Monetary Revolutions, Pt. 2.4 – What Is Money?

What Is Money?

Previously

In the previous article, here, we briefly examined the means and the history of governments corrupting their monetary systems which invariably corrupted the societies and cultures they are charged with defending.

Now, let’s make reasonable attempts to define this rather ethereal concept we call “money” by conducting a detailed examination of its purpose, qualities, attributes, characteristics, functions, and underlying philosophy.

A History Of Defining Money

For millennia, mankind has attempted to craft a solid definition of money.  At first blush, this should be a fairly straightforward endeavor (especially considering we use it every day). Unfortunately, such is not the case…

Circa 2,500 years ago, the ancient Greek philosopher, Aristotle, made good attempts at defining money.  He identified four attributes of good money – durable, portable, divisible, and rare (which he called “intrinsically valuable“).  While I am of the opinion that this initial list is inadequate, I think he took the most important step by starting the conversation. ^[1]

Author’s Note: Speaking of defining money, there is even a show called the “What Is Money” podcast, hosted by Robert Breedlove. ^[2] I recommend that anyone who has even a cursory interest in the concept of money listen to it.  By conducting long-form interviews with a broad range of guests, Mr. Breedlove has taken the deepest dive into the topic of defining money that I have ever seen.  Much like eastern philosophy attempting to define “the Tao“, (or “the Dao” or “the Way“), ^[3] something which should be so straightforward to define, money, has been one of the most elusive of topics ever tackled.  I give him credit for being so persistent and engaging in good faith efforts.  It is a worthy goal.

A Working Definition Of Money

In an attempt to provide a starting point for the conversation, I developed a working definition of “money”. It was my attempt at providing the correct and comprehensive (and seemingly at-odds) mix of inclusion, abstraction, and specificity.

My working definition of money:

“Money is an abstraction, a model, implemented as a psychotechnology, whose purpose is the fulfillment of the economic coincidence of wants (across both space and time) via an intermediating asset, that can be implemented via any tangible or intangible thing provided that thing has the following nine attributes and characteristics of acceptable, divisible, fungible, portable, reliable, scarce, controllable, opportunity costed, and verifiable, which results in the emergent functions (in order) of storehouse of value, medium of exchange, and unit of account, and ultimately serves the metaphysical, financial, temporal, dimensional, and linguistic function of universal translator.“

OK, that’s a mouthful and a lot to chew on… So, let’s break this definition into digestible sections.

Author’s Note:  This (rather wordy) working definition of money was developed by me solely.  Any deficiencies and inaccuracies are entire my own and should not be attributed to anyone else. Anything that I got right should be attributed to the long list of wonderful people who have positively influenced my thinking on the matter.

Implementation

“Money is an abstraction, a model,
implemented as a psychotechnology,…“

Expansion: 

For millennia, physical gold (and silver) had been the primary composition of money for many governments.  But, not just any gold could been used; it had to have certain characteristics such as purity (“fineness“), weight, dimensions, emblems (pictograms), etc.  Thus, when a gold coin had all of these attributes, it was traditionally called “money”.
What came along with the label of money was a way for us to think of this physical token (coin).  That way of thinking falls under the heading of psychotechnology (which we covered here). ^[4]
Individuals who used gold coins each had subjective value that they placed on these tokens.  Those who bought physical goods and services and paid for them with gold placed more subjective value on the purchased items than the gold coins they used to pay for them.  On the other side of the trade, the ones who sold those physical goods and services for gold coins, placed more subjective value on the money as an intermediating asset than the items which they sold.  Counterintuitively, this truly is a “win-win” scenario because each side had an increase in perceived value because they voluntarily were able to trade one thing of lesser subjective value for another thing of greater subjective value.

Thus, the gold coins were used as psychotechnology, a model or mental framework, because of the way that they were able to facilitate a trade between two people.  In both cases, the gold was a means of transferring subjective value between parties.

Monetary Note: I could have two gold objects (one gold coin and one gold nugget), each containing exactly one troy ounce of gold. The difference between the two is that the gold coin has acceptable and desired attributes (such as purity and geometry or specific dimensions) while the gold nugget has poorly defined or unknown characteristics (composition and no apparent geometry). In a gold standard society, only the gold coin would be accepted as money while the gold nugget would not be accepted due to its unknown or undefined characteristics. In each case, they contain the exact same amount of gold yet only one would be considered money. Ultimately, what causes the gold coin to be considered money is not the physical material but that its form meets certain characteristics of the definition of money, which is a type of psychotechnology.

Purpose

“…whose purpose is the fulfillment of the economic coincidence of wants (across both space and time) via an intermediating asset and can be implemented via any tangible or intangible thing…“

Expansion: 

Before the ubiquitous utilization of money, barter (trading) was the primary means of transferring value amongst people and parties.  Unfortunately, without money, this caused a whole host of challenges that are inherent with barter.
Let’s pretend that you have a truck that you want to sell and I have eggs that I want to sell. Let’s also say that I want to purchase your truck. In this case, the only means that I have for purchasing your truck is with the eggs that I have. I might literally need to provide tens of thousands of eggs in order to bring enough value to the table to purchase your truck.
Unfortunately for both of us, I might not have the means to deliver that many eggs and you might not have the ability to store those eggs for the long term before you can exchange them for something else of value before they spoil. We could extend this scenario to almost any example of barter we can think of – shoes for paper, cows for flowers, books for concrete.

Ultimately, we are trying to create a condition called “coincidence of wants“, where we each have something that the other person wants and are willing to come to some agreement of qualities and quantities for exchanging those things.

And, the above hypothetical example only addresses physical products. What about services? How does one transfer services from person to person to person in a barter economy?

Hence an “intermediating” asset was developed in order to facilitate the economic coincidence of wants – money.

This intermediating asset allowed us the ability to store (in both space and time) the subjective value of just about anything provided both parties came to a voluntary and mutually beneficial agreement. Ultimately, this intermediating asset became a means to facilitate economic transactions and exchanges of both physical goods and services. This intermediating asset should not spoil (for transportation over time) and should be relatively portable (for transportation over space).

Attributes & Characteristics

“…provided that thing has the following nine attributes and characteristics of acceptable, divisible, fungible, portable, reliable, scarce, controllable, opportunity costed, and verifiable…“

Expansion: 

Any list of acceptable attributes and characteristics of money that I’ve seen in the past has always been inadequate and did not stand up to scrutiny.  After much searching, I had to develop my own list that addressed those inadequacies. While the above list of attributes and characteristics has drawn from others throughout history, I believe that this is the only one of its kind which brings all of them together. That said, I could be wrong…

These characteristics and properties are not binary (“all or nothing“).  Instead there is a range of values (either objective or subjective) for each of them.  Thus, just because something that we consider to be money doesn’t have 100% of all of these attributes and qualities doesn’t mean that people don’t find great value in using it as money.  And, that is the crucial lesson here – what the market considers to be dependable money doesn’t need to possess an all-or-nothing component. Instead, a range of acceptable properties can exist.

The most important lesson is this – what people value as money isn’t the thing itself (i.e. gold, silver, seashells, cigarettes, etc.). Instead, what they value the most are the qualities and characteristics of the thing.

Let’s go through the above list of nine attributes. Along with each attribute, I provide end notes on various indices, objective measures of each attribute as a measure of ability to be dependable money. If you have any curiosity, I recommend going through the end notes to see what my recommendations are for each monetary attribute.

Monetary Note: The list and descriptions of attributes and characteristics that I have identified below is of my construction.  Any errors, fallacies, and missteps are entirely my own and a good-faith effort to provide a comprehensive and gapless set of attributes that can reasonably be applied to any commodity which is used as dependable money.

