You know what I want
June 27, 2017 9:05 PM Subscribe
Moneyness is an interesting blog about all things money. Interesting articles:
An interesting blog, but I found this paragraph from the second link kind of weird :
posted by Dr Dracator at 10:27 PM on June 27, 2017 [2 favorites]
A neat result of the transferability of cheques is that cheque payment systems are incredibly robust in the face of disasters and banking system shutdowns. Any direct transfer a bank deposit, say using a debit card or some other form of electronic fund transfer, requires that the parties to a payment to establish a communications channel with their respective banks. If there is a problem with either of the banks, the merchant, or the connection itself, then the transfer can't go through. With a cheque however, there is no need to communicate with one's banker. A cheque is created entirely without the bank's say-so. Anyone is allowed to receive that cheque, it being their choice to either cash it or pass it along. Which means that if the banking system is on the fritz, cheque payments can proceed.That's not neat, that's a major bug: nobody really knows if a transaction went through until the recipient tries to cash the cheque!
posted by Dr Dracator at 10:27 PM on June 27, 2017 [2 favorites]
It is however better than not being able to spend the money represented by the cheque at all & the recipient always has the option to discount the face value to account for the risk of the cheque bouncing...
posted by pharm at 12:34 AM on June 28, 2017
posted by pharm at 12:34 AM on June 28, 2017
Dr Dracator: "That's not neat, that's a major bug: nobody really knows if a transaction went through until the recipient tries to cash the cheque!"
Reminds me of the old joke about the man who opens a bar and on the third night closes his first $100 dollar tab. The customer hands him a $100 bill. The bartender says, "Wow, my first hundred. That's a real landmark, I'm going to frame that bill and hang it on the wall for posterity!" And the customer says, "Well, then do you mind if I write you a check instead?"
posted by chavenet at 4:36 AM on June 28, 2017 [11 favorites]
Reminds me of the old joke about the man who opens a bar and on the third night closes his first $100 dollar tab. The customer hands him a $100 bill. The bartender says, "Wow, my first hundred. That's a real landmark, I'm going to frame that bill and hang it on the wall for posterity!" And the customer says, "Well, then do you mind if I write you a check instead?"
posted by chavenet at 4:36 AM on June 28, 2017 [11 favorites]
Dr Dracator: That's not neat, that's a major bug: nobody really knows if a transaction went through until the recipient tries to cash the cheque!
The instant that someone accepts an endorsed cheque as payment, that transaction is complete, just as if they had accepted cash. It's the same problem as accepting most types of paper currency: Can you trust the issuer to meet their obligations? We've had stable currencies for long enough in much of the West - because we've had stable governments which have consistently met their obligations - that we've gotten used to not thinking about it. The need to evaluate the creditworthiness of the issuer is still there, though.
posted by clawsoon at 4:39 AM on June 28, 2017 [2 favorites]
The instant that someone accepts an endorsed cheque as payment, that transaction is complete, just as if they had accepted cash. It's the same problem as accepting most types of paper currency: Can you trust the issuer to meet their obligations? We've had stable currencies for long enough in much of the West - because we've had stable governments which have consistently met their obligations - that we've gotten used to not thinking about it. The need to evaluate the creditworthiness of the issuer is still there, though.
posted by clawsoon at 4:39 AM on June 28, 2017 [2 favorites]
Is there a connection between currency (as defined in the article) and money laundering?
posted by clawsoon at 4:40 AM on June 28, 2017
posted by clawsoon at 4:40 AM on June 28, 2017
clawsoon: "We've had stable currencies for long enough in much of the West - because we've had stable governments which have consistently met their obligations - that we've gotten used to not thinking about it. "
There's also a related issue, that of "legal tender," when a currency is defined by the state as the means of payment used for official transactions (such as tax payments). In those western countries the tendency is to conflate the two ideas (so that there is but one currency and it is legal tender) but in many places that's not the case (such as informal economies running on imported dollars while state payments are still in local currency) and with the rise of alternative currencies (like the ever-so trendy Bitcoin) the question looms again.
