What would happen if all the money dissapeared?
August 2, 2009 2:14 AM Subscribe
What would happen if all the money in the world dissapeared? including electronic...
This post was deleted for the following reason: hypothetical filter - if you are trying to solve a problem, let us know what it is, otherwise this is just sort of a "let's talk about X" question -- jessamyn
We'd revert to a barter economy, where the well known double coincidence of wants would doom some 95% of the world's population to death. Here's how it would shake out.
Workers who inhabit the so-called third sector of the economy (services) would have almost nothing to barter. So these folks would die.
Those in the secondary sector (manufacturing) and primary (agriculture, mining, etc) would fare better, but even so many would die simply because of the double coincidence documented above - i.e., those with the food would have to want the metal or other goods you've got in order to do a trade.
Farmers and hunters would rule economic system, with a smaller number of hangers on (cobblers, blacksmiths, miners, etc) eking out a marginal and uncertain existence (that pesky double coincidence again).
So yeh, horrible times would result.
posted by Mutant at 2:32 AM on August 2, 2009 [3 favorites]
Workers who inhabit the so-called third sector of the economy (services) would have almost nothing to barter. So these folks would die.
Those in the secondary sector (manufacturing) and primary (agriculture, mining, etc) would fare better, but even so many would die simply because of the double coincidence documented above - i.e., those with the food would have to want the metal or other goods you've got in order to do a trade.
Farmers and hunters would rule economic system, with a smaller number of hangers on (cobblers, blacksmiths, miners, etc) eking out a marginal and uncertain existence (that pesky double coincidence again).
So yeh, horrible times would result.
posted by Mutant at 2:32 AM on August 2, 2009 [3 favorites]
I hate to say it but the ones most heavily armed would (still) win.
As a reference I give you a poem written in 1914
from The Keeper of Sheep by Alberto Caeiro
XXXIII
Poor flowers in the flower beds of manicured gardens.
They look like they’re afraid of the police…
But they’re so true that they bloom in the same way
And have the same ancient coloring
They had in their wild state for the first gaze of the first man,
Who was startled by the sight of them and touched them lightly
So that he would see them with his fingers too.
posted by at the crossroads at 2:43 AM on August 2, 2009 [2 favorites]
As a reference I give you a poem written in 1914
from The Keeper of Sheep by Alberto Caeiro
XXXIII
Poor flowers in the flower beds of manicured gardens.
They look like they’re afraid of the police…
But they’re so true that they bloom in the same way
And have the same ancient coloring
They had in their wild state for the first gaze of the first man,
Who was startled by the sight of them and touched them lightly
So that he would see them with his fingers too.
posted by at the crossroads at 2:43 AM on August 2, 2009 [2 favorites]
...I'm guess we dog walkers would be the first to croak.
posted by BostonTerrier at 2:47 AM on August 2, 2009
posted by BostonTerrier at 2:47 AM on August 2, 2009
Something new would quickly arise as money. Money, in its natural form, is just a commodity. If you know Bob will take wheat, you may also accept wheat in trade, because you know Bob has something you want. Then someone else may take wheat because YOU will.
Once enough of a market accepts a given commodity, the "network effect" kicks in -- each new person accepting a commodity increases the likelihood that others will as well. Once a commonly-accepted commodity becomes popular enough, it can serve as money -- the best historical types are typically metals, because they store a lot of value in a small space (they're hard to make), they're very durable, and they're 'fungible' -- any piece is the same as any other piece of the same purity and weight. But it doesn't have to be metal... Europeans typically used gold, silver, and copper, but seashells and beautiful rocks have served in other cultural backgrounds.
Money, at its core, is just the most marketable commodity, despite what governments have done to it in the interim. Even if every example of every existing government-backed currency disappeared tomorrow, something new would arise well before civilization collapsed. There would be enormous damage, to be sure: living standards would drop sharply, many types of jobs would evaporate, and people would die, but there would be no Dark Ages, with farmers tyrannizing the world.
And yes, I think dog-walkers would be very early against the wall, BostonTerrier. Sorry.
posted by Malor at 3:03 AM on August 2, 2009
Once enough of a market accepts a given commodity, the "network effect" kicks in -- each new person accepting a commodity increases the likelihood that others will as well. Once a commonly-accepted commodity becomes popular enough, it can serve as money -- the best historical types are typically metals, because they store a lot of value in a small space (they're hard to make), they're very durable, and they're 'fungible' -- any piece is the same as any other piece of the same purity and weight. But it doesn't have to be metal... Europeans typically used gold, silver, and copper, but seashells and beautiful rocks have served in other cultural backgrounds.