Monetary Note: These indices are entirely my creation and my best efforts at providing concreteness and context for the reader. As clarified before, any missteps or mistakes are entirely my fault and should not be attributed at anyone else.

Acceptable:

A commodity which is ubiquitously used (accepted) within a free market as the intermediating asset for trading (a “medium of exchange“). If the majority of people use that money for transactions then it is highly acceptable (i.e. U.S. dollars). If few people use it then is is not acceptable. Ironically, in today’s society, gold would actually have very low acceptability even though it used to be highly acceptable in previous centuries.
Previously, gold and silver did a good job as materials to constitute money.  In fact, entire empires have been built on the fact that gold and silver coins from these empires were accepted far and wide beyond the borders of those empires.  We saw examples of these empires and the results of their hard money systems in a previous article which you can read here.

Historical Note: Historically speaking, on small regional scales, other commodities have been used as acceptable money, such as seashells, cigarettes, and carved stones.

Index Note:  See “Acceptability Index” in the End Notes, References, & Citations ^[5]

Divisible:

The ability for an individual unit of money to be subdivided into smaller and well-defined parts without undue burden or cost and without losing disproportionate value. In the case of dependable money, this normally means having smaller units, such as a $1 bill which can be “broken” into small units such as quarters, dimes, nickels, and / or pennies.
In the case of “divisibility”, the smaller the units that a money can be subdivided into then the greater its divisibility. As an example, the ability to divide a $1 bill into 100 smaller units (pennies) has reasonable divisibility.

Monetary Notes: Technically, a $100 bill cannot be subdivided into two $50 bills. In fact, “subdividing” (tearing or cutting) a $100 bill would actually destroy the monetary value instantly. Instead, that $100 bill must be exchanged in order to divide it in half without any degradation of value. The same could be said for all physical dollars.
Continuing this line of thinking, one could physically subdivide one troy ounce of gold into two one-half ounce pieces by physically breaking or cutting it in half, but that would come with a whole host of issues. Breaking that coin into two exact halves would be very difficult, and getting anyone to accept the two halves (with their obvious jagged edges) would be a challenge. Instead, that one troy ounce gold piece would have to be melted down and recast and stamped into two smaller gold coins. That would require effort and definitely be difficult and costly for the holder. Alternatively, one could find someone else who would be willing to exchange a one troy ounce gold coin for two half ounce gold coins.
For the record, one bitcoin can be subdivided perfectly into 100,000,000 parts without any damage or loss of value.

Index Note:  See the “Divisibility Index” in the End Notes, References, & Citations ^[6]

Fungible:

Think “interchangeable”.  Each unit of money is exactly the same as any other unit of money and can be interchanged with other unit easily without any loss of value or undue costs.  One troy ounce of gold has the same monetary value as any other one troy ounce of gold.  A single $100 bill is perfectly interchangeable with one hundred $1 bills. In the world of commodities (commodity trading), one bushel of wheat is exactly the same as any other bushel of wheat.
Conversely, some forms of money are not easily interchangeable. For example, one seashell might not be easily interchanged with another seashell. One “Rai stone” will probably not be easily fungible with another Rai stone. ^[7]

Index Note:  See “Fungibility Index” in the End Notes, References, & Citations below. ^[8]

Portable:

The ability for money to be moved from location to location without undue costs or difficulty.  This can be a function of its weight, density, and transportation costs.
Moving gold or silver across any significant distance has considerable risks and costs associated with it. Moving bars of gold would require secure transport, possibly necessitating security personnel, and some sort of guarantee of the purity of the gold bars upon delivery. In real world terms, moving gold and silver bars typically cost 0.1% – 1.0% of the value of the commodity. Thus, moving gold or silver one hundred times might actually cost the entire value of the stack. Not very cost efficient. This also does not address the risk of loss, which would result in 100% of the loss of value of the value.
In comparison, moving one hundred U.S. dollars electronically is very cost efficient and very low risk. It is one of the reasons why checks, bank wires, ATM’s, Venmo, and CashApp have become so popular as means of moving currency.

Monetary Note:  The ability to move money relatively easily with little friction (especially for trading purposes) is called “saleable over space“.

Index Note:  See “Portability Index” in the End Notes, References, & Citations below. ^[9]

Reliable:

Money which does not break or degrade easily over time. “Reliable” is also called “durable“. 
Seashells, goats, cigarettes, and dollars (which have all been used as money) all have a varying amount of reliability.  In the case of seashells, moving them around can cause them to break and reduce their reliability as a form of payment.  Goats require feeding and care, which can be costly.  Cigarettes are very fragile and always go stale.  And, eventually, goats and cigarettes perish.  As for physical US dollars, they subject to being burned, torn, worn down, or even outright lost.
Gold and silver were highly sought after due to the fact that they did not chemically, biologically, or mechanically degrade over time. While silver’s surface can oxidize slightly, it is literally only a couple of atoms thick and is easily wiped off. While gold and silver do not have very good mechanical properties (they have very low hardness and strength levels), they are both ductile ^[10] (especially gold) which allows it them to be formed, imprinted, bumped, and jostled without causing any breakage. This basic mechanical property of ductility has allowed gold and silver to retain their shape, recognizability, dependability for literally thousands of years. Quite an accomplishment!

Monetary Note:  We’ll talk about the U.S. Dollar’s lack of reliability by way of printing in the section “Scarce” below.

Monetary Note:  The ability for dependable money to retain its value (especially for trading purposes) over time is called “saleable over time“.

Index Note:  See the “Reliability Index” in the “End Notes, References, & Citations below. ^[11]

Scarce:

A money that is scarce has either an ultimate supply cap or can only be increased in supply by very small quantities with corresponding proportional costs.
For a real life example, in the case of gold, it has an inflation rate of about 1.5%. In other words, each year, new gold is added to the existing supply which is about 1.5% of the existing supply. For the most part, the limiting factors would be technology, cost of production, and physical availability of gold within the mines. In this case, on an annual basis, gold has a relatively high amount of “scarceness”. ^[12]
As for fiat currencies, new units can be created and added to the existing supply quite quickly and easily. Due to this ease of creation, it is not uncommon for fiat currency inflation rates to be double digits (of percent). ^[13] For the most part, governments can increase their fiat currencies electronically without any real opportunity costs. Thus, on an annual basis, fiat currencies have relatively low “scarceness“.

Index Note:  See the “Scarcity Index” in the “End Notes, References, & Citations below. ^[14]

Controllable:

“Controllable” is the ability for the owner of an asset to control where, when, how, and with whom that asset is traded, without interference. In this instance, what I call “controllable” I mean as individually controllable. Said another way, the individual owner of the money has the unencumbered ability to receive, retain, and remit (send) money without being compelled to move it nor onerous constraint of movement.
Currently, it is quite easy for the federal government and individual banks to confiscate our currency (both physical and electronic). Thus, making the U.S. dollar very low on the controllable scale.

Author’s Note: The concept of individually controllable gets into the entire topic of “logic of violence” which we covered in a previous article, here, in which I referred to the book “The Sovereign Individual“. For additional thoughts on the topics of individually controllable, logic of violence, and power projection, I highly recommend the book “Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin” by Major Jason P. Lowery (USSF).

Index Note:  See the “Controllability Index” in the End Notes, References, & Citations below. ^[15]

Opportunity Costed: ^[16]

For anyone who wants to add to the existing supply of money, there must be some sort of significant cost associated with the creation and addition to the current supply.  The cost to add to the existing supply of money must be so high that each individual must make a difficult and impactful decision as to what is in their best interest – either work to produce more more monetary units or expend time and effort on other endeavors.  For example, either mining for gold or working for someone else as an accountant or opening a restaurant.
For any commodity money which does not have an ultimate supply cap, then the cost of increasing the supply should be in proportion to the monetary value of the existing money supply. So, if the supply of monetary units is going to increase by 1% then the cost of increasing that supply should be equal to 1% of the total supply. For example, if the total market value of a currency in supply is $1T, then increasing it by 1% should cost ~$10B.

