A Brief (and Incomplete) History of Money

A Brief (and Incomplete) History of Money

The history of money is a very broad topic but this module will highlight a few subtopics that are relevant to our course.  

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Daniel Martin Katz

February 14, 2018
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  1. @ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND

    LAW professor nelson rosario A BRIEF (AND INCOMPLETE) HISTORY OF MONEY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM
  2. DANIEL MARTIN KATZ E D U | I L L

    I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | M A R S H A L L I P. C O M BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW
  3. BLOCKCHAINLAWCLASS.COM A BRIEF (AND VERY INCOMPLETE) HISTORY OF MONEY

  4. BLOCKCHAINLAWCLASS.COM THE HISTORY OF MONEY IS A VERY BROAD TOPIC

    BUT ALLOW US TO HIGHLIGHT A FEW SUBTOPICS THAT ARE RELEVANT TO OUR COURSE
  5. BLOCKCHAINLAWCLASS.COM WHAT IS MONEY ?

  6. “MONEY IS ANY ITEM OR VERIFIABLE RECORD THAT IS GENERALLY

    ACCEPTED AS PAYMENT FOR GOODS AND SERVICES AND REPAYMENT OF DEBTS IN A PARTICULAR COUNTRY OR SOCIO-ECONOMIC CONTEXT. “ BLOCKCHAINLAWCLASS.COM
  7. BLOCKCHAINLAWCLASS.COM MONEY IS A UNIT OF ACCOUNT STORE OF VALUE

    MEDIUM OF EXCHANGE
  8. MONEY CAN BE IMPOSED THROUGH POLITICS OR WAR BLOCKCHAINLAWCLASS.COM

  9. MONEY CAN ALSO EMERGE THROUGH VARIOUS SOCIOCULTURAL PRACTICES … BLOCKCHAINLAWCLASS.COM

  10. HISTORY IS REPLETE WITH EXAMPLES OF INTERESTING FORMS OF MONEY

    … BLOCKCHAINLAWCLASS.COM
  11. THE YAP ISLANDS BLOCKCHAINLAWCLASS.COM

  12. RAI STONES AND YAPESE SOCIETY THE STONES DIDN’T NEED TO

    MOVE THE YAPESE PEOPLE USED RAI STONES AS MONEY TRANSFERRING OWNERSHIP OF STONES WAS DONE ORALLY BLOCKCHAINLAWCLASS.COM
  13. RAI STONES AND YAPESE SOCIETY IN FACT, ONCE A STONE

    SANK TO THE BOTTOM OF THE OCEAN WHILE BEING TRANSPORTED AND IT IS STILL CONSIDERED GOOD MONEY BLOCKCHAINLAWCLASS.COM
  14. RAI STONES AND YAPESE SOCIETY MONEY CAN BE DEPENDENT ON

    SOCIAL CONSENSUS NOT JUST INTRINSIC VALUE BLOCKCHAINLAWCLASS.COM
  15. https://www.npr.org/sections/ money/2011/02/15/131934618/ the-island-of-stone-money http://www.slate.com/blogs/ atlas_obscura/2013/10/15/ cash_card_or_car_sized_stone_payment_ options_on_the_island_of_yap.html BLOCKCHAINLAWCLASS.COM

  16. THE IRISH BANKING STRIKES BLOCKCHAINLAWCLASS.COM

  17. THE IRISH BANKING STRIKES (1966-1976) MAY 7 – JULY 30,

    1966 MAY 1 – NOVEMBER 17, 1970 JUNE 28 – SEPTEMBER 6, 1976 THREE TIMES IN TEN YEARS FOR SEVERAL MONTHS AT A TIME BLOCKCHAINLAWCLASS.COM
  18. THE IRISH BANKING STRIKES (1966-1976) THE STRIKES SHUT DOWN ALL

    OF THE CLEARING BANKS IN THE REPUBLIC OF IRELAND. THUS, PEOPLE WERE NOT ABLE TO GET MONEY OUT OF THE BANKS BLOCKCHAINLAWCLASS.COM
  19. “Here’s what orthodox economics would have predicted for a country

    without banks: A collapse in the money supply, a credit crunch, a trade implosion, mass unemployment, an atomized GDP, and the gears of industry and commerce grinding to a crashing halt.” https://hbr.org/2010/11/the-irish-banking-crisis-a-par BLOCKCHAINLAWCLASS.COM
  20. Though the money supply did contract sharply, neither trade, commerce,

    nor industry came to a grinding halt. https://hbr.org/2010/11/the-irish-banking-crisis-a-par BLOCKCHAINLAWCLASS.COM How? People created their own currencies, to substitute for the collapsing money supply. They kept using checks to pay one another, but then, people’s checks began trading within communities.
  21. BLOCKCHAINLAWCLASS.COM PUBS AS CLEARING HOUSES https://www.ft.com/content/b8bc4a7a-20c3-11e5-ab0f-6bb9974f25d0