Money, at its core, is just the most marketable commodity, despite what governments have done to it in the interim. Even if every example of every existing government-backed currency disappeared tomorrow, something new would arise well before civilization collapsed. There would be enormous damage, to be sure: living standards would drop sharply, many types of jobs would evaporate, and people would die, but there would be no Dark Ages, with farmers tyrannizing the world.
And yes, I think dog-walkers would be very early against the wall, BostonTerrier. Sorry.
posted by Malor at 3:03 AM on August 2, 2009
(Basically, in real life, gold and silver coins would almost certainly return to circulation -- this would be extremely disruptive, but civilization would not collapse.)
posted by Malor at 3:05 AM on August 2, 2009
posted by Malor at 3:05 AM on August 2, 2009
A lot of people would ask "Hey, where did all the money go?" Some of them may even scratch their heads while asking the question.
posted by onya at 3:14 AM on August 2, 2009 [3 favorites]
posted by onya at 3:14 AM on August 2, 2009 [3 favorites]
Malor is right on here, although I'd say money isn't so much a commodity as a convention. Most of our money these days is virtual, very far removed from precious metals or even banknotes.
And since it is a social convention, what happens next would depend on what happened to the last one (did the governments fail? did all electronic devices go boom?) and how quickly people can rig up a new one.
Although "really bad things happening" is a safe bet, it's remarkable how quickly people can adapt to strange circumstances. I visited Brazil during a period of hyperinflation; there were all sorts of adjustments to keep a modern society going in absurd situations. Something like buying a house was an enormous hassle, but it could be done.
posted by zompist at 3:23 AM on August 2, 2009
And since it is a social convention, what happens next would depend on what happened to the last one (did the governments fail? did all electronic devices go boom?) and how quickly people can rig up a new one.
Although "really bad things happening" is a safe bet, it's remarkable how quickly people can adapt to strange circumstances. I visited Brazil during a period of hyperinflation; there were all sorts of adjustments to keep a modern society going in absurd situations. Something like buying a house was an enormous hassle, but it could be done.
posted by zompist at 3:23 AM on August 2, 2009
People would invent a new currency, almost immediately, in all likelihood. Might I suggest ChatDollars as a name?
posted by DoctorFedora at 3:24 AM on August 2, 2009
posted by DoctorFedora at 3:24 AM on August 2, 2009
I think after all the fighting stopped, we'd simply print out some money and start using it to simplify trade.
In February, there was a Metafilter post about alternative currencies. I seem to remember another one that was more recent, but can't find it now. It linked to some really interesting photographs of money that people created and used during the Depression. Some were issued by stores and local governments. Some were printed on paper, one was a seashell.
Here's a website that shows quite a few scrips that were used during the Depression. Of course, there was still money during the Depression, but it was not circulating. So for many people, there might as well have not been any money.
posted by Houstonian at 3:48 AM on August 2, 2009
In February, there was a Metafilter post about alternative currencies. I seem to remember another one that was more recent, but can't find it now. It linked to some really interesting photographs of money that people created and used during the Depression. Some were issued by stores and local governments. Some were printed on paper, one was a seashell.
Here's a website that shows quite a few scrips that were used during the Depression. Of course, there was still money during the Depression, but it was not circulating. So for many people, there might as well have not been any money.
posted by Houstonian at 3:48 AM on August 2, 2009
One thing to note is that stored and loaned wealth would disappear. All the monetary abstractions would be gone: bank accounts, loans, debts, options, etc.
So it would come down to real wealth. Physical artifacts, land, and specialized knowledge. People with real wealth would be able to parlay that into bartering power, while people who are rich only on paper would be paupers. Warren Buffet would be screwed. There would be a "new world order", insofar as the old rich would not be nearly so rich.
And then, about three days later, people would work out new currencies to facilitate trade. Personally, I'll accept Flax Script... but only if HC has signed it.
It's kind of like the hypothetical "what if all the guns disappeared?", with its answer, "people get stabbed for a few days until somebody machines a new musket."
posted by Netzapper at 4:04 AM on August 2, 2009 [1 favorite]
So it would come down to real wealth. Physical artifacts, land, and specialized knowledge. People with real wealth would be able to parlay that into bartering power, while people who are rich only on paper would be paupers. Warren Buffet would be screwed. There would be a "new world order", insofar as the old rich would not be nearly so rich.
And then, about three days later, people would work out new currencies to facilitate trade. Personally, I'll accept Flax Script... but only if HC has signed it.