posted by chavenet at 5:34 AM on June 28, 2017 [2 favorites]
There's also a related issue, that of "legal tender," when a currency is defined by the state as the means of payment used for official transactions (such as tax payments). In those western countries the tendency is to conflate the two ideas (so that there is but one currency and it is legal tender) but in many places that's not the case (such as informal economies running on imported dollars while state payments are still in local currency) and with the rise of alternative currencies (like the ever-so trendy Bitcoin) the question looms again.
posted by chavenet at 5:34 AM on June 28, 2017 [2 favorites]
In some places (I'm thinking of Denmark here), legal tender obligates anyone doing business to accept that currency in cash (with some restrictions on reasonable denominations) as valid payment. So unlike with a cheque, you're not considering the creditworthiness of the national bank that issued the notes - you're legally obligated to accept it as payment regardless of your feelings on the value of said cash.
posted by Dysk at 7:03 AM on June 28, 2017
posted by Dysk at 7:03 AM on June 28, 2017
Any direct transfer a bank deposit, say using a debit card or some other form of electronic fund transfer, requires that the parties to a payment to establish a communications channel with their respective banks.
Isn't that what a check is?
The electronic systems now in place are faster and easier to keep track of, sure. but not really that different.
posted by ArgentCorvid at 7:15 AM on June 28, 2017
Isn't that what a check is?
The electronic systems now in place are faster and easier to keep track of, sure. but not really that different.
posted by ArgentCorvid at 7:15 AM on June 28, 2017
Note that the first linked post touches on legal tender.
posted by Chrysostom at 8:13 AM on June 28, 2017
posted by Chrysostom at 8:13 AM on June 28, 2017
ArgentCorvid: Isn't that what a check is?
If I'm reading correctly, an endorsed cheque can keep being passed along endlessly as a method of payment without ever needing a bank to be involved. It's not common now, but I've read of colonial cases where everybody knew that Mr. Bigmoney's cheques were good so they kept being passed from person to person for years as payment because regular currency was in short supply. The post says that cheques used that way are recognized in law as a form of currency.
posted by clawsoon at 9:00 AM on June 28, 2017
If I'm reading correctly, an endorsed cheque can keep being passed along endlessly as a method of payment without ever needing a bank to be involved. It's not common now, but I've read of colonial cases where everybody knew that Mr. Bigmoney's cheques were good so they kept being passed from person to person for years as payment because regular currency was in short supply. The post says that cheques used that way are recognized in law as a form of currency.
posted by clawsoon at 9:00 AM on June 28, 2017
Isn't that what paper money is? "Promises to pay the bearer, on request, the sum of..." was on every bank note in Hong Kong.
posted by Dysk at 9:04 AM on June 28, 2017
posted by Dysk at 9:04 AM on June 28, 2017
Unless it's on the gold standard, the payment is the paper money. It doesn't represent anything. The Bank of England website states that that "promise" means that the currency can be paid out in gold or coinage, even though that's no longer true. Interestingly, Hong Kong's new (ok, 2002) 10 dollar bill does not state that promise and instead says "Legal Tender in Hong Kong."
posted by R a c h e l at 9:10 AM on June 28, 2017 [1 favorite]
posted by R a c h e l at 9:10 AM on June 28, 2017 [1 favorite]
Oh, and I should credit the source for some of that (here, it's a seriously crappy and frustrating webpage that won't let you just stay on the content though)
posted by R a c h e l at 9:11 AM on June 28, 2017
posted by R a c h e l at 9:11 AM on June 28, 2017
I had a minor misconception there. I realize now the check is the message in the payment communications channel when banks are involved. But it can also be the payment, since you expect there to eventually be a bank involved at the end of the chain.
In the EFT world, there is only the the "move amount x to specific account y" message.
It's kind of touched on in the links, but I've always had a "neat." reaction to the similarity between checks, bank notes, and treasury notes.
posted by ArgentCorvid at 12:21 PM on June 28, 2017 [1 favorite]
In the EFT world, there is only the the "move amount x to specific account y" message.
It's kind of touched on in the links, but I've always had a "neat." reaction to the similarity between checks, bank notes, and treasury notes.
posted by ArgentCorvid at 12:21 PM on June 28, 2017 [1 favorite]
R a c h e l: Unless it's on the gold standard, the payment is the paper money. It doesn't represent anything.
There's an argument - let's kindly call it controversial - that what the money represents is a call on the assets backing it. Modern paper money is typically backed by government bonds at a central bank, etc. Some discussion here. I'm no expert on the idea, but I'm guessing that if the currency is backed by government bonds, the currency will drop in value more-or-less in sync with the price of those bonds as the government's ability to pay is called into question. So the money gives you a claim on the government's tax collection surplus (pre-loan-servicing), and when that goes away so does the value of the money you're holding.
That could, however, all be bullshit.
posted by clawsoon at 2:52 PM on June 28, 2017 [1 favorite]
There's an argument - let's kindly call it controversial - that what the money represents is a call on the assets backing it. Modern paper money is typically backed by government bonds at a central bank, etc. Some discussion here. I'm no expert on the idea, but I'm guessing that if the currency is backed by government bonds, the currency will drop in value more-or-less in sync with the price of those bonds as the government's ability to pay is called into question. So the money gives you a claim on the government's tax collection surplus (pre-loan-servicing), and when that goes away so does the value of the money you're holding.
That could, however, all be bullshit.
posted by clawsoon at 2:52 PM on June 28, 2017 [1 favorite]
There's an argument - let's kindly call it controversial - that what the money represents is a call on the assets backing it. Modern paper money is typically backed by government bonds at a central bank, etc. Some discussion here. I'm no expert on the idea, but I'm guessing that if the currency is backed by government bonds, the currency will drop in value more-or-less in sync with the price of those bonds as the government's ability to pay is called into question. So the money gives you a claim on the government's tax collection surplus (pre-loan-servicing), and when that goes away so does the value of the money you're holding.
That could, however, all be bullshit.
It's bullshit.
Modern Western paper money isn't technically backed by anything (that is, anything tangible). There is no asset underlying it for which it can be exchanged upon demand. That the value of the money moves in tandem with anything does not mean it represents a claim on that anything.
I feel like people making this argument literally do not grasp the simple historical fact that once upon a time you could actually go into a government office, hand over your paper currency, and walk out with its equivalent in gold. This is no longer the case in the developed world.
posted by praemunire at 5:37 PM on June 28, 2017
That could, however, all be bullshit.
It's bullshit.
Modern Western paper money isn't technically backed by anything (that is, anything tangible). There is no asset underlying it for which it can be exchanged upon demand. That the value of the money moves in tandem with anything does not mean it represents a claim on that anything.
I feel like people making this argument literally do not grasp the simple historical fact that once upon a time you could actually go into a government office, hand over your paper currency, and walk out with its equivalent in gold. This is no longer the case in the developed world.
posted by praemunire at 5:37 PM on June 28, 2017
praemunire: Modern Western paper money isn't technically backed by anything (that is, anything tangible).
Why the parenthetical about tangibles? (Can't intangibles be assets, too?)
posted by clawsoon at 5:40 PM on June 28, 2017
Why the parenthetical about tangibles? (Can't intangibles be assets, too?)
posted by clawsoon at 5:40 PM on June 28, 2017
You're looking for pound notes, loose change, bad cheques, anything.
posted by ogooglebar at 10:00 PM on June 28, 2017 [1 favorite]
posted by ogooglebar at 10:00 PM on June 28, 2017 [1 favorite]
« Older Where do the stairs at the bottom of the pool go?... | The music of nightmares Newer »
This thread has been archived and is closed to new comments
posted by dilaudid at 10:27 PM on June 27, 2017 [5 favorites]