  22. THE ECONOMY CONTINUED TO GROW (ALBEIT PERHAPS SLOWER THAN IT

    HAVE OTHERWISE)
  23. In fairness to ‘orthodox economics’ it is not clear what

    would have happened if the strikes continued indefinitely BLOCKCHAINLAWCLASS.COM OVERSTATED IMPLICATIONS ?
  24. That said, it is still an interesting example of how

    peer to peer transacting can occur in the absence of central institutions BLOCKCHAINLAWCLASS.COM PEER TO PEER TRANSACTING
  25. None
  26. BLOCKCHAINLAWCLASS.COM THE FIAT CURRENCY SPECTRUM

  27. BLOCKCHAINLAWCLASS.COM ALL CURRENCY WHICH CANNOT BE CONSUMED IS A FORM

    OF FIAT
  28. BLOCKCHAINLAWCLASS.COM PARTICULARLY IN THE SECOND HALF OF THE 20TH CENTURY

    WE SEE AN ACCELERATION IN THE LEVEL OF FIAT IN CURRENCY
  29. IN OTHER WORDS, FIAT CURRENCY EXISTS ON A SPECTRUM BLOCKCHAINLAWCLASS.COM

  30. BLOCKCHAINLAWCLASS.COM THERE ARE FOR EXAMPLE GRAIN CENTRIC CURRENCY SYSTEMS

  31. BLOCKCHAINLAWCLASS.COM WHERE THE CURRENCY IS SET EQUAL TO THE GRAIN

    HARVEST AND YOU HAVE THE OPTION TO REDEEM CURRENCY FOR GRAIN
  32. ONE CHALLENGE IS THAT THE GRAIN WILL EVENTUALLY ROT BLOCKCHAINLAWCLASS.COM

  33. SO GRAIN CENTRIC CURRENCY IS NOT VERY STABLE BLOCKCHAINLAWCLASS.COM

  34. GOLD DOES NOT ROT BUT AT THE SAME TIME GOLD

    IS NOT IMMEDIATELY CONSUMABLE BLOCKCHAINLAWCLASS.COM
  35. ITS VALUE IS LINKED TO A COLLECTIVE BELIEF THAT IT

    IS VALUABLE BLOCKCHAINLAWCLASS.COM
  36. IN OTHER WORDS, THE IDEA THAT IT WILL BE ACCEPTED

    BY OTHERS IS THE SOURCE OF ITS VALUE BLOCKCHAINLAWCLASS.COM
  37. COINAGE IS OFTEN A GREATER FORM OF FIAT THAN THE

    UNDERLYING INPUTS BLOCKCHAINLAWCLASS.COM
  38. WHEN THE NOMINAL VALUE OF A COIN EXCEEDS THE MELT

    VALUE IT IS FIAT THAT FILLS THE VOID BLOCKCHAINLAWCLASS.COM
  39. PAPER MONEY REQUIRES AN ADDITIONAL LEAP OF FAITH (FIAT) IN

    ORDER TO BE SUSTAINED BLOCKCHAINLAWCLASS.COM
  40. BLOCKCHAINLAWCLASS.COM US CURRENCY FROM 1863-1933 WAS REDEEMABLE FOR GOLD COIN

    THE REDEMPTION OPTION 1907 AUGUSTUS SAINT-GAUDENS INDIAN HEAD EAGLE
  41. BLOCKCHAINLAWCLASS.COM US CURRENCY FROM 1878 AND 1964 WAS REDEEMABLE FOR

    SILVER THE REDEMPTION OPTION
  42. THE END OF THE REDEMPTION OPTION BLOCKCHAINLAWCLASS.COM “ON MARCH 25,

    1964, C. DOUGLAS DILLON, THE 5 7 T H S E C R E T A R Y O F T H E T R E A S U R Y A N N O U N C E D T H AT S I LV E R C E R T I F I C AT E S WOULD NO LONGER BE REDEEMABLE IN SILVER D O L L A R S . ( 3 1 U. S . C . 4 0 5 A - 1 ) . CO N G R E S S A L L O W E D T H E E X C H A N G E O F S I L V E R CERTIFICATES FOR SILVER BULLION UNTIL JUNE 24, 1968.”
  43. ‘NIXON SHOCK’ BLOCKCHAINLAWCLASS.COM T H E N I X O

