Cutely animated lectures on modern economic weirdness

Started by JasonPratt, October 22, 2013, 12:59:05 PM

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JasonPratt

I'm consolidating and reposting some information from posts down in the RPF category in the Gov't Shutdown thread, for ease of reference. (This thread might still go to RPF sooner or later, but the information is relatively neutral so I'll optimistically start here.)

Okay, disclosure: the business (and the guy) who made these videos is interested in trading you gold and/or silver for your worthless paper "currency", upon which presumably they'll buy more gold and/or silver and sell that to someone (at a reasonable markup) in exchange for their worthless paper "currency", etc. etc., insert any amount of amusement here.  :D But that's why they can afford to create such colorful animated lectures.

NEUTRALIZING THAT FACTOR (and also I'll try to help with that below), the lectures are still nifty short ways to explain where modern economic systems have come from, and how they operate now, and why that necessarily results in all kinds of socio-political goofiness.

Episode 4 is the most purpose-neutral of the lectures, so if you're interested in the topic and only have time to watch one, I recommend scrolling down to that one. But I'll go through them in order.


Ep 1, Currency vs. Money (skip to the 3:00 mark past the promotional fluff):



This video can be mostly skipped, so I'll summarize the main points:

1.) Nothing has "value" except in the judgment of a rational agent. A point the videos miss, but which is actually very important so I figured I'd better mention it. Gold, for example, is strictly speaking a fiat currency, too, inasmuch as without rational agents agreeing to use it as a medium of representative value its utility value during most of human history would be minimal, although in modern days it has some good industrial value like copper and platinum. But even then, only valuable due to the activities of rational agents. You cannot eat gold or use it in its natural state to attract mates.

2.) "Money" acts as a representation of the work of a rational agent when valued by another rational agent, in agreement between the two agents. (A point the first video almost misses, but which is also very important, and which comes out better in ep 2.) Money is proportionately effective for this purpose when it is portable, divisible, durable, fungible (provided in units of equivalent value so one unit is equal to one of the same kind of unit), and keeps its value over long periods of time. Obviously durability helps a monetary unit keep its value. Diamonds and other gems are a classic example of money, but because they're so durable they're hard to divide into portions, and that also makes them difficult to standardize in quality. Also, with modern technology we can now make diamonds, and that dilutes how well they keep their representative value over time. Silver and other metals corrode. Gold (once refined to an easily measureable standard) is durable (doesn't corrode) and is fairly easily divisible (because it's fairly soft), and it's relatively rare and can't be manufactured, but not as rare as, say, platinum which otherwise shares its properties. That's why you'll hear people (like these people!) talking about gold as the best known monetary standard.

Still, whether it's gold or silver or platinum or diamonds; they only count as "money" with long-term value due to the agreement between rational agents to treat those objects as representations of that-which-the-agents-value, typically work provided by agents (either directly or through proxies such as machines or animals).

3.) "Currency" acts as a representation of "money", and has a lot of the same properties ideally, but it doesn't hold value of exchange, usually because it's easy to create. But precisely because it's easy to create and yet acts as a representation of a representation of value, it's tempting to try to be more effective by cutting out the middle portion and let currency represent value of exchange between rational agents directly. That might even work if a government (or a group agreeing to set up a medium of exchange within the group) created a limited pool of "money" to act as the representation of the work value of all rational agents in the population and then NEVER CREATED ANY MORE OF IT.

If a reader understands all that, there's no further reason to watch that video, and you can skip them trying to sell you gold for your fraudulent paper currency while interviewing themselves on camels. ;)


Ep 2, Seven Stages of Empire, is a good historical lecture (or a couple of them actually), and well worth watching after the initial fluff (skip to around 3:10, safe to quit around 22:15, very minor suggestions of a commercial in between the two lectures). Each lecture has some groggy military history, too!




Ep 3 is the most sheerly "commercial" of the series, and as far as I can tell from watching it you can skip it altogether. But I try to be a fair completist, and I'm anticipating someone will ask why I skipped Ep3, so there's the link if anyone cares.




Ep 4, The Biggest Scam In The History of Mankind: having had a brother in the banking business (especially the investment side) for 20 years I can testify (with Ron Paul et al ;) ) that the presentation is not only attractive but entirely accurate. Anyone looking for a 20 minute explanation of how the deficit system works (and why it does what it does, and why it was put in place), could do a LOT worse than watch this video. (Skip past the "oooh now you're going to be the elite understanding the big secret" promotional fluff to 1:11 to actually start; around 25:00 they go to the commercial part, so you can safely stop there, or even a bit earlier.)



While the lecture is accurate as far as it goes, it does leave out some important details which complexify the matter further, such as the fact that in any case someone has to pay the bank expenses to hold money in a transferable form for our convenience, and that doesn't count the common expectation that if we give money to the banks we want our money to increase in value while it's there. When we shop around for 3% money market accounts, or even 0.00001% checking account, ANY AMOUNT OF PROFIT we expect banks to grow for our money means the bank has to engage (to some degree) in the speculative process described in the video.

Nevertheless, this is a concise and (so far as it goes) accurate explanation for why modern economic policies (in the US or otherwise) are not sustainable NO MATTER WHAT the government spends its money on; and it's helpful for citizens to keep these factors in mind in order to assess the accusations flung by politicians at one another when blaming each other for various spiraling failures. Here in the US, both main parties have actively collaborated with instituting and perpetrating the situation. Parties in other countries may vary; maybe discuss differences below?
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