The Hierarchy of Money

The villager parable is too egalitarian. That's not really how it worked.

For most of history, peasants were sustenance farmers, meaning they grew their own food and if the harvest was bad, they could starve. For them, there was no such thing as insurance and they really needed ways to reduce risk. For example, they'd feast their neighbors so that when times were hard, the neighbors would hopefully help them out in turn. Investing in close-knit relationships isn't like barter - it's more like informal credit. Kinship networks still work something like this today.

And this meant they didn't really need money. Social obligations were everything.

But how do people who aren't peasants themselves get food? By extracting rents and taxes, in return for protection and certain services, perhaps plowing fields. Local "big men" might take payment in kind, but for a more organized government, they'd collect taxes using money, which gave the peasants incentives to grow and sell food for money.

So villages would monetize or demonetize depending on the state of nearby governments. A monetized society allows people who aren't farmers to buy food. It allows cities to exist. Therefore, civilization was built on military force, taxes, and rent extracted from peasants, who were the basis of a mostly agricultural economy.

Be glad our civilization isn't built on sustenance farming anymore.

As someone who works at a financial institution, this is a really refreshing and concise breakdown of money and monetary systems. I think the most important thing that people should realise from reading this is that none of the things we have in our monetary systems were dreamed up for no reason, each solves a clear problem, and often was found by multiple independent groups of people at different times. I absolutely love the fact that it's essentially just layers of trust, analogous to a certificate authority or a domain name system.

And, of course, that the top level of trust is a bit arbitrary, and that "black money", of course the US Dollar, isn't worth more than trust in the US government.

There may be some value in this, but it is fundamentally wrong from first to last. First: There never was a great age of barter, you needed to have money before you had a lot of specialization. The idea that you could have brewers trying to pay for everything in beer doesn't resemble anything that did or could have happened. Last: Fiat money wasn't something people voluntarily accepted, it's something governments forced on people. Governments required people to pay taxes in fiat money, governments required people to accept fiat money as payments for debts, governments forced people to "sell" their gold.

Wow, what a fantastic blog post!

While there are some necessary simplifications, I couldn't find a single mistake on a first pass.

Anyone who wants to understand current monetary systems should read it.

Substituting "stones" for gold is a brilliant stroke of the pen. It will surely be helpful to any readers who are hung up on gold.

Thank you for writing this and sharing it on HN.

I feel like this is either AI-generated or severely lacks context.

There might be a point in there, but it might also just be paragraphs of text with little structure joined together.

What's the narrative? What does this want to tell me? And why?

Something like an opening header block with 2-5 sentences would go a long way.

The part where the bat wielding despot required payment using the money of his issue was left out.

For a (I am sure seriously simplified) history of money, I really enjoyed Jacob Goldstein’s “Money: The True Story of a Made Up Thing.”

The only problem of money is inflation. The ability of one single entity to print money at will, stealing from everybody else without them noticing is one of the greatest con jobs in the history of mankind (and we all know who has the master printer in the world)

Money is a beautiful instrument for trading and free markets, the only way for two entities to peacefully exchange goods. Inflate that money supply and you are silently stealing from the pockets of those who trust that instrument

> The villagers are tired of bartering

Come on… It's been known for more than a century that bartering has never been the default mean of exchange among humans, can we kill this myth eventually?!

What article is missing is the (hierarchy of) permission.

Who can create money, who can access it, who can change the rules, who can freeze or censor transactions or even weaponize whole financial system?

What I dislike about fiat is that inflation is treated as a (wanted) feature while it is a cost paid by plebs via Cantillon effect.

All Govs keep rolling debt burden being paid with more debt.

Paper backed by paper and/or trust into goverments only. History and significant part of the world shows that this trust is being failed too often.

How sustainable current system is?

How do you describe money without explaining taxes? There is no money without taxation happening.

The crypto bros are gonna have an aneurysm reading this

When I started to understand how money works, it started to feel like everything I've been raised to believe was a lie down to the foundational principles.

Even Hanlon's Razor "Never attribute to malice that which is adequately explained by stupidity" also fell apart when I came across Grey's Law "Sufficiently advanced incompetence is indistinguishable from malice."

The complexity is extreme and more intricate than any person could have designed. Clearly, it evolved over long periods of time to get to this point. It's worse than a "conspiracy" because a conspiracy requires collaborative intent and a shared understanding. With this system, participants have convergent intent but very little to no shared understanding (as essentially none is required).

In terms of outcomes, the system functions in much the same way as a conspiracy, but without any of the self-restraint mechanisms which might otherwise limit the group's actions (as would come naturally if each member had full awareness of what the group was doing)... Which in this case, disturbingly, spans the entire planet and all human affairs.

The first step to solving a problem is understanding that the problem exists. This makes this problem particularly difficult to solve because it has power over the collective human minds which created and uphold it. It can replace any dissident with a compatible 'attention head' within its neural net.

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