Money, money, money
One topic dominated a recent trip to my home country, England. And, as you can probably guess from the headline, that topic was money.
So what? Isn't money always important? Well, of course, as we know from the film Cabaret, money makes the world go round. But in England, money seemed to confront me at every turn.
This was partly my own fault, because I was reading a fascinating book about money by Felix Martin, called Money: The Unauthorised Biography. More about that later.
Visiting Britain always makes me more aware of money because I have to adapt to a different currency — pounds and pence — instead of the euros that I use in Germany. And on this visit, there was a lively debate in the news about whether Scotland would be able to use the pound if it votes for independence from the United Kingdom in a referendum in September.
Even without independence, Scotland will have the power from 2015 to issue its own bonds to finance infrastructure projects. Not surprisingly, these have been nicknamed "tartan bonds" or "kilt-edged securities".
I was also made to think about the very nature of money when I was asked at a train station in London for a donation to the charity Dementia UK. The collector, who was holding a bucket, caught my attention when he shouted: "Get rid of the coins in your pocket!" When I told him that I found this an interesting way to get people to donate, he added: "Well, people need to. It's just an annoyance."
This reminded me of a comment by a good friend many years ago, who predicted that we would soon look back and think how ridiculous it was that we lugged around lots of metal in our pockets. Yet although there are now various forms of electronic money — including the controversial "bitcoins" — metal coins still seem to be a long way from disappearing. But that day will surely come.
As Felix Martin points out in his book on money, museums are full of old metal coins. This gives the impression that historically coins have been the main form of money.
But this is not the case. The main form of money was — and still is — simply an accounting record of who owes what to whom. For example, in England between the 12th and 18th centuries, records of public finances were kept on a wooden stick, called a "tally". And nowadays, bank accounts are nothing more than a set of numbers in a computer.
Yet not even banks are essential for money. As Martin describes, during the bank strike in Ireland in 1970 the economy continued to function because the main method of payment was by cheque, even though nobody could pay these into their bank accounts. Trust in people's creditworthiness was the key.
According to Martin, money has three fundamental elements: an agreed abstract unit of value; a system for recording accounts to keep a record of debt and credit balances; and a means of transferring debts and credits between people, such as coins and notes, cheques or an electronic transfer between bank accounts.
This means that coins and notes aren't really money itself. Instead, they are just a physical representation of a more abstract concept of value. Think about that next time you reach into your pocket or purse to buy something — or while you are listening to this song.
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