Author Topic: Definition of money  (Read 442 times)

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Offline Pabitra

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Definition of money
« on: May 02, 2019, 12:46:30 AM »
Conventional wisdom says that coins are money since they are the assets of the issuing authority.
Currency notes are just promissory notes of the Central Bank and they are the liability of the Bank.

Now a fresh definition is needed in a cashless society.

See

Sweden Central Bank Urges Legal Money Definition From Lawmakers - 7Bitcoins

Offline EWC

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Re: Definition of money
« Reply #1 on: May 02, 2019, 11:52:19 AM »
To quote from the link

"Since the cash was invented people took it if granted that Fiat it is the real money."

I would not trust this fellow to run an errand to the shop, let alone to re-define money

Rob T


Offline FosseWay

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Re: Definition of money
« Reply #2 on: May 02, 2019, 02:20:56 PM »
I would not trust this fellow to run an errand to the shop, let alone to re-define money

On this, if not on certain other matters, we are in full agreement!

That article is riddled with howlers of all kinds. Grammatical ones, for a start. And factual - the currency of Sweden has been the krona only since 1873. From decimalisation in 1855 until 1873, a decimal version of the previous riksdaler was used. And, perhaps most pertinently, conceptual - the article talks in general terms about defining "money" but what the Riksbank is actually mulling over is how "legal tender" should be expressed. The two are not the same thing, clearly.

And this sentence in the bio about the author: "Bitcoin Maximalist and Toxic to our banking and monetary system" is completely incomprehensible.

Offline Figleaf

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Re: Definition of money
« Reply #3 on: May 02, 2019, 08:53:45 PM »
There is a guerrilla war being waged by FinTech enthusiasts against ... uhhh .... the unconverted? The less smart banks like the FinTech stuff as handling cash costs them bonus money, like all the nonsense about facilitating payments and social tasks and license to operate. It's this approach that has cost the financial sector so much trust of the public. The site is obviously run by a somewhat befuddled FinTech enthusiast who will grab on any news item to prove that FinTech has the future and cash is out. This sort of propaganda is cheap and plentiful.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

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Re: Definition of money
« Reply #4 on: May 03, 2019, 08:48:37 AM »
Good to find so much agreement.  Ultimately, I judge if two parties agree the same value for the same thing then for those two parties that valuation is a kind of money.  Legal tender legislation will try to bring state control over such transactions in various ways.

Getting instead into the nitty gritty I have a couple of concerns about Fintech - which run in opposite directions.

1)  As set up in the UK it seems to me to push risk from the bank onto the user.  With basic cash payments you actually see the payee face to face.  With remote payment by cheque there is a triple check on the transmission process.  I put a name on the cheque, I arrange to deliver it to an associated address, but crucially, the bank checks the name prior to payment.  But with direct electronic payments there is just one process, as I understand it.  I have to give the right number.  I believe a double checking system, where I get to see the account details confirmed, prior to completion, should have been possible, and would be much better.  Am I missing something here?

2)  Having said that, in the modern world access to direct digital person to person payment seems to me vital.  I judge we got it in the UK in the teeth of banking opposition because pushed by individuals with political clout like Andrew Tyrie, and Donald Cruikshank.  It seems to me less progress is being made in the USA than in the UK, (and at least parts of Europe), on this matter.  The newly set up Zelle payment system in the US seems to be there to address the problem, but seems so far to be little used?  Why?  Again, am I missing something here?

Rob T

Offline Figleaf

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Re: Definition of money
« Reply #5 on: May 03, 2019, 09:29:18 AM »
Banks are slowly coming around to checking account number and account name combinations. Cheques no longer play a role, of course. We are talking about electronic transfers. In the Netherlands, there is a nation-wide system storing number-name combinations, created decades ago, that facilitated transfers from parties at different banks. This is now used for electronic checks on name-number combinations. If you make a transfer to another country you are warned and on your own.