Author’s Note: For the record, I am not advocating for the above method of “proportional costs”, but if I were pressed to provide a solution in the absence of a money which does not have an ultimate supply cap (as bitcoin does of 21M) then this would be my proposed solution.

Author’s Note: “Scarce” and “opportunity costed” seem to be very similar but are different. In short, some entity could expend an inordinate amount of resources to bring a considerable amount of a scarce commodity to the market, thus creating a significant disruption to the monetary supply. In this case, the commodity would have a significant opportunity cost but low scarcity. This has happened with gold several times in history (i.e. Spain bringing gold from the America’s into Europe, the 1850’s California “gold rush”).

Monetary Note: The ultimate governor of opportunity cost is the “Second Law of Thermodynamics“. ^[17] In the context of money and economics, the Second Law states “There ain’t no such thing as a free lunch.” ^[18] We will explore the role of the Second Law in future articles.

Index Note:  See “Opportunity Index” in the End Notes, References, & Citations below. ^[19]

Verifiable:

“Verifiable” is the ability for the holder of the money to take reasonable steps to ensure that a unit of money is valid and has not been forged (counterfeited) without incurring unreasonable costs.
As a real life example, the U.S. Treasury Department and the Federal Reserve have actually done a good job of embedding effective and cost-efficient anti- counterfeiting measures within physical dollar bills.  This changes the “logic of violence” (which we talked about in a previous post here), thus making the expense of creating forgeries more costly than the benefits (when coupled with law enforcement and the judicial system as criminal deterrents).

Monetary Note: In the case of gold, there have been a variety of methods for determining if a gold coin or bar is valid. ^[20] In all cases, these are relatively costly methods in time, material, and capital.

Index Note:  See “Verifiability Index” in the End Notes, References, & Citations below. [21X]

Chermatistics Index:

“Chrematistics” is the economics study of money. ^[22] As mentioned above, when considered for monetary purposes, the market does not value the underlying commodity itself; instead it values the monetary properties of the commodity.
As a result, I have made best attempts to try to devise a contextually appropriate and objective measure of these nine monetary attributes in combination. Consequently, we could calculate just how much something can be considered dependable money by combining all of the above indices into a single measure which I call the “Chrematistics Index“. ^{[23] [24]}
As far as we have seen, these is no one thing which has ever fulfilled all of the above attributes and characteristics completely.  If anything, all things that we have called “money” in the past have existed on a spectrum of values.
For the record, I think gold did a good job as a form of money for millennia.  While it had most of the attributes and characteristics of good money, it did not have all of them and definitely not entirely for any one single attribute.
In future articles, we will explore the applications and implications of the Chrematistics Index.

Monetary Note: Even bitcoin, which I consider to be the “apex predator” form of money, does not have 100% of all of the above nine attributes.  That said, it is FAR superior to anything that we have ever used. Taking this a step further, bitcoin is actually the first true form of money.
What I find interesting and counterintuitive is that bitcoin is entirely artificial.  Thus, the first true form of money had to be engineered from the ground up.  Just like all psychotechnologies (which are all engineered from the ground up), bitcoin is a psychotechnology which is built upon other psychotechnologies (i.e. written language, software, math, encryption, accounting, algebra, and geometry).

Functions

“…which results in the emergent functions (in order) of
storehouse of value, medium of exchange, and unit of account…“

Expansion: 

If a commodity has the above mentioned attributes and characteristics then people will naturally gravitate towards it without any need for an external entity to compel them to use it.
A consequence of people using it en masse is that they will store their subjective valuations in that money, transforming it into a “storehouse of value” (or “store of value“). ^[25]
Conversely, in a free market, any commodity which does not retain its store of value for the individual has little purpose and is quickly abandoned by the market, ultimately making it worthless as an intermediating asset. In the absence of a free market, governments override this natural process by mandating (“by fiat” which translates from Latin to “order, authority, or decree“) that its currency be used regardless of what its citizens prefer, thus subordinating the philosophy, values, and ethics of the citizenry to that of the state.
Following store of value, the monetary functions of medium of exchange ^[26] and unit of account, ^[27] will emerge. I cover these functions in more detail in the “End Notes, References, & Citations” section.

Monetary Note: I specifically placed these functions in a specific order to emphasize their importance for hard money.

Philosophy

“…and ultimately serves the metaphysical, financial, temporal, dimensional, and linguistic function of universal translator.“

Expansion:

When two people engage in free exchange (without coercion), they are expressing their highest ideals, values, and priorities.  Restated simply, one party wants to buy a good or service and the other wants the intermediating asset (dependable money) in which to store value.  They each have made the rational determination that they are coming out ahead because of the exchange; a true win-win situation. This is in stark contrast to the popular culture which believes that all transactions are a zero-sum-gain, that one winner requires one loser.

These un-coerced free market interactions become the ultimate in communicating and exchanging value with each other. Both individuals are demonstrating that they value that particular exchange over all of the myriad of other possible exchanges (opportunity costs).

Economics Note:  This is one of the core aspects of the Austrian School of Economics; when two parties engage in free exchange, both individuals find greater value in the things that they received in the exchange versus the things that they originally owned.
For the nerds out there, this is why there is no such thing as “intrinsic value” since all value is subjective, not objective. The topic of “value” is an entire metaphysical treatise in philosophy that is far beyond the scope of this opening series. I recommend becoming a regular listener to the “What Is Money” podcast by Robert Breedlove for a deeper dive into this fascinating topic.

Ultimately, good money is able to collapse millions of differing values from millions of different people into a single, objective, and well-defined number (i.e. “dollars per gallon of gasoline” or “ounces of gold per house“).  As a result, no matter who the person is making a subjective value judgement, the number of hard money units is objective, easily recognizable, and definable.
Collectively, this makes dependable money a philosophical universal translator because it is a reflection of the values of not only the holder of the money but of the market overall. Dependable money is saleable across both space and time, making it a virtual time machine for carrying values across ages and a veritable map of values across three-dimensional spans.

Metaphysical Note:  You’ll notice that, in the working definition of money that I provided, nothing in the definition refers to central parties nor trust. One could even argue (as I do) that truly dependable money is completely independent of central parties and is entirely trust-less.

Defining Currency

We’ve used the term “currency” often in this opening series but have not defined it. Below is my best efforts working definition of currency:

“Currency is a credit-based (debt-based) system which
acts as a proxy of money yet is incapable of exhibiting
all of the qualities, attributes, characteristics,
and functions of good money.“

To the Treasury Department’s credit, they have done a good job of embedding effective and cost-efficient anti-forgery measures in a U.S. dollar bill.  This makes forgery more difficult for very low cost.  Thus, the logic of violence prevails.
Ironically, for all of its efforts of defeating forging, the Treasury Department is the ultimate forger of illicit currency because they (along with the Federal Reserve and the commercial banks) can legally increase the so-called “money supply“, (the number of credit units in the M1 and M2 money supplies) both directly and indirectly, ad hoc, into our financial system; yet we, the general public, cannot legally do so. Thus:

When the federal government inflates the
currency supply, it’s legal forgery.
Yet, if we inflate the supply, it’s illegal forgery.

From this, we have the ultimate in state arrogance and conceit with the popular culture accepting that:

It is perfectly acceptable when the
state increases the money supply…
but it’s bad when everyone else does it.

Metaphysical Note:  Unlike the definition of dependable money, fiat currencies require central parties and trust in order to maintain their proxy to dependable money.

