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Money is meaningless

I’ve got a new theme building about money being worthless, useless, rubbish, a waste of space … you name it.

Not real money of course, but money as a concept.

It no longer works in the modern world.

Money is meaningless.

It was created for the physical exchange of trade, goods and services. Today we do little physical exchange.

When money was created, it was to replace gold and bartering.

You see something you want, you pay for it … with notes and coins backed by the realm, the nation’s banks, the governments and anyone else in officialdom.

That’s how we created trade.

And it’s been good for the past half a millennia.

But the world is changing.

We are moving from direct to virtual, from physical to electronic, from hand-to-hand to device-to-device.

As we do this, money becomes meaningless.

That is why we are getting rid of cheques.

It is why cards – as in credit and debit cards – are rapidly morphing into mobile wallets and wireless devices.

It is why card companies and others have declared a war on cash.

We want to get rid of money, because money is meaningless.

Money is no longer relevant in a digital world.

In a digital world, we just exchange bits and bytes, and money is far less relevant when goods and services are being exchanged as bits and bytes.

This is because bits and bytes are just virtual debits and credits, with no physical movement of money involved.

As soon as money becomes bits and bytes, it loses its meaning because you can trade for anything with a virtual exchange.

You can exchange for physical goods – order TVs, fridges and cars online; you can trade with electronic goods – download music, films, books and software; and you can also trade lots of other things such as knowledge, ideas and credits.

This is why P2P lending and payments has become mainstream – because you are just exchanging bits and bytes of virtual credits and debits.

It is for these reasons that Facebook’s activities in virtual credits is important, just as other experimentations with virtual goods and services has been notable, such as those of Second Life in the virtual world and QQ in China.

What these experimentations are making me realise is that money is becoming meaningless, as it’s now all about virtual debits and credits of exchange for value.

So it’s what’s valuable that’s meaningful, not money.

The value is in getting knowledge, ideas, creativity , advice, support, inputs and outputs … oh yes, and even goods and services.

I’m going to expand on this theme so this is just a marker that builds upon ideas started last year.

And why is this important to banks?

It’s important to banks because the traditional bank guarantee has been to keep our money safe and secure … that guarantee should now be to purely keep our data safe and secure.

After all, it is just bits and bytes.


About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Gottfried Leibbrandt

    Chris, I know Balatron means Joker, so I’ll assume the above is in your role as court jest. If you really are serious, than I will have whatever you’re smoking ’cause it must be good.
    “As soon as money becomes bits and bites it becomes meaningless?” Hellooo! 99.9% of money is already bits and bytes stored on bank computers. “Money is meangless in a Facebook world”. Are you going to cater for old age with facebook credits, or by storing a cache of digital movies?
    We just had the biggest crisis in recent history over the potential breakdown of money.
    Oh, and if you still have doubts, here is book I can highly recommend: When money dies, by Adam Fergusson, about the Weimar hyper-inflation; all about money becoming menaingless, and not pretty.

  • Chris Skinner

    Mr Leibbrandt
    Glad you liked it!
    Money – as a physical exchange mechanism – is meaningless.
    It’s the accounting of value that is meaningful.
    I could save for my pension by buying gold nuggets, investing in oil barrels, and yes, even saving millions of Facebook credits if that’s what I deem to be of value.
    All of these goods and services are means of exchange of value between money and commodities and now virtual currencies.
    I don’t think the global financial world will run on such mechanisms btw, as the financial world implies just that – it runs on finance.
    But another world is growing alongside this one that runs on data.
    The two are hybrid and, by not building a hybrid model of value management, banks are missing a trick.

  • Such is a very cunning plan, mr Skinner.
    The monetarist’s money is in a sense money an optical illusion, albeit a very persistent one.
    With increased speed of communication and the formation of many interest-based groups spanning the globe, the economy is slowly disentangling itself from several physical limitations.
    The differences in these limitations, time-delay and distance, have been traditional levers for the money changing business or cultivated pawnshops, but as these differences are gradually evening out the business models based on it are becoming increasingly vulnerable.
    A viable way forward is to disassociate uniformity from universality, and start offering a means for certified secure interoperability of value. Money is such an accepted means, stocks and stock options are as well.. but with the continuing growth in computing power community based bartering systems can be calibrated, even brand recognition and goodwill can be measured.
    As you indicate, it’s not so much that finance doesn’t work, but a slightly more abstract, more versatile interpretation is actualizing using the advances of information technology which will gradually undermine the mediating function money has.
    It’s going to take some effort, but as several technologies continue to show accelerated change, especially if they reach a level of adaptiveness and flexibility comparible with software such as next generation manufacturing, this may be sooner than later.
    Once e.g. carbon nanotubes are introduced in commodity goods making them effectively unbreakable, it is a matter of time before that is a common practise which basically puts an end to much of the planned obsolescence based market segments. Once carbon fiber stickers can be used to strengthen crummy houses, and solar cell paint is used for accumulating electricity.. these are transformational applications of technologies which already exist but are slightly too expensive for the moment.
    But they will end many current business model. It is only rigidity that leads to Schumpeter’s creative destruction.. Banks are better off facilitating the future instead of fighting it.
    Take care

