Is money "just a piece of paper" as is often stated?
Actually not an easy question to answer simply and quickly.
So here are some links to get you thinking about it;
•Fiat money (http://en.wikipedia.org/wiki/Fiat_money)
•I Promise to pay the bearer (http://www.hitxp.com/articles/economics/promise-pay-bearer-currency-history-federal-bank/)
And, how does cryptocurrency fit into the scheme of things? (Fulvio? I think this might be a hobby horse (https://satelliteshow.files.wordpress.com/2010/03/hobby-horse1.jpg) of yours.)
"This Australian Note is legal tender throughout Australia and its territories"
What does this actually mean?
"When I use a word,' Humpty Dumpty said in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'
'The question is,' said Alice, 'whether you can make words mean so many different things.'
'The question is,' said Humpty Dumpty, 'which is to be master — that's all." ― Lewis Carroll, Through the Looking Glass
None of the Google definitions of "money" I find satisfactory; they all seem to focus on "coins and banknotes" or "assets and wealth".
I find the Wikipedia definition (http://en.wikipedia.org/wiki/Money) much more helpful:
QuoteMoney is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context.
To qualify as "money" in my mind, an object has to have two things, which this definition covers: "general acceptance" within a particular culture or geographic region, and the usage for "payment of goods and services".
Thus, Katanga Crosses qualify as money as they had a culturally accepted "value" within the central African cultures where they were found. Bird feathers, seashells, teeth and other forms of "primitive money" can also all have monetary function and a "general acceptance", culturally, in the societies where those things can be found (particularly New Guinea and the Pacific Islands). Gold and silver coins also fall into the category, as do banknotes and even "electronic money", whether it be government-backed e-dollars or private crypto-currencies.
If money is to retain its usefulness long-term, it must have several properties.
- Rarity. Its value is reduced if any old fool can just go up to any old tree or rock and find some "raw money".
- Convenience. Money must be easier to use than barter, otherwise people will simply revert to barter and leave their "money" at home.
- Resistance to counterfeiting. Similar to point 1, money loses its value if the rare item being used as money can be easily substituted with a cheap, common imitation.
Related to "rarity" is "control"; a successful monetary system needs to have some kind of controls in place to prevent enterprising individuals from going to the great lengths needed to obtain additional "rare" objects. The monetary value of the manila ring of West Africa collapsed after European traders realised these copper loops had trade value and mass-imported them.
Related to "convenience" is "security". The "perfect form of money" would be super-easy to use and would be impossible to lose, steal or destroy. We have not yet invented this perfect form of money.
Related to "counterfeit-resistance" is "anti-counterfeiting laws". There needs to be some societal organization that detects, catches and punishes counterfeiters and helps improve the currency system with new anti-counterfeiting methods.
Quote from: 'JeffH' pid='70182' dateline='1428183048'"This Australian Note is legal tender throughout Australia and its territories"
What does this actually mean?
"Legal tender" has a legal definition (http://en.wikipedia.org/wiki/Legal_tender#Australia), in regards to payment of debts, particularly debts owed to the government (i.e. taxes). This statement means that you may use this note in payment of such debts.
"Australia and its territories" also has a legal definition: you can use it for paying debts in the six states, two mainland territories and the various island territories throughout the Pacific and Indian Oceans. I believe the Australian Antarctic Territory is also theoretically included, though bases operated by other countries within the territory claimed as the AAT would presumably use their own country's money instead. The Australian government does not guarantee it's legal tender status beyond those territories. Other sovereign states (such as Tuvalu) have unilaterally declared the Australian dollar legal tender within their own territories, but whether this remains so is entirely the responsibility of those sovereign states and not the Australian government.
Quote from: 'JeffH' pid='70182' dateline='1428183048'(Fulvio? I think this might be a hobby horse (https://satelliteshow.files.wordpress.com/2010/03/hobby-horse1.jpg) of yours.)
Dunno that I'd call it a hobby horse. Field of interest into which I do much research, is perhaps more accurate.
Sap did a pretty good job of covering the bases on this, so there's no real need to go over it.
I'm guessing you asked mainly in regards to crypto however, so I'll address that, especially since I've been covering this within the crypto community, and trying to dispel some myths.
Just today, in fact, I answered a guy who was asking if its too late to invest in Dogecoin. You may want to look up the answer I gave him, its still on the front page, and of course in my history.
Any currency is only as good as its acceptance. If everyone loses faith in say the aussie dollar, its toast, and drops in value until it becomes enough of a bargain for speculators to gamble on the trend reversing. With fiat currencies, government policy is intricately tied to the perceived desirability or otherwise of the currency. And its because there are so many options that people can trade currencies for great profit, and for the detriment of the currencies themselves, and of the people reliant on them AS currencies rather than playthings or gambling chips.
Cryptos are also subject to the scourge of the traders of course. In some ways even moreso, since it takes a ludicrously small amount of money to pump and dump any crypto, including Bitcoin. There are plenty of individuals in the world who could buy all the cryptocurrencies outright, if they felt like it. However, what we don't have are the whims of governments in manipulating valuations. That may be a good or a bad thing, depending on the government(s) involved, but its generally accepted that not being able to simply fire up the presses to churn out a few trillion more is a stabilising influence.
Acceptance is the only real hurdle that the cryptosphere has yet to really deal with. Sure, there are plenty of places where you can pretty much buy anything without resorting to fiat... heck, last year a guy did a canoe trip down the Ohio River, relying solely on Dogecoin tips for his survival. Google it, its quite a story.
However, until pretty much everyone understands what cryptos are and how they work, and especially how to hold and use them safely, I don't think we're going to reach the critical mass among the general population that we need to make more than a niche impact. And that's a pity, I think. Because I see a lot of upside to decoupling money from the people we put in power to look after our best interests.