Tying It All Together

With a working definition and basic understanding of money, we have a baseline with which to work. Using this working definition, we can begin to look at categories of money and to see which commodities are actually able to fulfill the definition fairly well and which will fail spectacularly.
Ultimately, if we have a reasonable and comprehensive definition of dependable money then we can use that as a filter for disqualifying ersatz (fake or inferior) money.

Next Steps

Based upon our working definition, in the next article in this series, we’ll take a more detailed look at the terms “hard money” (dependable money) and “soft money” (currency) so that we can understand the implications of each and why they are so important to our daily lives. You can read the article here.

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End Notes, References, & Citations

[1] Aristotle defines money

Brave search engine summary: “Aristotle defines money“
“Aristotle Defines Money
Aristotle defined money as a medium of exchange, a unit of account, and a store of value. He believed that money should serve as a universal value that allows for the exchange of goods and services even when the parties involved do not desire the same items at that moment. According to Aristotle, good money should possess four characteristics:

• Durable: It must withstand the test of time and not deteriorate easily.
• Portable: It should be easily transportable relative to its size and hold significant value.
• Divisible: It should be easily separable into smaller units without losing its basic qualities.
• Intrinsically Valuable: It should have inherent value independent of other objects and be rare.“

[2] The “What Is Money” podcast hosted by Robert Breedlove

This is one of my favorite podcasts of all time. As of the writing of this article, Robert has close to 600 hundred episodes and thousands of hours of long-form interviews with great guests from a wide range of backgrounds and expertise. The Brave search engine does a good job of summarizing Robert Breedlove’s show:

“The ‘What is Money?‘ Show is a podcast hosted by Robert Breedlove that explores the concept of money through deep conversations with various thinkers. The podcast aims to uncover the truth about money by discussing its many definitions and implications on civilization. It covers topics ranging from philosophy and history to technology and economics, often featuring guests who share their insights on how money influences different aspects of life. The show is available on multiple platforms including Apple Podcasts, Spotify, and Podbean, and it has gained a significant following with a high rating of 4.8 out of 5 based on 2,070 reviews. Additionally, the podcast has featured discussions on bitcoin and its potential to transform business and financial systems.”

Mr. Breedlove’s show can be found at the following links:

• “What Is Money” Podcast homepage
• “What Is Money” on Spotify
• “What Is Money” on PodBean
• “What Is Money” on YouTube

[3] “The Tao” or “The Dao“

“The Tao
“The Tao or Dao is the natural way of the universe, primarily as conceived in East Asian philosophy and religion. This seeing of life cannot be grasped as a concept. Rather, it is seen through actual living experience of one’s everyday being. The concept is represented by the Chinese character 道, which has meanings including ‘way’, ‘path‘, ‘road‘, and sometimes ‘doctrine‘ or ‘principle‘.
In the Tao Te Ching, the ancient philosopher Laozi explains that the Tao is not a name for a thing, but the underlying natural order of the universe whose ultimate essence is difficult to circumscribe because it is non-conceptual yet evident in one’s being of aliveness. The Tao is “eternally nameless” and should be distinguished from the countless named things that are considered to be its manifestations, the reality of life before its descriptions of it.”

Brave search engine summary: “The Tao“
“The Tao, often translated as ‘the Way,‘ is a central concept in Taoism, representing the natural order of the universe and the fundamental principle that underlies all existence. It is described as an enigmatic process of transformation that ultimately underlies reality, and it is considered to be the source of all things, the seed of the universe’s primordial purity, and the natural way of the universe.
The Tao is often characterized as something that cannot be fully described or defined in words, as it is considered to be ineffable and beyond the realm of differentiation and linguistic constraints. It is not a thing or a substance in the conventional sense, but rather a way of being that can be observed in the things of the world. Although it gives rise to all being, it does not itself have being.
In Taoist philosophy, the Tao is seen as the natural order that keeps the universe balanced and ordered, and it is related to qi, the essential energy of action and existence. The Tao is a non-dualistic principle, representing the greater whole from which all individual elements of the universe derive. It is also associated with the concepts of yin and yang, where every action creates counter-actions as unavoidable movements within manifestations of the Tao.
The Tao is not a name for a thing, but the underlying natural order of the universe whose ultimate essence is difficult to circumscribe because it is non-conceptual yet evident in one’s being of aliveness. The Tao is “eternally nameless” and should be distinguished from the countless named things that are considered to be its manifestations.
In the Tao Te Ching, the ancient philosopher Laozi explains that the Tao is not a name for a thing, but the underlying natural order of the universe whose ultimate essence is difficult to circumscribe because it is non-conceptual yet evident in one’s being of aliveness. The Tao is “eternally nameless” and should be distinguished from the countless named things that are considered to be its manifestations, the reality of life before its descriptions of it.
The Tao is also seen as the fundamental and central concept of Taoist schools of thought, and it is perceived as a natural order underlying the substance and activity of the Universe. Language and the “naming” of the Tao is regarded negatively in Taoism; the Tao fundamentally exists and operates outside the realm of differentiation and linguistic constraints.
In summary, the Tao is a complex and multifaceted concept that represents the natural order of the universe, the fundamental principle that underlies all existence, and the way of being that can be observed in the things of the world. It is a concept that is difficult to define and is often described through its relationship with nature and the principles of balance, harmony, and the natural flow of the universe.”

[4] psychotechnology

Psychotechnology (noun)
psy·​cho·​tech·​nol·​o·​gy -jē
plural psychotechnologies
1: the application of psychological methods and results to the solution of practical problems especially in industry
2: an application of technology for psychological purposes (as personal growth or behavior change)

“How Psychotechnology Changed Humanity Forever
Psychotechnology refers to tools that fit your mind and enhance how it operates.

[5] Acceptability Index

I have coined the measure “Acceptability Index” to express just how commonly a money is used as a purchasing medium (medium of exchange) on a scale of 0% – 100%.  I consider the Acceptability Index to be that portion of the global population which allows for payment in such a money (independent of the unit of account). For example, the U.S. dollar is used in approximately 54% of global trade invoices. Thus, its Acceptability Index would be 0.54.
Currently, considering its long history of usage of dependable money, gold ironically, has a very low Acceptability Index score because it is rarely used as a medium of exchange for purchasing assets and is rarely used as unit of account. In fact, the majority of the time that gold is bought and sold is when it is used as a hedging asset, a reserve asset, jewelry, or industrial use. Thus, rarely is gold used as a monetary asset (as an intermediating asset).
Currently, bitcoin’s Acceptability Index is also very low because, compared to global trade, it is rarely used as a medium of exchange to purchase assets. As a general trend, though, that is moving upwards very quickly and is probably higher than gold’s Acceptability Index.

Brave search engine summary: “global transactions of US dollars“
“U.S. Dollar Global Transactions
The U.S. dollar continues to dominate global transactions, with its usage reaching over 50% in January 2025, according to Swift data.
This highlights the dollar’s entrenched role in international finance and trade, despite ongoing discussions about potential alternatives. The dollar’s dominance is supported by its widespread use in global trade, foreign exchange transactions, and as a reserve currency.

• Dominance in global trade: The U.S. dollar is used in approximately 54% of global trade invoices, even when the U.S. is not directly involved in the transaction.
• Foreign exchange transactions: 88% of foreign exchange transactions involve the U.S. dollar, underscoring its liquidity and global acceptance.
• Role in international payments: In January 2025, the dollar accounted for 50.2% of all international foreign-exchange traffic sent via Swift, marking the highest figure since mid-2023.
• Reserve currency status: The U.S. dollar remains the world’s primary reserve currency, with 58% of total allocated foreign exchange reserves held in dollars as of mid-2024.”

