So something that struck both myself and my family recently on the news (video here) was the story about a woman who had slowly saved up $600 in cash in order to purchase herself an iPad which was to be her first computer. She was turned down at the counter and told that to purchase an iPad one must use either credit or debit. Cash was not accepted.
When prompted, Apple simply pointed to a line in their purchase policy. Customers may only purchase an iPad using debit or credit and they are limited to two iPads per customer. According to many, this approach is designed to foil those who would buy up fifty or sixty iPads with cash, smuggle them overseas, and sell them at ridiculous markups. As my father pointed out while pulling out a one dollar bill, Apple's policy can't possibly be legal. Written right on the money we use everyday is the phrase, "This note is legal tender for all debts, public and private." Let me highlight a few words there, "legal tender" for "all" debts. Something doesn't quite mesh there in my opinion. However, if you watched the video link above to the end you already know that according to the U.S. Treasury Dept it is legal to not accept cash.
Needless to say this is a strange development in our economy, where what is essentially imaginary currency is accepted where physical money is not. This brings two extreme situations to mind.
One, the idylic, utopian future portrayed in Star Trek where credit is the only form of currency. Money is obsolete, (much to the dismay of Khan) and greed is not as prevalent.
Two, a world of economic slavery where you must present deeply personal information in order to do any buying or selling. Orwellian in privacy and reminiscent of some of the events in Revelations.
It isn't just big corporations turning away from the greenbacks. People are started to expect cash to be rejected in some cases. Just last weekend when I was filming the Kennebec Dance Centre show I recall a woman asking if she had to write a check or if cash would be fine. (On the other end of the spectrum we had a woman ask if she could use debit). It's fascinating really how many ways humanity has come up with to organize wealth. Much of currency nowadays simply zips along through the tubes of the internet, hardly ever being used as actual cash. I've also always found it amusing that many bills are produced using the leftover scraps from that most American of apparel, blue jeans.
Apple did reverse their no-cash policy before the evening was over on the very day the story broke. They shipped the woman a free iPad and issued their apologies.
I don't know about you, but it kind of makes me want to be a pirate and only trust in my shiny doubloons. That or barter and pay the bills with chicken.
YES. I vote for a combination doubloon/chicken pay system.
ReplyDeleteSeriously, our money management is messed up. People gain and lose this imaginary money based on the whims of emotion (I really don't like the stock market).
The scary thing is that ALL money is imaginary. Up until about the great depression we were on the "gold standard": one unit of currency had some value in gold; and a country never had any more currency circulating than it did gold. But the Great Depression showed that that didn't work so well, so the US went of the gold standard. The US later returned to a modified version of the gold standard, and has been adjusting it ever since.
ReplyDeleteMoney today is not actually backed by any physical object of value. Money derives its value from the value people assign to it. This value is determined by how much money is actually in circulation. This money supply is determined largely by the government, which prints the money, but is powerfully influenced by the state of the economy (people need money to exchange goods. if we are producing more good this year than the last; we need more money to initiate that trade. But this also leads to inflation, which in small amount isn’t so bad, but large amounts are VERY bad.)
Money value is also determined by the something called "velocity" and the money multiplier. Let’s say I have ten dollars. I save one dollar, and spend 9. The merchant that received that dollar is going to save about 10% of that, and spend about 90%, etcetera. Ultimately that $10 has generated about $100 in the economy. If people lose faith in the economy and save more (such as in a depression or recession, as we are seeing now) that multiplier can change and have huge effects on how much cash is circulating (when consumers stop spending, suppliers stop making sales, and in turn can’t go out and spend their earnings. It’s a vicious cycle).
Finally, the value of money is also controlled by the perceived stability of that money. On an international scale, the dollar is considered very strong because people think that the dollar will still be around tomorrow, and the next day (because behind the dollar is the most powerful economy the world has ever seen, though China will surpass us very soon.) But if a country’s economy slows down or has problems (as we are seeing in Greece right now with the Euro) the international community will avoid using that country’s currency as a principal medium of exchange. It’s bad for a county’s citizens to have weak currency, but great for everyone else that might want to travel there. And a weak currency means a country can export goods cheaper than other countries (ahem, China).
That is a very condensed explanation of how money works, and I left out several things. But basically, money’s value is what people think it is- money is imaginary. That applied to hard cash and electronic transactions. None of it actually exists; it’s all numbers and perceived value.
Sorry if I dragged this on too long, when you start getting into it, the way money works is really fascinating.
If you ever get a chance, I recommend reading a book called “Naked Economics: Undressing the Dismal Science.” Or taking a macroeconomics class.
Also, I like the stock market, it’s one of the best ways for companies to raise capital quickly to grow and develop. It gives investors the opportunity to make money. It only becomes a problem when greed out-weighs sense and investors make foolish risks. (The stock market is a form of gambling, yes, but it is the most intricate, calculated and scientific gambling you will ever see.)
Hooray! I just realized I can post comments without a blog account!
Yeah I realize all money is imaginary. And I realize that there are some good things about the system. I'm the worst kind of commenter: I complain about something for which I don't have all the facts yet. :) Well, actually I'm not the worst: at least I want to learn. So thank you for helping to educate me.
ReplyDeleteGreat comment. You should comment on my posts too. :D
Incidentally, the vlogbrothers made a sweet video involving pants about the problems in Greece: http://www.youtube.com/watch?v=mEVqeaFHsHE
I still don't understand all of it, but the vlogbrothers (and you, Josh) help. :) It's all so abstract. I'll figure it out eventually.
I don't ever think much about how it all works because I can never get enough of the shit ANYWAY.
ReplyDeleteI'll check that link out in the morning :-)
ReplyDeleteIf you ever get a chance I recommend taking a Macroeconomics class. Avoid Micro- it's terribly boring.
It's a great system in the sense that it has allowed such incredible growth and development in the US and around much of the world; but it is also really disturbing to think that just a few tweaks in this grand mural can make the whole thing fall apart.