Thinking about it makes you a better person, not a worse one … “THE love of money”, St Paul memorably wrote to his protégé Timothy, “is the root of all evil.” “All” may be putting it a bit strongly, but dozens of psychological studies have indeed shown that people primed to think about money before an experiment are more likely to lie, cheat and steal during the course of that experiment. … Another well-known aphorism, ascribed to Benjamin Franklin, is “time is money”. If true, that suggests a syllogism: that the love of time is a root of evil, too. But a paper just published in Psychological Science by Francesca Gino of Harvard and Cassie Mogilner of the University of Pennsylvania suggests precisely the opposite.
When the U.S. Civil War broke out in 1861, cotton was king. The southern United States produced and exported much of the world’s cotton, England was a major textile producer, and cotton textiles were exported from England around the world. At the time, many around the world depended on cotton for their livelihood. The South believed this so deeply that when the North blocked Southern ports to cut off the South’s primary means of financing war—cotton sales—Southern leaders were sure that Britain would enter the war on their side. That never happened. So when cotton supplies dried up in late 1862, thousands in Manchester and Lancashire who either directly or indirectly depended on cotton for a living found themselves without work. In this post, we describe the British cotton famine of 1862-63 and the stoic British national response. We draw primarily from a fascinating BBC Radio broadcast on the subject and John Watts’ matter-of-factly named Facts of the Cotton Famine, published in 1866.
Minting small change was a big, expensive problem in the ancient world. This column argues that the ancient Lydian government and Greek city-states absorbed the cost of producing an extremely wide array of denominations of coins as a political strategy. Governments had much to gain from the spread of coinage in managing budgetary affairs. If it subsidised the mint, an ancient government would make savings in terms of transaction costs.
There is a common story about what money is, which is based on a common story about how money came to be. In the beginning, people lived in small communities of blood relatives and fended for themselves. They hunted and gathered for their subsistence, and learned how to weed out undesirable plants so that they would have easy access to plants that produce food. As people became more adept at cultivation, populations grew. And people found that they could not always grow or procure from nature the things they needed in order to survive. Trade was born. ... People in different communities had surpluses of different goods. They traded these goods with one another. They established value and conducted their trade by bartering a certain quantity of one good for a quantity of a different good. ... lugging around his own goods in sufficient quantities to trade became burdensome and impractical. Furthermore, stockpiling his surplus might have worked up to a point, but once the mice and the weather got at it, it quickly became worthless. ... In some accounts, people decided to use a thing of value to them, and intrinsically recognisable as valuable to others, for money. It would initially serve as a means of exchange, and would gradually take on other classic functions of money as people expanded their use of it to include the payment of fines, tribute or fees (as in ancient administrative states, tribute-based empires or the tax collectors of the Old Testament). Certain kinds of shells were good: they were pretty, of uniform size and shape, easily transportable, and durable. Precious metals were even better: they were universally valued; they did not rot, rust or degrade; and they were easy to store and to transport. ... Other accounts consider implausible the idea that certain things are of intrinsic value. ... an important problem in the history of money: is it a commodity in itself, or a token of an existing agreement, an agreement in turn resting on a prior social relationship? ... are new forms of money really more efficient? They often come at a price, after all. What does efficiency mean? Efficient for what purposes, and when?
Nothing is more ordinary than a Monday morning at a Swedish bank. ... People go about their business quietly, with Scandinavian efficiency. The weather outside is, more likely than not, cold and gray. But on April 22, 2013, the scene at Stockholm’s Östermalmstorg branch of Skandinaviska Enskilda Banken got a jolt of color. At 10:30 am, a man in a black cap burst into the building. “This is a robbery!” he announced, using one arm to point a gun at the bankers and the other to hold out a cloth bag. “I want cash!” ... If the staff was alarmed, no one much showed it. Instead, the employees calmly informed the stranger that his demands could not be met. The bank, they explained, had no cash on the premises. None in the vaults, none at the tellers’ windows, none at all. When the robber looked confused, he was directed to a poster on the wall that proclaimed this a “cash-free” location. “It’s true,” the manager told him. “Sorry.” Crestfallen, the would-be thief lowered his gun and prepared to leave. Just before he stepped out, he turned to one of the tellers. “Where else can I go?” he asked. ... His options, in fact, were fairly limited. What this man had somehow failed to notice was that his country is at the forefront of a global economic shift.
Cash is the squirmy ferret of societal wealth—tricky to secure physically and, once liberated in the wild, almost impossible to get back—and money, as technology, has changed a lot in half a century. A day’s errands once called for bulging pockets. Now it’s possible to shop for groceries, pay rent, buy lunch, summon a taxi, and repay your sister for a movie without handling a checkbook, let alone fumbling with bills and coins. Most people think of card and electronic payments as conveniences, stand-ins for exchanging cold, hard cash. Yet a growing group of theorists, led in the United States by Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, are embracing the idea that physical currency should be the exception rather than the rule. ... Phasing out big bills would make it harder for domestic currency to support corruption abroad. ... Hobbling the underground market should also temper tax evasion, a costlier problem than many people realize. The most recent I.R.S. estimates indicate a tax-payment shortfall of four hundred and sixty billion dollars a year—a disparity that’s transferred to those who pay. ... Most important for many economists, low-cash life allows for negative interest rates, in which the lender pays the borrower interest. ... In 2013, Sweden eliminated its largest-denomination bill, and demand for its second-largest bill, the five-hundred-krona note (about sixty dollars), surprisingly fell off soon afterward. By 2014, only a fifth of Swedish retail transactions were being conducted in cash. (In the U.S., it’s slightly less than half.)
This first mode of money is public. We might call it ‘state money’. Indeed, we experience cash like a public utility that is ‘just there’. Like other public utilities, it might feel grungy and unsexy – with inefficiencies and avenues for corruption – but it is in principle open-access. It can be passed directly by the richest of society to the poorest of society, or vice versa. ... Alongside this, we have a separate system of digital fiat money, in which our money tokens take the form of ‘data objects’ recorded on a database by an authority – a bank – granted power to ‘keep score’ of them for us. ... This second mode of money is essentially private, running off an infrastructure collectively controlled by profit-seeking commercial banks and a host of private payment intermediaries – like Visa and Mastercard – that work with them. The data inscriptions in your bank account are not state money. Rather, your bank account records private promises issued to you by your bank, promising you access to state money should you wish. ... The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge.
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In the mid-to-late nineteen-sixties, as gold’s role in the international monetary system was about to implode, a handful of top Johnson Administration officials, a few sympathetic members of Congress, and hundreds of government-paid scientists set off on a nuclear-age alchemical quest. Barr gave it the code name Operation Goldfinger. The government would end up looking for gold in the oddest places: seawater, meteorites, plants, even deer antlers. In an era during which people wanted badly to believe in the peaceful use of subatomic energy, plans were drawn up to use nuclear explosives to extract gold from deep inside the Earth, and even to use particle accelerators to try to change base metals into gold. ... Operation Goldfinger represented the logical culmination of a government obsession with not having enough gold. The post-war global economy was expanding much faster than the gold supply that propped it up. Dollars freely convertible to gold were the underpinning of the world’s monetary system, and President John F. Kennedy—and many others—feared that if holders of dollars and other U.S. securities were to cash in their paper for gold, there wouldn’t be enough gold to exchange, and a global crisis could ensue.