As a proxy, we could use the percentage that a particular commodity is held “in reserve“. For example, the U.S. dollar (USD) is held as the global reserve currency at a very high percentage by many countries. In contrast, gold is held at a much lower percentage by countries (and their respective central banks). As for bitcoin, hundreds of institutions around the world hold bitcoin on their balance sheets, far in excess of gold’s balance sheet ownership (by count, not market cap). These institutions include countries (sovereign wealth funds, privately held companies, publicly held companies, pensions, insurance companies, family offices, ETF’s, and bonds).

Monetary Note: For the nerds out there, the true global reserve currency is the euro-dollar, which is a monetary layer on top of the U.S. dollar. The euro-dollar system has been around since the late 1940’s and is a result of the Bretton Woods system of World War II. It has created massive global price inflation and price volatility.
For context, the U.S. has the M0, M1, and M2 so-called “money supplies” (which are majority credit-based). U.S. banks lending to international financial institutions create the M3 money supply (which creates more credit). Those financial institutions then lend out those M3 dollars on a fractional reserve basis (which creates even more credit) which creates a de facto M4 money supply.
These M3 and M4 monetary layers are completely outside of the direct control of the Federal Reserve’s policies and requirements regarding reserve requirements and interest rates.

Monetary Note: For a partial list of institutions which hold bitcoin on their balance sheets, go to: BitcoinTreasuries.net.

[6] Divisibility Index

One could objectively measure the “divisibility” (the ability to create smaller units or fractions) of a money by the log₁₀ (“log base 10“) of the reciprocal of its smallest unit (for which I have coined the phrase “Divisibility Index“).  Higher is better.
For example, the U.S. dollar can be broken up into hundredths of a dollar, pennies, or 0.01.  It’s Divisibility Index would be the log₁₀ of the reciprocal of 0.01 (1 / 0.01)

log₁₀(100) = 2

Gold coins can only reasonably be divided into tenths (0.1).  It’s Divisibility Index would be the log of the reciprocal of 0.1 (1 / 0.1):

log₁₀(1/0.1) = 1

Bitcoin can be sub-divided into one hundred million smaller pieces with perfect precision and zero cost.  It’s Divisibility Index would be:

log₁₀(1/0.00000001) = 8.

When measured against other monies (or currencies) throughout history, bitcoin has a Divisibility Index that is several order of magnitude greater than anything else in human history. Bitcoin’s smallest unit is called a “satoshi” or “sat” (plural “satoshi’s” or “sat’s“)

Monetary Note:  There are some instances where gold can be subdivided into twentieths but this is uncommon.  In those cases we could say that the Divisibility Index would be log₁₀(20) = 1.3

Monetary Note: A “layer 2” solution for bitcoin is called the “Lightning Network” (“LN“). On the LN, satoshi’s can be further subdivided into thousandths of a sat, or milli-sat’s. Thus, effectively making bitcoin’s Divisibility Index = 11 ( log₁₀ (1 / 0.00000000001) ).

Monetary Note: In some instances, money could be represented as sea shells, cigarettes, or large and precisely cut stones.  One of the central problems with these materials as they cannot be reasonably sub-divided.  As a result, they were never broadly valued and adopted as dependable money.

Math Note: I deliberately chose to use the log₁₀ instead of the linear number because it is very easy to increase the divisibility by simply adding another “zero”, thus increasing the linear number by a factor of ten. Using log₁₀ dampens the effect while still recognizing the increase in divisibility.

[7] Rai stones

“Rai Stones
“A rai stone (Yapese: raay), or fei stone, is one of many large artifacts that were manufactured and treasured by the native inhabitants of the Yap islands in Micronesia. They are also known as Yapese stone money or similar names.
The typical rai stone is carved out of crystalline limestone and shaped like a disk with a hole in the center. The smallest may be 3.5 centimetres (1.4 in) in diameter. The largest extant stone is located on Rumung island, near the Riy village; it is 3.6 metres (12 ft) in diameter and 50 centimetres (20 in) thick, and weighs 4,000 kilograms (8,800 lb).
Rai stones were quarried on several of the Micronesian islands, mainly Palau, but briefly on Guam as well. The practice stopped in the early 20th century. Today around 6,000 large rai stones are outstanding on the island, and several can be seen in museums worldwide.
The stones were highly valued by the Yapese and used for important ceremonial gifts. The ownership of a large stone, which would be too difficult to move, was established by its history as recorded in oral tradition rather than by its location. Appending a transfer to the oral history of the stone thus effected a change of ownership.
Some modern economists have viewed Rai stones as a form of money, and the stones are often used as a demonstration of the fact that the value of some forms of money can be assigned purely through a shared belief in said value.“

[8] “Fungibility Index“

The “Fungibility Index” is the reciprocal of the cost (as a percent) of ensuring that two monetary units are actually the same (interchangeable).  Higher is better.
In the case of paper money, the cost of verifying that two bills are the same would come from combination of four factors:

• the cost of creating and embedding anti-forging measures into the money (i.e. special ink, holograms, embedded strips, special paper, etc.)
• the time associated with conducting the verification
• the weighted cost of law enforcement (i.e. U.S. Secret Service, banking regulations, etc.)
• the risk of accepting a fraudulent coin (or bill or token)

This might include holding the bill up to a light to verify watermarks and embedded strips. It could include using specialized markers containing specific chemicals for verifying the ink on the bill is authentic. Overall, this might take approximately 30 seconds to go through a verification of a couple of bills. Thus, we would multiply this time by the person’s hourly rate to derive a cost of ensuring that two bills are interchangeable.
Under normal conditions, there would probably be a great deal of variability of measuring this cost.  The “Verifiability Index” below could be used as a proxy.
Ironically, even though all U.S. dollars (i.e. a “One Dollar” bill) are supposed to be exactly the same and interchangeable, this is definitely not the case.  Only the Federal Reserve and the Treasury Department can introduce new dollar bills (physically or electronically) into the existing supply while if you or I did that then we would be incarcerated, even though we could produce physical bills which would be of the exact same quality and composition as to what the federal government produces.  Only dollars which were introduced by the federal government are considered legally valid.  This is in stark contrast to gold where any person could reasonably introduce more gold into the monetary system; the origin of the gold didn’t matter.  Hence, U.S. dollars are not truly fungible while gold coins are.

Author’s Note:  For anyone who recognizes the term “NFT” (from crypto), this stands for “non-fungible token“.  The fact that a “token” is “non-fungible” means that each individual piece / item / token is entirely individual and NOT interchangeable with any other token.  In fact, it is designed to be completely unique.  Hence, the name “NFT“, “non-fungible token“.

Brave search engine summary: “methods of verifying a dollar bill“
“Verify Dollar Bill Methods
To verify a dollar bill, there are several methods you can use. First, you can check the texture of the bill. Genuine currency is printed on special paper made of 25% linen and 75% cotton, which gives it a distinct texture. A real $1 bill should feel crisp and slightly rough to the touch.
Another method is to examine the bill under a light source. Hold the bill up to a light to check for a watermark, which should be a replica of the face on the bill. Additionally, look for a security thread that is embedded in the paper. This thread should be visible when held up to a light and may glow under ultraviolet light.
Color-shifting ink is another feature to look for. On bills of $5 or more, the denomination in the lower right-hand corner should shift colors when tilted. For example, the $100 bill has a blue ribbon with small, blue 100s that reflect when moved at an angle.
You can also use a counterfeit detector pen, which marks the bill with a color that indicates its authenticity. However, it is important to note that these pens can sometimes be fooled by more sophisticated counterfeits.
Lastly, check for microprinting, which is tiny text that is difficult to replicate. This can be found around the portrait and on the security threads of the bill.”

Index Note: While measuring the above costs directly is not possible, I will endeavor to estimate these costs some time in the future in order to create a reasonable proxy for the Fungibility Index.