In France, the system is that you indicate name and number to the bank. The bank checks (may take a week or so) and when the combination is OK, enables the possibility for you to transfer money to that party only. This works for transfers to other countries, but is cumbersome and slow.

I am not aware of work to couple name-number data bases in the EU, but would be highly surprised if there isn't a project in the pipeline. I presume the UK will not or no longer be part of such efforts.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline FosseWay

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Re: Definition of money
« Reply #6 on: May 03, 2019, 09:29:39 AM »
Good to find so much agreement.  Ultimately, I judge if two parties agree the same value for the same thing then for those two parties that valuation is a kind of money.  Legal tender legislation will try to bring state control over such transactions in various ways.

Agree with both of these points. Legal tender is ultimately simply a mechanism to ensure debts can be paid, not that commercial transactions in general can take place. Because getting into debt has legal consequences for the debtor, it is important to ensure that the debtor is not prevented from settling their debt by the creditor being awkward. One can otherwise envisage situations where a debt arises and the creditor refuses perfectly reasonable means of payment simply as a way of getting the debtor into trouble. Legal tender isn't relevant to most transactions most of us make every day, and it isn't specifically related to the cash v. electronic debate, in that it would be perfectly possible for an Act of Parliament to decree that some other form of money than cash is also LT.

Quote
1)  As set up in the UK it seems to me to push risk from the bank onto the user.  With basic cash payments you actually see the payee face to face.  With remote payment by cheque there is a triple check on the transmission process.  I put a name on the cheque, I arrange to deliver it to an associated address, but crucially, the bank checks the name prior to payment.  But with direct electronic payments there is just one process, as I understand it.  I have to give the right number.  I believe a double checking system, where I get to see the account details confirmed, prior to completion, should have been possible, and would be much better.  Am I missing something here?

Do you mean that there is the possibility when transferring money online that you mistype the recipient's account details and the money appears to be paid but either goes nowhere or goes to someone other than who you intended? If so, I agree, but I also note that such confirmation is becoming more commonplace. I can only speak from experience with Swedish online banking as I don't use my UK bank account for much more than regular income and direct debit expenditure that is all automated. But here, there are three kinds of recipient account. One is the equivalent of a UK sort code plus account number, and applies to most private banking accounts. The others are giro-based, and all public authorities, many sales outlets and some prolific online sellers have them. These latter types give you confirmation of the name of the account before you press Confirm. Private accounts don't. So in answer to whether you're missing something - I don't think so. I suspect that the UK online payments setup may be slightly behind the Swedish, partly because the non-cash economy is bigger here and partly because it is practically easier to upgrade systems in a small economy and country of 10 million than one the size of the UK's, and it's easier for relatively few financial institutions to coordinate their efforts.

It will be interesting to see whether the same applies to international payments to authorities. When driving through the Netherlands a few weeks ago I got a speeding ticket, and I have just paid the fine. I got no acknowledgement beyond "transaction sent" that it has gone to the right place. Clearly in cases like this, it is particularly important that the payment works as expected.

Quote
2)  Having said that, in the modern world access to direct digital person to person payment seems to me vital.  I judge we got it in the UK in the teeth of banking opposition because pushed by individuals with political clout like Andrew Tyrie, and Donald Cruikshank.  It seems to me less progress is being made in the USA than in the UK, (and at least parts of Europe), on this matter.  The newly set up Zelle payment system in the US seems to be there to address the problem, but seems so far to be little used?  Why?  Again, am I missing something here?

Again, I can only speak from the Swedish perspective. Here we have a service called Swish that allows payments by phone to anyone whose phone number you have and who themselves has Swish set up. I imagine it works similarly to Samsung Pay and Apple Pay, but it is independent of the phone operators and is run as a national concern by the major banks, as most cash machines are. So providing you have a smart phone with a contract connected to you (i.e. not an anonymous pay-as-you-go), and you have downloaded the app, activated it and connected it to your bank account, you can use it. In my experience it always tells you who you're paying, in that it presents the name of the subscriber whose phone number you've sent the payment to, but it only does this after you press Send, which is slightly odd but does at least alert you to the possibility you've made a mistake there and then.

