Why Time is Money?

February 6, 2006

Money is VERY easy to understand — it is merely a store of time. You perform some work for someone, instead of bartering for their services or products, they can give you some of their time that they have earned in the form of something valuable, divisible and easy to recognize. This has historically been gold or silver (or wheat or oxen or dirt). Gold and silver have been the best forms of money as they are near impossible to counterfeit or duplicate.

As society evolved, people wanted to be secure with their savings, so they stored it into banks of security. These banks issued receipts for the gold or silver. Banking was private, they all had their own “dollar” bills that were private — banks competed by offering good rates for secure savings or they helped you invest your gold/silver by loaning it to others.

You could always redeem your receipts (or the receipts of others) for the physical gold/silver if you wanted. This all changed in around 1913 (and a few times before in US history) when the government said gold wasn’t valuable and that paper receipts were. Of course, central banks up until the early 1970’s still balanced their accounts with gold, and central banks still store gold in reserves. Crazy how the general public loves paper, but governments and central banks loves gold.

Money is very easy to understand, but it’s not time–it is a placeholder for value.

I’m not sure I agree with you — I’ve looked at the Austrian, Keynesian and a multitude of other market theories and I don’t see money as a store of value. For all of us, when we do a job ourselves, it is because we can do that job cheaper than paying someone else. Some mow their own lawns, others pay others. Why would someone pay someone else to do something? Because it would cost them more to do it themselves.

You can call this “value” but I call it time-savings. When I buy a toaster, I am saving time over building one myself (or toasting bread the old way). When I buy a car, I am saving time in transportation and I am saving time in building my own vehicle. For me, money is time — time saved and time redeemed. Money is not only my time but the time of others.

Monetary value is imaginary–without human agreement it does not exist.

I completely disagree! Money is real — the time you save when you use money for the time of others is very real. If money is stable and market driven through competitive standards, you’ll be more easily able to value a product. The problem with using fiat currency (ie, paper dollars backed by nothing), you have no idea how many dollars are in existance as government continues to add more to the market. If someone drops US$100 in your pocket today, you’ll spend it or invest it or put it somewhere. Now picture everyone getting US$100 more at the same time — we’ll all want to spend it, chasing prices higher. This is inflation, caused by central banking and fiat currency. You can’t create gold out of thin air, though.

Whereas if I want to buy a certain amount of gold, someone has to sell it to me.

Yes, this is a good thing. Instead of creating money out of thin air (causing everyone else’s money to drop in value), you have to find someone willing to part with their wealth! This makes investors more likely to think about their investments rather than have some imaginary placeholder to use. When we make investments today, we think “what will one dollar be worth in 20 years?” With gold, we don’t have to do that — $1 today is $1 tomorrow is $1 100 years from now. From 1800 to 1913 when we were on the gold standard, $1 was $1 was $1, EXCEPT the War between States when Lincoln created fiat currency and the dollar dropped (until we returned to the gold standard). From 1913 to 2005, $1 became $0.04 in just 92 years.

What “time” is represented by the rapid valuation of that company?

Their products save you time — instead of writing a physical letter, you send a gmail. Instead of looking in 100 books for an answer, you use the search engine. They save you time. I believe they are overvalued against real currency because of the inflation of dollars, though. .did the BMW take 3 times as long to make as the Hyundai? Consider salary differences…if money==time, why does a CEO make so much more money than you?

A BMW does take 3 times as long to support as a Hyundai. BMW dealers offer quick service, free loaners, coffee and donuts, stronger build quality and many other aspects. Over 10 years, the BMW likely will offer more time savings for those who can afford it than the Hyundai can. A higher quality car would cost you personally much more time to make (go through materials, check for compliance, check for quality install, etc, etc) plus the enhanced support.

Why does a CEO make so much more? I am a CEO — the work I perform is much more difficult than my entry-level worker. I have to have knowledge of more than just “type program into computer” — I have to be on top of what my competitors are doing, what they might do, and where they are heading. I have to watch consumer prices and demand for my product, and make decisions to keep the company profitable. I have to understand how to manage my managers and my employees, and I save my investors the time of running their own businesses.

Of course, I believe the position of the CEO and the corporation has been destroyed by the SEC and the US government in general — they created so many rules and destroyed the real reason to invest — dividends and profits.

grow your strength so that YOU can exert the control, or drop out of society and live as a hermit.

This is a very socialist authoritarian response! I believe that society works best through voluntary cooperation with a mutual profit of both parties in any relationship — this is called capitalism.

[credits: dada21@/.]
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