[9] Portability Index

I have coined the term “Portability Index” as a means of attempting to measure the ease with which a token can be moved over a fixed distance.  The Portability Index is the log₁₀ of the reciprocal of the cost to move the money over some fixed distance (i.e. 1,000 miles).  Higher is better.
For example, the cost to move gold about 1,000 is about 0.1% – 1% (assuming the cost of transportation, security, and verification).  The Portability Index would be either:

• 2 = log₁₀( 1 / 1% ) or
• 3 = log₁₀(1 / 0.1% )

For our purposes, I’ll use 0.5% which gives gold a Portability Index of 2.3.
In the case of bitcoin, we know of instances of transactions which moved $1B for $5:

($5/$100,0000,000) = 0.000000005 = 0.0000005%. 

If we assume that the distance was 1,000 miles, the Portability Index for that bitcoin transaction is:

log₁₀(1/0.000000005) = 8.3

USD’s have a variety of costs associated with moving them depending on the method of movement. Moving dollars over an app such as Venmo or CashApp is essentially free (not counting the proportional cost of the phone and data plans, which are miniscule). Using a bank to wire money typically costs approximately $25 – $35. Paying cash for a coffee is essentially free (minus the risk of losing one’s wallet). The cost of paying for that same coffee using a credit card is approximately 1.5% – 2.5% for the vendor. Considering that the vast majority of retail transactions happen via credit cards, using a cost of 2% might not be unreasonable. Thus, that would give USD’s a Portability Index of:

( log₁₀( 1 / 1% ) = 1.70

[10] ductile

[11] Reliability Index

I defined the “Reliability Index” as the average number of years that money in possession can be stored and still retain 90% its value over time.  Higher is better.
This would fall under the general category of “cost of carry” which, in this instance, would be a combination of two factors:

• The cost of corruption (due to chemical changes, rot, burning, tearing, etc.)
• The cost of keeping the money secure from theft (in a safe or using security personnel)

What this really comes down to is how well one specific unit of money retains its cohesiveness and does not degrade in integrity over time. This Index is completely independent of the total number of monetary units in existence (which is for the “Scarcity Index” below). The Reliability Index is purely a function of the endurance of one specific unit of money that is already in storage / possession. For example, due to it’s chemical and mechanical properties, gold has very good reliability and does not degrade over time.
Security measures come in two types – active and passive. Active measures would be comprised of computer systems and security personnel while passive would be passwords / passphrases. Active measure require constant operational costs while passive do not require any costs other than possibly initial setup.
For fiat currencies, the physical forms would be paper money and coins. Coins are very durable and typically do not degrade over time while paper currency has a very short lifetime (approximately 6.6 years). That would mean a Reliability Index of approximately 0.66.
For the M1 and M2 money supplies, these are purely electronic. They require active measure to secure them, which is a cost. In addition, whenever banks “repurchase” those electronic dollars, they are essentially destroying them.
For gold and silver, they do not degrade over time but there are active security costs associated with storing them. If we assume 1% per year, that would (approximately) translate to a Reliability Index of 10.
With bitcoin, there are no active nor passive costs of keeping one’s own bitcoin. Simply holding bitcoin ensures that it does not degrade over time. In fact, the best method of retaining one’s bitcoin stock is simply to hold it (“hodl’ing” or “to hodl”). Ultimately, the Reliability Index of bitcoin would essentially be infinite.

Accounting Note:  If it costs to keep some asset, then that actually degrades the value of the thing.  As I have defined it, those costs would be counted against the asset.  Thus, when the costs have become 10% of the asset then we have reached the 90% mark.

Mathematics Note:  I could have chosen a percentage other than 90%.  I deliberately chose that one because of the idea that most of us would be irritated if we had our pay reduced by more than 10% (down to 90% of what it was previously).  It’s somewhat arbitrary but it was the best I could think of which would be meaningful to most people.

Accounting Note: For fiat currencies, that can sometimes be measured in months.  For some more stable currencies, that might be a few years.

Accounting Note: Bitcoin’s “value” when measured in USD is volatile. One could argue that, on a short enough time span, bitcoin has a rather low Reliability Index. But, taken over any time span longer than four years, bitcoin’s Reliability Index is rather high.

Accounting Note:  If it costs to keep some asset, called “cost of carry” (to hold in storage), then that actually degrades the value of the thing.  As I have defined it, those costs would be counted against the asset.  Thus, when the costs have become 10% of the (value of the) asset then we have reached the 90% mark.  So, even if the asset hasn’t lost any value (when measured in price), the storage costs have effectively lowered its value.

Monetary Note:  The ability for money to retain its value over time relatively easily with little cost is called “saleable over time“. A money’s saleability over time is affected by both its Reliability Index and Scarcity Index.

Index Note: This is different from the “Scarcity Index” (below) which is an indication of how many new monetary units are introduced, not a measure of the longevity of one specific unit.

[12] stock-to-flow ratio

Brave search engine summary: “stock to flow ratio“
“Stock to Flow Ratio
The stock-to-flow (S2F) ratio is a metric used to measure the scarcity of a commodity, particularly precious metals and cryptocurrencies. It is calculated by dividing the current stock (the total amount of the commodity that exists) by the annual production flow (the new supply of the commodity that is produced each year). A higher ratio suggests greater scarcity, which generally leads to a higher price.
The stock-to-flow model is a method of determining a resource’s scarcity. The stock-to-flow ratio is calculated by dividing the amount of stock by its annual production. The model is used to forecast the value of assets, with Bitcoin being a notable example. Bitcoin’s stock-to-flow ratio is determined by the predictable halving events that reduce the rate of new BTC entering circulation approximately every four years. This periodic reduction in supply contributes to the increasing scarcity of Bitcoin over time.”
Ultimately, the stock-to-flow ratio is the reciprocal of the inflation rate. So, if the monetary inflation rate is 2% (0.02) then the stock-to-flow ratio is 50 ( 1 / 0.02 ). In the case of bitcoin, its current inflation rate is 0.84%, which would give it a stock-to-flow ratio of 119 ( 1 / 0.0084 )

[13] high inflation currencies

Brave search engine summary: “list of currencies with high inflation“
“High Inflation Currencies
The countries with the highest inflation rates as of 2025 include Argentina at 193%, Syria at 120%, South Sudan at 107%, Palestine at 70.4%, and Zimbabwe at 57.5%.
These high inflation rates significantly impact the value of their respective currencies, leading to economic instability and reduced purchasing power.

• Argentina: The Argentine peso has experienced an inflation rate of 193%, making it one of the most inflated currencies globally.
• Syria: The Syrian pound has an inflation rate of 120%, contributing to severe economic challenges.
• South Sudan: The South Sudanese pound has an inflation rate of 107%, reflecting ongoing economic instability.
• Palestine: The Palestinian shekel has an inflation rate of 70.4%, indicating significant price increases.
• Zimbabwe: The Zimbabwean dollar has an inflation rate of 57.5%, highlighting the country’s continued struggle with hyperinflation.”

[14] Scarcity Index

The “Scarcity Index” is the log₁₀ of the stock-to-flow ratio. Basically, the mathematical reciprocal of the inflation rate. In math terms this would be expressed as:

log₁₀ ( 1 / Inflation Rate )

The U.S. dollar’s Scarcity Index (with an inflation rate of 5.6% and stock-to-flow ratio of 17.86) would be:

log10 ( 1 / 0.056 ) = 1.25

Gold’s Scarcity Index (with an inflation rate of 1.5% and stock-to-flow ratio of 66) would be:

log₁₀ ( 1 / 0.015 ) = 1.82

Bitcoin’s current Scarcity Index (currently with an inflation rate of 0.85% and stock-to-flow ratio of 119) would be:

log₁₀ ( 1 / 0.0084 ) = 2.08

Mathematics Note: Instead of using the log₁₀ function, I could have simply used the stock-to-flow number directly as the Scarcity Index. I chose to use the log10 function to dampen the effect. Some might disagree with this decision and they wouldn’t be wrong.

