Sunday, May 24, 2009

Stuff You Should Know About Money

Stuff You Should Know About Money

First of all, money does not have and was never intended to have any intrinsic value. Anyone who values money for its own sake ("The king is in his counting house counting out his money") has a mental illness.

Money was invented (some form of it dates back 5000 years) as a convenient way to equalize exchanges, such as payment for work done or to balance out a barter exchange.

The gathering of people into villages and towns created the first need (after defence of the tribe) for public services, which meant taxes. Egypt and Mesopotamia exacted taxes in the form of goods and labour five millennia ago. By 2500 BCE they had begun to accept silver and gold bars as currency--the pyramids were not built by those who could afford to buy their way out of service to the pharaoh.

Religious temples were the first banks. Currency made theft easier, more convenient. Temples were the biggest and most secure structures in the ancient world, so they became the places to store money and other valuables.

Temple priests were the first bankers, ensuring their personal security by 1750 BCE by making loans to followers who needed cash for a short term. Mortgages, especially of the sub-prime variety, were still a long way in the future.

The world's oldest surviving bank, the Banca Monte dei Paschi di Siena, was founded as a pawn shop in Italy, in 1472.

Paper money goes back much further, at least in China. The emperors issued paper currency in China as early as 910 CE, three centuries before Marco Polo arrived.

Though suitably impressed with the concept of paper currency, Marco was alarmed at how much of it the emperor of the day, Kublai Khan, was printing. The Khan, trying to generate enough wealth to pay for an invasion of Japan (and eventually to conquer all of the eastern world), caused inflation to soar.

Of the tens of thousands of boats he sent to Japan, almost every one sank in a typhoon, never reaching the shores of Japan, because they were built in a cheaper style of a kind suitable for travelling on rivers, not seas. His power and influence in China never recovered.

China ended its first attempt at paper currency in the 15th century as the country exhausted itself through inflation caused by printing too much money. China, the most powerful and innovative country in the world, with explorations to every part of the globe and trading partners in all popular ports, ended its exploratory and trading ventures around the world (crippling the shipping industry) after the Kublai Khan debacle.

The U.S. learned how convenient it was to print money for Civil War costs when it created the "greenback" in July, 1861. After the war, the value of the U.S. dollar had decreased, but the Confederate dollar was worthless.

The U.S. today has about $829 billion in coin and paper money in general circulation. Two-thirds of it is held in other countries.

A study of paper money around the world revealed in 2008 that U.S. cash had more cocaine residue on it than the currency of any other country. Also found on paper money were staphylococcus bacteria and fecal residue. (Don't ask. Don't tell.)

Around 1916, a U.S. citizen could carry his cash to Washington, D.C. and have it washed, ironed and reissued. I wonder why...oh, right.

The old saying that money doesn't grow on trees is correct. U.S. bills are 75 percent cotton, 25 percent linen. Some countries use at least some man-made fibres. Expect some plastic to appear in "paper" money soon.

As counterfeiting has been a booming enterprise since money was invented (some of us are old enough to remember having to bite some coins to ensure they weren't counterfeits loaded with lead), mints have to continually invent new ways to counteract it. The latest U.S. five dollar bill has more than 650,000 tiny glass domes that create an optical illusion the government hopes will be impossible (or at least economically unfeasible) to duplicate.

Poor Frank X. McNamara. Back in 1949 he took friends out to dinner in New York City, then realized to his shock that he had forgotten his cash when it came time to pay up. He promised himself to never find himself in a position like that again. He invented the first credit card, Diner's Club.

The first Diner's Club card wasn't plastic, but cardboard. It listed the 14 restaurants who were prepared to accept the card on the back. It had an annual fee of three dollars.

John Shepherd-Barron, a Scottish inventor, gets the credit for inventing the first true ATM. He created it in 1967 for Barclay's Bank in North London. His concept was based on the same technology as chocolate bar dispensers.

Since plastic cards had still not appeared, Shepherd-Barron's machine accepted only specialized cheques that were dotted with identifying traces of radioactive carbon-14.

Um, radioactive? Yup. Shepherd-Barron claimed that users of the Barclay's cheques "would have to eat 136,000" of them to have any dangerous effects.

Once a specialized Barclay's cheque was entered into his ATM, the user would key in a four digit PIN to confirm identification.

And so began the age of having to remember passwords.

Bill Allin
Turning It Around: Causes and Cures for Today's Epidemic Social Problems, a guidebook for teachers and parents who want to address the developmental needs of their children at the right time, not too late as often happens.Learn more at

[Primary source: Discover, April 2009]

Thursday, May 14, 2009

Why the Economy is as Undependable as the Weather

Why the Economy Is As Undependable As the Weather

Isn't it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?
- Kelvin Throop III, grandson of a likely fictional character of disputed origin, possibly Canadian (in other words, origin uncertain)

No matter where in the world people live, they all complain of the inaccuracies of their weather forecasters.

No matter where in the world people live, they are also feeling the effects of the economic downturn, despite the accumulated expertise of noted economists.

Why are weather forecasts so often wrong? In my country, Environment Canada (the government weather service) claims it is right 89 percent of the time. And it is, if you count only forecasts made within the previous three hours of any given time.

Weather and climate may follow general patterns, but they do not adhere to weather charts nor necessarily follow computerized climate models. As technologically advanced as we are in the 21st century, our meteorologists and climatologists know with certainty as much about the accuracy of their forecasts as doctors know about the human body. Which is very little despite their claims to the contrary.

Have you ever taken the time to watch dust moving around in a puddle or fog swirling on a summer morning? They defy accurate description. I have watched waves on the lake near where I used to live approach each other from opposite directions, then continue on by passing through each other as if the other weren't there at all. Shouldn't they cancel each other out? They don't. Waves are an effect of weather above them.

The economy of a country depends on so many factors that no one person or computer can keep track of them all. The current recession began when unethical bank officers granted mortgages to people who could not afford to pay them back, even though the interest rates were below the prime lending rate. The banks then sold these "loser" papers to other banks around the world, combined with good mortgage papers. Somebody had to pay. Turns out we all did.

Remember the dotcom collapses several years ago where internet startup companies collected fortunes with little more than a dream to sell? Or the Worldcom and Enron collapses (among others) where their executives stated profits and sales increases in the 30 percent range when they were only a fraction of that?

A great deal of the economy of a country depends on the honesty and integrity of those who move money around it. Stripped to its essentials, an economy functions on the greed and honesty of those with money. In the end, greed always dominates.

So weather forecasts are based on factors we don't even understand, while economic forecasts depend on the integrity of those with money. Is it any wonder that neither can be depended upon?

As for science fiction, some of it from the past may be seen in technology today?

Yet that's not the point of Throop's quote. His point is that many people will believe forecasts created by those who claim to be experts, while deriding technological and cultural forecasts from sources such as writers of science fiction. Science fiction writers don't claim to be experts.

Anyone who claims to have expertise in any subject will find followers provided that they can back up their predictions with good stories.

Weren't snake oil salesmen of the past successful because they told the best stories? Are our biggest advertisers today not successful because they tell the best lies that appeal to our vanity and need for social status? Didn't our ancestors believe the tribal chiefs and medicine men and women who told the best stories?

We tend to believe those who tell the most convincing stories, whether the stories have truth and validity or not.

So it rains on our parades and our retirement nestegg stocks tank. Our lives remain determined largely by our beliefs.

Bill Allin
Turning It Around: Causes and Cures for Today's Epidemic Social Problems, a guidebook for teachers and parents who want to grow children who believe what they can depend on.
Learn more at