It's kind of like the hypothetical "what if all the guns disappeared?", with its answer, "people get stabbed for a few days until somebody machines a new musket."
posted by Netzapper at 4:04 AM on August 2, 2009 [1 favorite]
And yes, I think dog-walkers would be very early against the wall
Depending on how many dogs you had in your custody at the time and whether you had enough salt handy to preserve them.
posted by biffa at 4:12 AM on August 2, 2009 [1 favorite]
Depending on how many dogs you had in your custody at the time and whether you had enough salt handy to preserve them.
posted by biffa at 4:12 AM on August 2, 2009 [1 favorite]
I disagree that there would be a mass extinction of services people, because they still have something to trade- their service. They just would be paid in bread, or something. Investment bankers though, would find it tough.
posted by titanium_geek at 4:25 AM on August 2, 2009
posted by titanium_geek at 4:25 AM on August 2, 2009
So, um, you do realize that this is impossible, yes? Money is an idea. You can't get rid of it without getting rid of the very idea of a medium of exchange.*
If it were a commodity, you could do a thought experiment about having it all disappear overnight. Like, for example, you can do a thought experiment about what would happen if, overnight, all of the rice in the world simply disappeared. People could still know what rice is, even if there weren't any, because rice is a real thing in the world.
But money really only exists in our heads. Sure, we keep records of it using things like currency and electronic transaction accounts, but those only mean what a sufficient number of people agree that they mean. So the only way that money can disappear, for real, is if everyone, the world over, suddenly lost the idea of a medium of exchange. And because the idea of a medium of exchange is so damn obvious--humanity has been using either money or "proto-money" for about 100,000 years--that you'd really have to do a significant amount of violence to everyone's cognitive faculties for something like this to possibly work. But that kind of eliminates the whole point of the experiment, no?
In other words: don't be silly. You can certainly think about what it would be like if certain people/institutions lost a ton of money (that's called "October 2008" for those of who who are wondering), but you can't just single out money for an eliminative thought experiment the way you could an actual commodity.
This is what money is, not a commodity as Malor suggests. Zompist has the right of that one.
posted by valkyryn at 4:43 AM on August 2, 2009
If it were a commodity, you could do a thought experiment about having it all disappear overnight. Like, for example, you can do a thought experiment about what would happen if, overnight, all of the rice in the world simply disappeared. People could still know what rice is, even if there weren't any, because rice is a real thing in the world.
But money really only exists in our heads. Sure, we keep records of it using things like currency and electronic transaction accounts, but those only mean what a sufficient number of people agree that they mean. So the only way that money can disappear, for real, is if everyone, the world over, suddenly lost the idea of a medium of exchange. And because the idea of a medium of exchange is so damn obvious--humanity has been using either money or "proto-money" for about 100,000 years--that you'd really have to do a significant amount of violence to everyone's cognitive faculties for something like this to possibly work. But that kind of eliminates the whole point of the experiment, no?
In other words: don't be silly. You can certainly think about what it would be like if certain people/institutions lost a ton of money (that's called "October 2008" for those of who who are wondering), but you can't just single out money for an eliminative thought experiment the way you could an actual commodity.
This is what money is, not a commodity as Malor suggests. Zompist has the right of that one.
posted by valkyryn at 4:43 AM on August 2, 2009
Ok lots of interesting answers and it looks like two ways to read the question.
Assuming all the money disappeared, never to return then we'd definitely revert to what came before our current monetary system, a barter economy. This is a very common scenario described in undergraduate economics books (e.g., Mishkin's Economics of Money, Banking and Financial Markets is pretty good, but also look at Fetter's The Principles of Economics: With Applications to Practical Problems).
But if we'd like to discuss how something else would arise to replace our missing currency, the best place to look for understanding about what might happen would be financial history, to see what happened before.
Initially we'd have direct trade amoungst producers of goods - farmers and hunters primarily, with a few services sector participants trading what they could produce e.g., blacksmiths, etc. But over time some folks - merchants would emerge, whose business would not be creating the goods but transporting them from where they were produced to where they were consumed.
While they might accept payment in pretty much any other commodity which in turn could be traded on, over time they would begin to demand payment in specific commodities, historically this has been precious metals e.g., gold & silver but other commodities have been used by humans during economic history.
If things stopped there we'd have a relatively small global economy, with some bartering still going as well as some trade. However population pressure has a way of forcing folks to think up alternatives that will allow for growth. The system in place at this point wouldn't scale.
So what happened before? Well, we developed a banking system, and here's how it came about (briefly and at a very high level; this would be several lectures and a few hundred pages of reading in any reasonable economics class).
In the 1700s England, Netherlands, and many of the other European nations were very, very successful traders. But without a banking system the most successful merchants kept their precious metals either in their premises, in their homes or in a hole in the ground in the woods.