Monetary Note: In the case of bitcoin, that is more difficult to define due to the fact that even though bitcoin’s inflation rate was rather high in the beginning of its life, that inflation rate quickly dropped and its value (when measured in fiat currencies over the course of any four year period) was always moving up. As it stands now, bitcoin’s inflation rate is 0.84%.
Two factors prevail for bitcoin:  1)  Bitcoin’s inflation rate reduces by half every four years, 2)  There are known instances of people “losing” their bitcoin.  When combined, bitcoin actually has a deflationary rate (which is very difficult to measure directly but there are reasonable calculations).   In that case, bitcoin’s Scarcity Index is actually… infinite.

Monetary Note: We could argue that bitcoin’s supply growth has already turned negative, deflationary. At that point, the mathematical formula breaks down since it will also turn negative. At that point, we will be in new territory as we have never had a truly deflationary monetary supply. Some would argue that that is the ideal situation because it will require innovators and risk takers to entice the savers with very high yields in order to convince them to part with their savings which naturally increase in purchasing power without having to take any active steps or risk of investment.

[15] Controllability Index

In order for something to be considered “property” then it must be controllable entirely by the individual. Thus, the “Controllability Index” is how well one is able to control one’s money without it being confiscated or prohibited from being used to purchase goods and services.  Mathematically speaking, we could call this the inverse of confiscation or prohibition (1 – Confiscation Risk Probability).  The number would float between 0% and 100% where higher is better.

More broadly, this isn’t just about money that has been already confiscated; it is also about the risk of the remainder of our money being confiscated at any time.

One could argue that the vast majority of our money is definitely not under our individual control due to the fact that so much of our “money” (currency) is contained electronically in the banks and can be confiscated by the government at any time.  In addition, even physical cash is subject to “Civil Asset Forfeiture Act“, which allows the federal government to seize our physical currency without regard to our Constitutionally guaranteed 4th Amendment rights.

As it stands now, all electronic money (M1 and M2 money) can be confiscated not only by our federal government but by individual states and the banks where our financial funds reside.

Historical Note: A variety of fascists have distorted the definition of “ownership“. For example, in his seminal work, “The Ominous Parallels: The End of Freedom in America“, author Leonard Peikoff describes the attitude and philosophical stance of the Nazi’s, specifically the idea of property ownership. Adolph Hitler’s stance was that individuals could “own” assets but that ownership is in name only; the final arbiter of what could actually be done with those assets should only be determined by the state. Thus, making assets the de facto property of the state and those who are at the head of that state.

[16] opportunity cost

“Opportunity Cost
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the “cost” incurred by not enjoying the benefit that would have been had if the second best available choice had been taken instead. The New Oxford American Dictionary defines it as “the loss of potential gain from other alternatives when one alternative is chosen“. As a representation of the relationship between scarcity and choice, the objective of opportunity cost is to ensure efficient use of scarce resources. It incorporates all associated costs of a decision, both explicit and implicit. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure, or any other benefit that provides utility should also be considered an opportunity cost.“

“Opportunity Cost: Definition, Formula, and Examples
What Is Opportunity Cost?
Opportunity cost represents the desirable benefits someone foregoes by choosing one alternative instead of another. While opportunity costs can’t be predicted with total certainty, taking them into consideration can lead to better decision making.”

[17] The Second Law Of Thermodynamics

“The Second Law Of Thermodynamics
“The second law of thermodynamics is a physical law based on universal empirical observation concerning heat and energy interconversions. A simple statement of the law is that heat always flows spontaneously from hotter to colder regions of matter (or ‘downhill’ in terms of the temperature gradient). Another statement is: ‘Not all heat can be converted into work in a cyclic process.‘
The second law of thermodynamics establishes the concept of entropy as a physical property of a thermodynamic system. It predicts whether processes are forbidden despite obeying the requirement of conservation of energy as expressed in the first law of thermodynamics and provides necessary criteria for spontaneous processes. For example, the first law allows the process of a cup falling off a table and breaking on the floor, as well as allowing the reverse process of the cup fragments coming back together and ‘jumping’ back onto the table, while the second law allows the former and denies the latter. The second law may be formulated by the observation that the entropy of isolated systems left to spontaneous evolution cannot decrease, as they always tend toward a state of thermodynamic equilibrium where the entropy is highest at the given internal energy. An increase in the combined entropy of system and surroundings accounts for the irreversibility of natural processes, often referred to in the concept of the arrow of time.”

Science Note: One physicist, Ted Jacobson, has speculated that there is a deep and fundamental connection between entropy and gravity (which you can learn more about here. This is a very interesting speculation indeed considering that most physicists believe that entropy and gravity are two completely separate aspects of the universe.

[18] “TANSTAFL“: “There ain’t no such thing as a free lunch“

“No Such Thing As A Free Lunch“
” ‘No such thing as a free lunch‘ (also written as ‘There ain’t no such thing as a free lunch‘ or ‘There is no such thing as a free lunch‘ and sometimes called Crane’s law) is a popular adage communicating the idea that it is impossible to get something for nothing. The acronyms TANSTAAFL, TINSTAAFL, and TNSTAAFL are also used. The phrase was in use by the 1930s, but its first appearance is unknown. The ‘free lunch’ in the saying refers to the formerly common practice in American bars of offering a ‘free lunch’ in order to entice drinking customers.
The phrase and the acronym are central to Robert A. Heinlein’s 1966 science-fiction novel The Moon is a Harsh Mistress, which helped popularize it. The free-market economist Milton Friedman also increased its exposure and use by paraphrasing it as the title of a 1975 book; it is used in economics literature to describe opportunity cost. Campbell McConnell writes that the idea is ‘at the core of economics‘. “

[19] Opportunity Cost Index

The “Opportunity Cost Index” is the cost to add another unit to the existing supply expressed as a percent.  Higher is better. In the study of economics, this is related to “marginal cost of production“.
On some occasions, it might actually cost more than it’s worth to produce more supply.  Of course, in those instances, a free market would simply shut down operations until it became profitable again.
As an example, the “all in” costs of producing a physical U.S. dollar is 7.5 cents. Thus, the costs as a percent of the dollar denomination is anywhere from 7.5% for a $1 bill to 0.075% for the $100 bill.

For the U.S. dollar, using a straight average (across all dollar denominations), the Opportunity Cost Index would be:

(0.017) = 1.7%

For gold, its Opportunity Cost Index would be:

($1,276 / $3,500) = 0.36 = 36%

For bitcoin, the Opportunity Cost Index would be:

($48,671 / $120,000) = 0.41 = 41%

Monetary Note: Of course, this doesn’t count the cost of creation (and maintenance) for electronic dollars. For electronic dollars, when we consider the IT infrastructure costs, this would be fractions of a fraction of a penny, almost immeasurable. The more substantial costs would be those associated with operating the banks which hold the M1 and M2 money supplies. The costs associated with the maintenance of electronic dollars is addressed in the “Reliability Index” above. [11]

Monetary Note: Ultimately, the very low cost of creating new dollar bills means that the federal government can easily print (physically and virtually) new dollars. Thus, making its Opportunity Cost Index very low and a horrible rating.

Monetary Note: For the curious, bitcoin’s Opportunity Cost Index has always been high (relative to fiat currencies), making it a very good candidate as dependable money.

[20] Methods of evaluating gold’s purity

There are several well-established methods for evaluating the purity of a gold piece. These include:

• Literally dropping a gold piece on a solid surface and listening for the tone (hence the phrase “sound money“).
• Scratching a gold piece on a relatively rough surface stone (called a “touch stone“) so that the color of the gold can be evaluated for purity.
• A modern method of shining x-rays onto the surface of a gold piece in order to evaluate the contents of the piece.
• Melting down a gold piece to ensure that foreign substances are removed and verify that no foreign objects have been embedded (such as tungsten rods).