As to Zelle, I can't comment on why it's not widely used. But take-up of mobile phones in general and various specific uses of them has been historically slower in the US than in Europe. My guess is that this is partly down to innate conservatism in the US population, but more practically down to the logistical issues of ensuring decent coverage for enough of the landmass on a continent that overall is much more sparsely populated than Europe. In order to rely on their mobiles enough to get rid of their landline or commit to using mobile-based payments, people need to know that they will reliably be able to pay for e.g. a tank of gas or a motel in the back of beyond. So long as the fear remains that coverage will suddenly disappear, there is an overall braking effect on the spread of the technology. Same goes for electric vehicles - you need to know you can charge them somewhere with at least the same degree of certainty as that you can find a petrol station for a standard car.

Offline EWC

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Re: Definition of money
« Reply #7 on: May 04, 2019, 11:02:20 AM »
Banks are slowly coming around to checking account number and account name combinations. Cheques no longer play a role, of course.

Thanks.  Have cheques gone completely in France?  I assume they are still quite widely used in the US?  Quite a lot of people still use them in the UK.  UK Banks planned to unilaterally terminate cheque use in 2016 as I recall, but Andrew Tyrie told them to where they could go with that.  The plan seemed to disappear completely.

In France, the system is that you indicate name and number to the bank. The bank checks (may take a week or so) and when the combination is OK, enables the possibility for you to transfer money to that party only.

Sounds cumbersome.  In the UK you can set this up with a card and card reader, just with the sort code and account number.  Not a problem with relatives etc, since you can send a test payment prior to committing a big sum.  But others may not go along with that.  And if an innocent error sends the money to the wrong place there is no come back as I understand it.  I can see there are privacy issues involved in prior confirmation – but hey – if the banks want to set up the system – I judge they have to solve that – not push risk onto the user.

The others are giro-based, and all public authorities, many sales outlets and some prolific online sellers have them. These latter types give you confirmation of the name of the account before you press Confirm. Private accounts don't. So in answer to whether you're missing something - I don't think so.

Thanks.  There is a bad smell about that.  A long time back I closed my UK (one time) giro checking account, because the new owners would only supply cheque books with stubs to business customers, and refused to provide them to private customers.

Disgusting profits were taken by banks by luring people into unexpected charges for small errors over their running balance.  (My wife once stopped a bank working by standing at the head of the line and refusing to move until the manager came out and rectified what had been done to one of our kids).

Paypal have now hidden the running balance on their statements – just another of the ways private users are being befuddled.   There is a link to restore it, but despite, not because of, Paypal themselves.  The list of this stuff goes on and on.

Ajay Banga thinks I am one of his children.  I think he is a dangerous con man.

Rob T

Offline Figleaf

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Re: Definition of money
« Reply #8 on: May 04, 2019, 11:18:25 AM »
Thanks.  Have cheques gone completely in France?

No more cheques in the Netherlands. They were always marginal.

You can still do cheques in France, but in most cases they are refused. The most notable exception is people doing small jobs in and around the house. Another exception is coin dealers buying coins. According to the law, they may not pay in cash. This helps in tracing stolen goods and those offering them. There are crooked dealers who pay cash anyway, though. Otherwise, a 20 page chequebook may take years to be used completely.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline chrisild

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Re: Definition of money
« Reply #9 on: May 04, 2019, 11:47:04 AM »
Here we have a service called Swish that allows payments by phone to anyone whose phone number you have and who themselves has Swish set up.

And in the euro area we can use SEPA instant payments ("SCT Inst") - basically regular money transfer from your account to somebody else's, except it take a few seconds rather than one or two days. Does not require any extra account or setup; problem is that some banks (always creative when it comes to charging for services ...) want to be paid extra for that. Hope that, as more and more banks participate, that bad habit will soon die out.

Christian