Yep, that's all they could do. Banks hadn't been invented yet.
So after a few decades of the mayhem that won't surprise anyone reading this, it was noted that some merchants never got robbed. They have very, very effective physical security. Some other the other merchants noted this, asked if they could store (deposit) their gold for safekeeping.
"Sure, for a fee" was the response. "Ok, Sir, here is your receipt noting the date and amount of gold stored. Please produce it when you want your gold back" . So we had the first component of the modern banking system - a representation of value, on some level a store of wealth. The receipt backed by gold.
Over time these merchants stopped doing whatever it was they previously did, started storing gold for a living from that point on called themselves Goldsmiths.
Second component started when folks started trading those receipts among themselves. It was easier if you owed a debt - that you intended to pay with gold stored - if you simply gave your receipt to satisfy your debt rather than visit the Goldsmith, withdraw the gold which, more than likely, was just stored again with the same Goldsmith.
So we started trading receipts. Second component of the modern banking system.
Third component started when Goldsmiths noticed their total stores of gold would regularly increase (England's GDP was consistently increasing), but people would withdraw very little.
Why would they withdraw their gold? They had no place to put it. Capital markets hadn't developed yet (we needed to invent a banking system first) so The Goldsmith (although at this point folks were indeed now calling them banks) was the only place to put the wealth.
So the Goldsmiths, that they could print more receipts than they had gold. This worked for the Goldsmiths, who in that act defined moral hazard; they were getting paid to issue receipts, and if they issued more receipts than they had gold, what was the worst that could happen?
Well, all sorts of bank failures for starters, as you might expect. But at the same time we saw the emergence of the modern banking system in the form of credit and borrowing activities for "creditworthy" customers. Folks now started getting paid to deposit their gold, with the bank earning the spread between borrowing and lending. Cheques were invented, as bankers (goldsmiths) sought to keep control of the gold for as long as possible.
So all we'd need at this point would be a regulatory system - Bank Charter Act of 1844 is probably the best place to being reading if you are interested in learning the foundations of the modern regulatory environment - and we'd be right back where we started.
How long would this all take? Probably couldn't really answer, at the crossroads has a good point about military power - we just didn't have such large standing armies, even proportionally, the first time we created a monetary system.
And of course now we know what we're doing, and probably could design a better system from the outset. Does this mean we would do it differently if we could do it all again? I don't think so, as I've mentioned several times on MeFi we've got an inherent irrationality when it comes to money.
But regardless, the standing armies would clearly change the speed at which these events would progress.
Interesting question, no matter how you look at it.
posted by Mutant at 5:00 AM on August 2, 2009 [1 favorite]
Assuming all the money disappeared, never to return then we'd definitely revert to what came before our current monetary system, a barter economy. This is a very common scenario described in undergraduate economics books (e.g., Mishkin's Economics of Money, Banking and Financial Markets is pretty good, but also look at Fetter's The Principles of Economics: With Applications to Practical Problems).
But if we'd like to discuss how something else would arise to replace our missing currency, the best place to look for understanding about what might happen would be financial history, to see what happened before.
Initially we'd have direct trade amoungst producers of goods - farmers and hunters primarily, with a few services sector participants trading what they could produce e.g., blacksmiths, etc. But over time some folks - merchants would emerge, whose business would not be creating the goods but transporting them from where they were produced to where they were consumed.
While they might accept payment in pretty much any other commodity which in turn could be traded on, over time they would begin to demand payment in specific commodities, historically this has been precious metals e.g., gold & silver but other commodities have been used by humans during economic history.
If things stopped there we'd have a relatively small global economy, with some bartering still going as well as some trade. However population pressure has a way of forcing folks to think up alternatives that will allow for growth. The system in place at this point wouldn't scale.
So what happened before? Well, we developed a banking system, and here's how it came about (briefly and at a very high level; this would be several lectures and a few hundred pages of reading in any reasonable economics class).
In the 1700s England, Netherlands, and many of the other European nations were very, very successful traders. But without a banking system the most successful merchants kept their precious metals either in their premises, in their homes or in a hole in the ground in the woods.
Yep, that's all they could do. Banks hadn't been invented yet.
So after a few decades of the mayhem that won't surprise anyone reading this, it was noted that some merchants never got robbed. They have very, very effective physical security. Some other the other merchants noted this, asked if they could store (deposit) their gold for safekeeping.
"Sure, for a fee" was the response. "Ok, Sir, here is your receipt noting the date and amount of gold stored. Please produce it when you want your gold back" . So we had the first component of the modern banking system - a representation of value, on some level a store of wealth. The receipt backed by gold.