  • Gottfried Leibbrandt

    Chris, I think we are labouring under a misapprehension here concerning the term money. From your reaction, I gather you mean notes and coins. Whereas I take a broader definition of it including at least bank demand deposits and other comparable instruments (M1, M2 and all that stuff). By the way, since the crisis most of these are government guaranteed as well.
    We can debate whether physical notes and coin will become meaningless, although to date they have proven remarkeably resilient, and rumours of their death seem to be greatly exaggerated.

  • Banks, or more ideally consortia of banks, can play a much better role in the act of valuation.
    Of course money is not going away as an exchange medium, and much of the recent progress lies there, but i guess the case of the Eurozone says more than enough…
    Conceptually money is very close to a programming language, although more descriptive than instructive / prescriptive. Money as an artificial language has more or less tried to express uniform value yardstick, but it is terribly ambiguous as such.. especially for a contextualist. One euro in Italy is not the same as one euro in Holland.
    What banks can do, with using modern day techniques, is support the multiplicate ways of valuation, and that lies in an inversion of the current model. Using the wide spectrum of certified standards a dependency map can be constructed which essentially models the real worlds as far as commercial activity goes. The more information is available concerning the usage patterns the better interoperable interdepencies can be mapped out, as well as interchangeable degrees of freedom, with ‘money’ being the ultimate ‘interchangeable part’. As a result banks can map out the bottlenecks in the commercial landscape and advice companies on areas in need of innovation and inventions.
    Even de-facto standards, such as Farmville ‘farm cash’ is being used already which ought at least be an indication that it has become a valid means of valuation, eventhough the goods are virtual. The Chinese government blocked the use of virtual currencies in 2009.. that should say something. Especially considering their experience with big manufacturing outsourcing deals such as Foxconn and Flextronics.
    This is treading on the domain of GS1 and ISO, and even Verisign, but it would be a pity to not engage on this route.
    It’s not that banks cannot engage in increased security and defensive legal wrapping, but they should do both.

  • Chris –
    As I tweeted yesterday, I agree with you that the way in which we perceive money changes in the world of technology and the “cloud.” However, because I view the issue from an entirely different perspective, I can both agree and disagree with you and Gottfried on this one. (I did this in the WSJ on their privacy and transparency debate, too. I see those issues as two sides of the same ‘coin’ as well.)
    As a foundation to my comments here, I share two items. The first is in SWIFT’s Dialogue magazine for Q12011 is one of them. They were gracious to include some of my blogging from Sibos in Amsterdam on just this topic. A View from the CLOUD; The Shape of Finance starts on page 8 with a picture of me and my very bald head and perhaps a couple of interesting pages of text:
    The second item is from a more recent CLOUD post that continues this meme on currency as data:
    CLOUD Dimensions: Monetary Instruments Through the Lens of WHO, WHAT, WHEN, and WHERE (Part 1 – Checks)
    As the title indicates, I’ve got some other parts pending on this topic, which will lead to a larger whitepaper on payments. As I point out in the CLOUD Dimensions post, monetary instruments are just pointers to value. And, as Gottfried points out, coins and paper are indeed resilient mechanisms for pointing to this value. However, they are still simply ‘pointers’ to value, just like debit and credit cards or our accounts on banks’ computers. So, in my opinion, these cards aren’t being “replaced” by mobile. Mobile is simply another pointer to value.
    At a macro level, if you differentiate money from instruments, then I agree that things look different from a consumer point of view but also agree with Gottfried that the way we “aggregate” value (M1, M2, etc) are still vital functions. Functions, as he points out, that not only got out of whack in the latest crisis but now have governments backing them up.
    So from a CLOUD view, now that most money is indeed mostly digital as Gottfried points out, how can we better connect those bits and bytes in a meaningful way to avoid future crises and better assess value across communities, marketplaces and geographies?

  • I think I agree that the physical instrument known as ‘cash’ is increasingly meaningless… there are far easy ways to transfer ‘money’ today.