Dec 16 2008

Welker’s daily links 12/15/2008

Published by at 12:30 am under Daily Links

Alternative Currencies Grow in Popularity – TIME

Most of us take for granted that those rectangular green slips of paper we keep in our wallets are inviolable: the physical embodiment of value. But alternative forms of money have a long history, and appear to be growing in popularity. It’s not merely barter, or primitive means of exchange like, say, seashells or beads. Beneath the financial radar, in hip U.S. towns or South African townships, in shops, markets, and even banks, throughout the world people are exchanging goods and services via thousands of currency types that look nothing like official tender

Posted from Diigo. The rest of my favorite links are here.

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

6 responses so far

6 Responses to “Welker’s daily links 12/15/2008”

  1. Palmion 16 Dec 2008 at 5:37 am

    That's pretty cool.

    And it is very true that say, a type of currency that is not "official", while it may not be worth much in our society, is given value by when demand for it simply goes up. Even this basic economics principle is demonstrated in this example: something becomes valuable when people give it a certain value, or when they deem it "exchangeable" for something which we already know to be of value (i.e. goods and services)

    By deemind it 'exchangable" consumers (or should it be traders?) in essence actually increase demand fo the good/weird money thing because they are willing to give up more in order to obtain it. As its value continues to go up, the weird currency can begin to become more widely accepted by soceities (i.e the small towns).

    A bit random, but this really relates to my college applications, which I'm doing right now:

    Lets take Oxford as an example university: is the education there neccessarily that much better than any other decent, well-established university in england? Well, yes and no. No, because the final material and learning experience that you will have either way is about the same. You leave college with a bachelors either way. But also yes – because as long as everyone "overestimates" the value of Oxford, its reputation continues to soar above those of other decent universities. This causes a high demand for its services, essentially increasing its price/prestige, or what people are willing to give up for it…even though, objectively speaking it is about the same or not that much better.

    But back to econ:

    I've thought about this before as well – what is money, exactly? other than little green slips of paper. Why is it that we hold any value in it whatsoever, when money's original historical purpose is actually simply to be a useful medium for the exchange of goods and services – because if people kept trading tomatoes, you couldn't store them for a longer period of time and all our exchange mediums would "rot".

  2. Sebastian Son 17 Dec 2008 at 3:09 am

    It would seem most people trade with goods when inflation is high such as it was the case in Zimbabwe and in Germany before WW2. But apart from that I can not imagine any real gain from trading with goods as the value of them is undefined and has a different value to every person, such as water is worthless to a drowning person. But if there is no inflation people still trade with goods mostly since they do not have any money and as a result they trade their possessions for food and shelter.

  3. Nicon 17 Dec 2008 at 3:30 am

    'But back to econ:'

    I'd say ON to philosophy… This is a very interesting topic that is up for discussion. Why is it exactly that money has the value that it does? Why do we not use one single currency throughout the world and fix prices (as to stop inflation and bring about equality)? The laws of supply and demand (to an economist) make sure that this won't ever happyen. But to a philosopher (perhaps someone like Charles Taylor), this is merely out of pure instrumental greed. Narcissism is a social malaise that corrupts society and makes us look for the best possible outcome for only ourselves. Therefore, we do things like cutting supply (in order to maximise profits by driving up the price) and our relationships with others also effect price stabilisation.

    As Palmi said, the overvalued Oxford graduates are highly sought after. As I said, mainly because we are instinctively greedy and only look for the best possible outcome for our company by hiring the best.

    Right now on NBC, economists are discussing 'Where next for oil prices' as Opec cut their supply. Most likely, the price will rise, and generate more profit for the oil suppliers.

    Money does have its purposes though. In the olden days if I wanted to trade one tomato with Calvin for one apple we would simply exchange goods. Nowadays, through money, it is possible to allow several people to 'barter'.

    For example, if Calvin wanted an orange instead of a tomato, and Oliver wanted a tomato for an orange , then I could exchange a tomato with Oliver for his orange. I could then give the orange to Calvin for his apple. See how this could get very complicated? With the introduction of money, we can simplify the arising problems. I could give Calvin money for his apple, which he could then give to Oliver for an orange…

  4. CELINEon 17 Dec 2008 at 4:29 pm

    before we had currencies, things did not have a fixed value. the introduction of currencies also introduced fixed prices on things which only change with inflation or other economic factors.

    imagin a farmer back in the days where we did not have currency and fixed values on goods and services, then he could have made different prices for different people just due to preferences.

    there is a though: corruption, in switzerland there is a saying: one hand washes the other.. and it happens that, the CEO of Novartis gives the son of the CEO of Credit suiss a job.. and on the other hand Novartis decided that they willl take their money away from UBS and put it into CS.. wouldnt that also be corrution? but just because no money was involed it isnt?

    so what else did money bring with it??

  5. Wilhelm Non 17 Dec 2008 at 5:03 pm

    I found Nic's post pretty interesting, about us not having a shared currency because of narcissistic greed. As our currencies are no longer on the gold standard, all nations using a shared currency couldn't work. If a developing country decided they wanted some more money, and decided to just print some, it would spell disaster for the world. On the gold standard though, the value of the money is guaranteed, and a shared currency might work. There is no reason to do it though, as it would harm the self-correcting nature of different nations having various currencies (that are allowed to float).

    I don't think alternative currencies will work well, because money works on a system of faith. We have faith that one Chf is able to buy a candy bar because the government tells us it (Zimbabwe comes to mind though). Alternative currencies do not have this assurrance, so their value would be too unstable for more than the novelty value.

  6. Jenny Zimmermannon 19 Dec 2008 at 4:35 pm

    Reading Nic’s post was especially interesting because we have spent a great deal of our philosophy class this year discussing certain malaises of modernity, focusing especially instrumental reason. We are a part of what if often referred to as the “me-generation” that, from the definition, is considered to be very narcissistic and focused only on ourselves and our personal desires. This view of humanity is what Nic said is keeping us away from a single global currency. While I had never thought to approach economics from a philosophical perspective, I see where it applies and do, in fact, agree. China controlling its exchange rate, for example, may be seen by other nations (America) as selfish because they are not allowing trade between their nation and other nations balance itself out, but controlling it to increase their profits (lower valued currency = exports are cheaper).

    Similar to what Palmi said, I have often opened my wallet and looked at the yellow, orange, green or blue (not all green in Switzerland) papers and wondered how these little slips came to be worth so much. Modern society has heightened the importance of money so much that it is often viewed as a need instead of a want. Of course it is a highly useful medium to trade, as Nic so fabulously described, however, its true value is often forgotten. What I mean by this can also be explained using apples and oranges. Farmers has work hard for what they produce (sew it, tend to it, harvest it, etc), therefore, when they are trading it (an apple, let’s say) for a another (an orange) they are going to really think about whether getting that orange is really worth all the work that went into producing that one apple. Naturally, people do work hard for money, but it is often cast away as “oh that’s just 5 francs, no problem” or “that’s just 20 francs, that’s not so much”.