Over time these merchants stopped doing whatever it was they previously did, started storing gold for a living from that point on called themselves Goldsmiths.
Second component started when folks started trading those receipts among themselves. It was easier if you owed a debt - that you intended to pay with gold stored - if you simply gave your receipt to satisfy your debt rather than visit the Goldsmith, withdraw the gold which, more than likely, was just stored again with the same Goldsmith.
So we started trading receipts. Second component of the modern banking system.
Third component started when Goldsmiths noticed their total stores of gold would regularly increase (England's GDP was consistently increasing), but people would withdraw very little.
Why would they withdraw their gold? They had no place to put it. Capital markets hadn't developed yet (we needed to invent a banking system first) so The Goldsmith (although at this point folks were indeed now calling them banks) was the only place to put the wealth.
So the Goldsmiths, that they could print more receipts than they had gold. This worked for the Goldsmiths, who in that act defined moral hazard; they were getting paid to issue receipts, and if they issued more receipts than they had gold, what was the worst that could happen?
Well, all sorts of bank failures for starters, as you might expect. But at the same time we saw the emergence of the modern banking system in the form of credit and borrowing activities for "creditworthy" customers. Folks now started getting paid to deposit their gold, with the bank earning the spread between borrowing and lending. Cheques were invented, as bankers (goldsmiths) sought to keep control of the gold for as long as possible.
So all we'd need at this point would be a regulatory system - Bank Charter Act of 1844 is probably the best place to being reading if you are interested in learning the foundations of the modern regulatory environment - and we'd be right back where we started.
How long would this all take? Probably couldn't really answer, at the crossroads has a good point about military power - we just didn't have such large standing armies, even proportionally, the first time we created a monetary system.
And of course now we know what we're doing, and probably could design a better system from the outset. Does this mean we would do it differently if we could do it all again? I don't think so, as I've mentioned several times on MeFi we've got an inherent irrationality when it comes to money.
But regardless, the standing armies would clearly change the speed at which these events would progress.
Interesting question, no matter how you look at it.
posted by Mutant at 5:00 AM on August 2, 2009 [1 favorite]
i love it that you all are giving so much thought to progressive economies
(or retro-gressive economies) without ever batting an eyelash at taxation.
posted by at the crossroads at 5:38 AM on August 2, 2009
(or retro-gressive economies) without ever batting an eyelash at taxation.
posted by at the crossroads at 5:38 AM on August 2, 2009
I disagree that there would be a mass extinction of services people, because they still have something to trade- their service. They just would be paid in bread, or something. Investment bankers though, would find it tough.
I've got this buddy, he works for a company which designs microchips for mobile phones.
How it works is the company has some money (either money saved from previous sales, or money borrowed either from a bank or money from investors), and they use that money to pay his wages while he and his co-workers design the next version of these microchips.
Later the microchip designs will be sold to manufacturers (in exchange for money), who will make physical chips and sell them to mobile phone manufacturers (in exchange for money), who will sell them to mobile phone companies (in exchange for money), who will sell them to consumers (in exchange for money).
Of course, my buddy isn't living from paycheque from paycheque - he's got money saved up. In the bank.
If money ceased to exist, my buddy would be in pretty big trouble.
posted by Mike1024 at 5:48 AM on August 2, 2009
I've got this buddy, he works for a company which designs microchips for mobile phones.
How it works is the company has some money (either money saved from previous sales, or money borrowed either from a bank or money from investors), and they use that money to pay his wages while he and his co-workers design the next version of these microchips.
Later the microchip designs will be sold to manufacturers (in exchange for money), who will make physical chips and sell them to mobile phone manufacturers (in exchange for money), who will sell them to mobile phone companies (in exchange for money), who will sell them to consumers (in exchange for money).
Of course, my buddy isn't living from paycheque from paycheque - he's got money saved up. In the bank.
If money ceased to exist, my buddy would be in pretty big trouble.
posted by Mike1024 at 5:48 AM on August 2, 2009
I would still be rich. How do you measure your wealth?
posted by weapons-grade pandemonium at 5:56 AM on August 2, 2009 [2 favorites]
posted by weapons-grade pandemonium at 5:56 AM on August 2, 2009 [2 favorites]
i'm crossing my fingers for a return to feudalism!
...time to go build my castle, lord knows i don't want to be a peasant!
posted by assasinatdbeauty at 6:14 AM on August 2, 2009
...time to go build my castle, lord knows i don't want to be a peasant!
posted by assasinatdbeauty at 6:14 AM on August 2, 2009
This thread is closed to new comments.
posted by 3mendo at 2:30 AM on August 2, 2009