    N S H O C K W A S A S E R I E S O F E C O N O M I C M E A S U R E S U N D E R TA K E N B Y P R E S I D E N T N I X O N I N 1 9 7 1 , T H E M O S T SIGNIFICANT OF WHICH WAS THE UNILATERAL CANCELLATION OF THE DIRECT INTERNATIONAL C O N V E R T I B I L I T Y O F T H E U N I T E D S TAT E S DOLLAR TO GOLD.
  44. THE END OF THE GOLD STANDARD BLOCKCHAINLAWCLASS.COM P R E

    S I D E N T N I X O N E N D E D T H E G O L D STANDARD (AKA BRETTON WOODS) SUCH THAT FOREIGN GOVERNMENTS COULD NO LONGER EXCHANGE THEIR DOLLARS FOR GOLD
  45. LIKE MANY OTHERS IN THE MODERN ERA THE US DOLLAR

    IS A TRUE FIAT CURRENCY BLOCKCHAINLAWCLASS.COM
  46. FIAT CURRENCY IS NOT NECESSARILY BAD BLOCKCHAINLAWCLASS.COM

  47. BUT MIGHT HAVE UNFORESEEN CONSEQUENCES BLOCKCHAINLAWCLASS.COM

  48. BLOCKCHAINLAWCLASS.COM MONEY AS PLASTIC AND THE RISE OF THE CREDIT

    CARD INFRASTRUCTURE
  49. CREDIT ACCOUNTS WERE WERE ONCE PREVALENT AT MANY STORES BLOCKCHAINLAWCLASS.COM

  50. NOT VERY EFFICIENT TO HAVE EACH MERCHANT MAINTAIN A LEDGER

    ACROSS THEIR RESPECTIVE CUSTOMERS BLOCKCHAINLAWCLASS.COM
  51. AMONG OTHER THINGS, THIS PUT EACH MERCHANT IN THE DEBT

    COLLECTION BUSINESS BLOCKCHAINLAWCLASS.COM
  52. IN ADDITION, THIS PUT THEM IN THE FRAUD DETECTION BUSINESS

    BLOCKCHAINLAWCLASS.COM
  53. MODERN CREDIT CARDS ARE REALLY A POST WWII INVENTION BLOCKCHAINLAWCLASS.COM

    DINERS CLUB WAS ONE OF THE FIRST EFFORTS AT A CREDIT CARD
  54. EVENTUALLY THE LOCAL BANKAMERICARD LAUNCHED IN 1958 BECAME BLOCKCHAINLAWCLASS.COM

  55. THE CENTRALIZED CREDIT CARD HAD MUCH LOWER TRANSACTION COSTS THAN

    STORE BY STORE CHARGE CARDS OR CREDIT ACCOUNTS BLOCKCHAINLAWCLASS.COM
  56. UBIQUITOUS POINTS OF SALE BLOCKCHAINLAWCLASS.COM RAPID AUTHORIZATION CENTRALIZED FRAUD DETECTION

  57. CRYPTO VS CREDIT CARDS BLOCKCHAINLAWCLASS.COM

  58. https://link.springer.com/chapter/10.1007/978-3-662-53357-4_8 http://www.comp.nus.edu.sg/~prateeks/papers/Bitcoin-scaling.pdf

  59. IN TERMS OF TRANSACTION THROUGHPUT, CRYPTO HAS A LONG WAY

    TO GO BLOCKCHAINLAWCLASS.COM “Today’s representative blockchain such as Bitcoin takes 10 min or longer to confirm transactions, achieves 7 transactions per second maximum throughput …”
  60. BLOCKCHAINLAWCLASS.COM “… mainstream payment processor such as Visa credit card

    confirms a transaction within seconds, and processes 2000 transactions per second, with a peak rate of 56,000 transactions per second” IN TERMS OF TRANSACTION THROUGHPUT, CRYPTO HAS A LONG WAY TO GO
  61. BLOCKCHAINLAWCLASS.COM Access More Here https://wallethub.com/edu/credit-card-transaction/25511/

  62. BLOCKCHAINLAWCLASS.COM Access More Here http://www.businessinsider.com/payments-industry-disruption-2015-1

  63. BLOCKCHAINLAWCLASS.COM FOR MORE MODULES VISIT

  64. DANIEL MARTIN KATZ E D U | I L L

    I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | M A R S H A L L I P. C O M BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW
  65. @ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND

    LAW professor nelson rosario A BRIEF (AND INCOMPLETE) HISTORY OF MONEY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM