tradition: money is a token of debt.
In this view, one important consequence, is that the material of the token is not relevant. The use of precious metals is just an added security measure against counterfeit, but not the thing that make it valuable (that would be the debt that represent).
If this is true, part of the debate about strong money vs. fiat money just become pointless.
Currency is physical tokens of value for trading money. Money is a system that fulfills several criteria: unit of account, medium of exchange and store of value. Not debt in any meaningful sense, apart from systems that lack trust for store of value or stability for unit of account, in which case explicitly linking to another less easily gamed asset is supposed to increase trust.
Debt can be money if the legal system is sound. But money doesn't need to be debt if the money issuer is trusted not to debase the currency.
The history of paper and leather money is that it was originally considered receipts for the storage of precious metals like gold. In fact this was the case in the US until the 1970s. I'm not a gold bug suggesting a return to the gold standard, just pointing out that the concept of money, value, storage and ownership can shift and be redefined over time.
This description of money doesn't sound right, to me? Personally, I subscribe to the Graeber-Innes hypothesis: the use of precious metal coinage was a credit risk mitigation strategy. Using gold (or whatever) was important not because of any latent value of the metal, but simply because it provided material accounting for asset backed representative monies in a distributed, robust, vaguely secure manner.
I mean, I seem to remember the Mesopotamian cultures using "fiat" accounting for 3000-odd years? That's one of the theories of the development of writing: accounting.
The difference is that until fairly recently, no nation had a coherent monetary policy. One of the reasons is that economics did not really understand what money was until fairly recently. For a long time, people looked at money primarily as an asset that could be used for trade. Because of this, they viewed precious metals such as gold and silver as having intrinsic value. When they do not. Today, we understand that the primary backing of money is trust. Trust in gold, trust in governments, trust in economies.
A slight but significant difference would be that the currency would not create credit or debt when it was created. People will either mine the currency, which is trading a service for the currency, or buy it on an exchange, which is trading one store of value for another. So the economy would be value-based instead of debt-based.
With a commodity like gold, when its value increases, people mine more of it because people want more. This increased supply reduces its value.
To me, the ideal currency is one in which you can get paid for performing a service, and 20 years later, the payment is still worth exactly the cost of that service. A long-term store of value, a way of remembering the value of everything.
"Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve."
You should read the book Debt: The First 5000 Years. It might be an interesting read for you, as the author points out that times of virtual and "real" currency switched quite often. It shows some really interesting facts about the origin of money - especially the fact that the idea of money is not based on the idea to improve barter.
Your first sentence is a bit ironic. You're conflating currency with money. Gold was never really used as currency, the currency (dollar) was backed by money (gold)
Great. I hope you will agree most of these are differences of opinion ("particularly important", "serious problem") rather than empirical fact. Moreover, I hope you will agree that people with similar conventional beliefs on inflation & economics are in power, and the world economy is not doing very well. FWIW, here's a first cut at separating statements of opinion & fact to drill down to potential empirical differences.
That money exists to serve as an improved barter good,
rather than barter being a degenerate form of trade that
exists mostly in the rare cases when credit is
impractical.
Not sure about your disagreement here - are you saying that credit is more fundamental than barter? Money as an improved replacement for barter is hardly controversial. Credit is a third layer on top of money, which only comes into play when there are actual goods to be traded.
That quantity fixation or durability are
particularly important properties of money.
If you care about money as a long-term store of value, these are important characteristics. Paper notes from most countries that existed in the 1800s don't hold their value today. Gold coins do.
That gold is particularly important, versus
anything else that is pretty and value-dense.
Gold is important because it can't be mined as easily as paper is printed, and because it's an element and thereby difficult to truly counterfeit without an atom smasher. As such it limits the spending power of governments. It's also important for the same reason any network effect is important, namely other people use it (and have used it since historical times).
That the only forms of money are commodity-backed and pure
fiat.
This is possibly a factual disagreement. But either a paper note is exchangeable for a fixed quantity of a commodity like gold or it isn't. I suppose you can have some limits on redemption on a daily basis, but otherwise it seems like a reasonable boolean distinction. Please do elaborate on what you have in mind.
That the USD switched from the first camp to the other in
1971.
This also seems to be a factual claim. The US under Nixon did indeed abandon the gold standard fully in 1971, removing the $35 dollars per ounce peg (http://www.theatlanticwire.com/politics/2011/08/nixon-gold-s...). Most people both pro- and con- would refer to this as "going off the gold standard".
Describing the USD without reference to the Federal
Reserve at all.
I think that's implicit. Not sure this is a "common error".
The assumption that the debasement of coins over a 300
year period had any harmful effects other than making the
coins less pretty 1700 years later.
This is not an assumption but is explicitly argued. The underlying thesis is that governments that debase their currency by printing money eventually find their ability to compel obedience waning, as their official scrip is rendered useless.
That +200% wage and price inflation over 130 years is any
kind of serious problem.
Given that this period coincides with the decline and ultimate fall of the Roman Empire, I wouldn't call this a "common error" either.
That hyperinflation and regular inflation are the same
thing except in degree.
This claim is not made in the slides. But both of them do have the property in common that one's currency becomes less valuable. "Normal" inflation has devalued the US dollar 23.45X since 1913 (roughly $1 in 1913 buys $23.45 today; see usinflationcalculator.com). If that happened in one year we'd call it extremely strong inflation, if not hyperinflation.
That Bitcoin limiting supply controls inflation.
Please give a counterargument here. How can you inflate a currency if the supply is fundamentally limited?
That the problems with deflation are somehow non-obvious
or not happening observably in Bitcoin right now.
What are the problems? A rise in market cap to $1B over four years from nothing and adoption by millions in the face of government opposition looks like a smashing success. Fluctuations aren't unilateral seizures; everyone in Bitcoin has chosen to be in Bitcoin.
That flat-rate Demurrage fixes Bitcoin inflation.
I suppose you mean "fixed Bitcoin deflation"? Freicoin may not "fix" deflation but it's a currency which has regular inflation built into it. Because Kyle supports deflation he certainly did not claim that Freicoin is a "fix", but rather a technical embodiment of an alternate philosophy.
In short, I think most of the points you raise are not "common errors" but rather (at best) disagreements of opinion. Would appreciate any elaboration on the points of seeming factual disagreement.
I think you may have misread Graeber. He is NOT advocating for commodity/debt-free currency. His whole point is that money started as credit - only later was it viewed as commodity, and only occasionally.
Money effectively is both commodity and an IOU. Attempts to force it into one category or another eventually leads to social breakdown.
The key question for our time is how to craft a stable monetary system that is decentralized. We don't know how to do this yet, and Bitcoin is not likely the answer BECAUSE it is finite (which would be catastrophic, as gold was). Crypto currencies can and should grow in experimentation but this one has a fundamental flaw.
I think ultimately it's a useless distinction. People try to argue about "sound money" and all that, but more and more my view is that both the historical/anthropological evidence and the realities of our modern economic systems point towards the debt as money theory, and that sound money just doesn't really exist. Commodities like gold are commodities, and currency (which is money) is different.
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