Brave search engine summary: “cost to print dollar bill“
“Cost to Print Dollar Bill
The cost to print a $1 bill varies depending on whether variable or total costs are considered. According to the Federal Reserve, the variable printing cost—which includes materials like paper, ink, labor, and direct overhead—is 3.2 cents per note.
However, this figure does not account for fixed costs, such as indirect manufacturing overhead, research and development, and administrative expenses.
When fixed costs are factored in, the total production cost for a $1 bill rises. In7.5 cents per note. This represents an increase from 6.2 cents in 2021 and 5.4 cents in 2017, reflecting inflationary pressures and rising production expenses over time.
The $1 bill is among the least expensive denominations to print, partly due to its simpler design and fewer security features compared to higher denominations like the $100 bill, which costs 9.4 cents to produce.
The U.S. government prints millions of dollar bills annually, with the FY 2025 print order for $1 bills ranging between **2.18 million and 2.76 million notes, valued at $2.18 million to $2.76 million.
The material composition of a dollar bill—75% cotton and 25% linen—also contributes to its durability and cost structure, allowing it to last about 4.8 years in circulation.“

[21] Verifiability Index

I defined the “Verifiability Index” is the reciprocal of the cost to verify the entire contents of a single wallet (or some other storage mechanism) expressed as a fraction (i.e. “one percent of the total value”). This is different from the cost of verifying just one individual token.
I have coined the term “Verifiability Index” as a means of attempting to measure this.  The Verifiability Index is the log₁₀ of the reciprocal of the cost to move verify the authenticity of a unit of money.  Higher is better.
For example, the cost to assay gold (to verify its content) is about 0.1% – 1%.  Thus, its Verifiability Index would be a range of:

log₁₀( 1 / 1% ) = 2 to log₁₀( 1 / 0.1% ) = 3

Index Note: In the case of bitcoin, this would be similar to the “Fungibility Index” and “Portability Index” above.  We know of instances of transactions which moved $1B for $5 ($5/$1,000,000,000 = 0.000000005 = 0.0000005%.  The Verifiability Index for that transaction is log₁₀ ( 1/0.000000005 ) = 8.3.

For bitcoin, the cost of verifying the contents of any bitcoin wallet is fractions of a percent. For the Lightning Network (LN), which is a “second layer” on top of bitcoin, the verification costs are even smaller (fractions of a fraction).

[22] chrematistics

“Chrematistics
Chrematistics (from Greek: χρηματιστική), or the study of wealth or a particular theory of wealth as measured in money, has historically had varying levels of acceptability in Western culture. This article will summarize historical trends.“

[23] Chrematistics Index

The Chrematistics Index is the product of all of the previously cited indices. Mathematically speaking:

Chrematistics Index =

(Acceptability Index) X (Divisibility Index) X (Fungibility Index) X
(Portability Index) X (Reliability Index) X (Scarcity Index) X
|(Controllability Index) X (Opportunity Cost Index) X (Verifiability Index)

Ultimately, the higher the number in the Chrematistics Index, the more a commodity might be considered as a valued form of money. While this is not absolute, it should be a good guideline on what a free market might prioritize as the best form of dependable money.

Author’s Note:  The basis for the idea of creating the “Chrematistics Index” came from the famous “Drake Equation“, which was presented at the First SETI Conference in 1961. ^[24] Much as the Drake Equation was never meant to quantify the number of alien civilization but to stimulate scientific dialogue, I developed the Chrematistics Index, not to provide exacting measures of “money-ness”, but to help others consider the factors that would cause people to value something as hard money buy providing reasonable measures of the attributes and characteristics of a particular commodity.
Also, you have probably guessed by now that where one form of money might excel in a specific property, another might fall short and vice versa.  I deliberately left some ambiguity in totality to reflect the fact that the market has flexibility in choosing what it considers the best money.  In the future, some enterprising economists might be able to provide better formulations and even provide mathematical constants for each index (similar to the constant used in the “Ideal Gas Law“).

Mathematics Note: You may have noticed that in some of the indices, I used the “log₁₀” function (“log base 10“) instead of the raw number.  That was to dampen the effects of some of the quantities, thus not allowing them to become the primary driver, i.e. the “Portability Index” is a more reasonable “8.3” versus “200,000,000“.

Index Note:  Some of the indices (“Indexes“) which I coined above cannot be measured directly and definitely cannot be provided with any real precision.  For the most part they are qualitative and not quantitative in nature.

Author’s Note: To make the Chrematistics Index more relatable and tangible, I will endeavor to calculate the indices of the USD, gold, and bitcoin at some time in a future article.

[24] Drake Equation

“Drake Equation
The Drake equation is a probabilistic argument used to estimate the number of active, communicative extraterrestrial civilizations in the Milky Way Galaxy.
The equation was formulated in 1961 by Frank Drake, not for purposes of quantifying the number of civilizations, but as a way to stimulate scientific dialogue at the first scientific meeting on the search for extraterrestrial intelligence (SETI). The equation summarizes the main concepts which scientists must contemplate when considering the question of other radio-communicative life. It is more properly thought of as an approximation than as a serious attempt to determine a precise number.
Criticism related to the Drake equation focuses not on the equation itself, but on the fact that the estimated values for several of its factors are highly conjectural, the combined multiplicative effect being that the uncertainty associated with any derived value is so large that the equation cannot be used to draw firm conclusions.”

[25] store of value

“Store of Value
A store of value is any commodity or asset that would normally retain purchasing power into the future and is the function of the asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved.
The most common store of value in modern times has been money, currency, or a commodity like a precious metal or financial capital. The point of any store of value is risk management due to a stable demand for the underlying asset.”

“Store of Value: Definition, How Assets Work, and Examples
Understanding a Store Of Value
A store of value is essentially an asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without deteriorating in value. In other words, to enter this category, the item acquired should, over time, either be worth the same or more.
Gold and other metals are stores of value, as their shelf lives are essentially perpetual. For investors, interest-bearing assets such as U.S. Treasury bonds (T-bonds) qualify, too, because they retain their value while generating income.
Milk, on the other hand, is a poor store of value because it will decay and become worthless.“

[26] medium of exchange

“Medium of Exchange: Definition, How It Works, and Example
What Is a Medium of Exchange?
A medium of exchange is an intermediary instrument or system used to facilitate the purchase and sale of goods and services between parties.
For a system to function as a medium of exchange, it must represent a standard of value. Further, all parties to the transaction must accept that standard.
In modern economies, the medium of exchange is currency. Gold has served as a medium of exchange throughout history.”

“Medium of Exchange
In economics, a medium of exchange is any item that is widely acceptable in exchange for goods and services. In modern economies, the most commonly used medium of exchange is currency. Most forms of money are [categorized] as mediums of exchange, including commodity money, representative money, cryptocurrency, and most commonly fiat money. Representative and fiat money most widely exist in digital form as well as physical tokens, for example coins and notes.”

[27] unit of account

Brave search engine summary: “unit of account definition“
“Unit of Account Definition
A unit of account is a standard numerical monetary unit used to measure and compare the market value of goods, services, and other transactions. It acts as a common denominator that allows for the uniform expression of prices, facilitating economic transactions, pricing, and accounting. This function of money enables the comparison of the worth of different items and simplifies financial reporting and decision-making processes.“

“Unit of Account
In economics, unit of account is one of the functions of money. A unit of account is a standard numerical monetary unit of measurement of the market value of goods, services, and other transactions. Also known as a “measure” or “standard” of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt.
Money acts as a standard measure and a common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is necessary for developing efficient accounting systems.”