In Federal prison it is common to use books of stamps as currency. When I was there (95-99) it was around $5 per book of stamps. But it was more common to just give someone a commissary list (for the prison store) of items totaling the amount that they owe you.
For larger amounts, you'd have to have someone on the outside send money to the other person's people on the outside. These days, I suspect Bitcoin makes this much more efficient (for transfers happening outside the prison).
The novels Going Postal and Making Money by Terry Pratchett actually use this as a plot device; they're comic Fantasy books that roughly parallel the invention of fiat currency.
It goes from people starting to use stamps instead of coins because they were lightweight and "backed by the government" for postage, to people slowly accepting notes of credit which are backed by gold in a vault, to people realizing that the notes aren't really backed by the gold, so much as they are by the city-state's entire economy and potential to do useful work.
"What is the value of a coin compared to that of the hand that holds it?"
One of my favorite quotes from Making Money, discussing the true power of gold:
"It’s in the city itself. The city says: In exchange for that gold, you will have all these things. The city is the magician, the alchemist in reverse. It turns worthless gold into…everything."
I like the sentiment, but the actual thing used to cut people into the value of that economy has utility that can be priced in terms of that actual thing.
Imagine you lived in an economy where all you had to do was pay robots in the required electricity to gather the requisite resources (from somehow politically uncontested, infinite stores), assemble them, and deliver the product to you (or you to your destination, etc). The cost of storing that electricity, and transferring it to them would be accountable in electricity (the purchase of the manufacture of batteries in electricity, the electricity losses due to transformation and heat loss on the wires, etc).
Humans have thus far been really bad at amortizing the costs of the actual things they're transacting with. It may be impossible, but Bitcoin is the first system that seems to have attempted a solution.
"But there is no safety to anybody in taking these stamps any longer as money. They have not the slightest intrinsic value. They are not a legal tender. They will not be redeemed by anybody. They will not even pay postage. The public might just as well make wooden buttons or pebble stones a substitute for change as these stamps. They would have just as much value, and would answer precisely the same purpose, so long as the community chose to take them. But somebody must eventually lose very largely on these postage stamps, -- and the sooner their circulation is stopped the smaller the loss will be."
One wonders what the author would think of fiat currency, which is what the world uses to-day.
He would probably think much the same thing. "Greenbacks" (which is was what the currency printed by the US at the time was called) traded at a significant discount to gold when redemption of demand notes in gold was suspended. [0]
> "It must either be of intrinsic worth, like metal coins, or represent somebody's credit, -- that of the Government, of a corporation, or of private individuals."
I think there might be a subtext here that's not explicitly mentioned (it would have been understood at the time): the emergence of the electric telegraph.
> When people took them, they thought that they could convert them into this use at least, and that so long as letters had to go by mail they would have some value, and might therefore be safely regarded as currency.
The 1860s were right around the time that the electric telegraph was reaching worldwide popularity. So here in midst of the Civil War they have a fiat currency based on a commodity that is vulnerable to collapse in value, due to a disruptive technology.
The immediate threat to the currency is the USPS discontinuing acceptance of non-pristine stamps. And I think that's all the Times was intentionally referencing here. But I wonder if there was some understanding that stamps would make a terrible currency for this reason as well.
> It must either be of intrinsic worth, like metal coins, or represent somebody's credit, -- that of the Government, of a corporation, or of private individuals. The only intrinsic value of these stamps consisted in the fact that they might be used to pay postage.
This seems to be a contradiction. The stamp is a demand upon the credit of the US Postal Service to perform an act of value. What is the difference between that and a piece of paper which is a demand upon the credit of a bank to perform the act of handing you silver?
It's not. They explain that a stamp DID have intrinsic value, UNTIL (if you read on they explain) the credit of the USPS had been taken away by policy that a smudged/circulated stamp is invalid
I think the original authors point is, that the US Postal Service's performance of letter delivery, is not a denominated currency like ounces of gold or cents and dollars. But the real value of a stamp would be ounces of mail, and not only the act of delivery
From the article: "The rebel Congress has passed a law, authorizing the issue of five millions of dollars in copper coins, of the denominations of five, ten and twenty-five cents. "
Took me a while to notice this. If it were Portuguese, I would immediately notice it. It seems to me that English hasn't changed as much as Portuguese has.
This is what sounded old to me: "very gross wrong upon the people, in thus repudiating its own stamps".
The always fantastic NPR-produced podcast Planet Money had a recent episode on how the founder of a Bitcoin company dreamed up a new currency system based around the blockchain while he was locked up in prison. Pretty fascinating and a great way to be introduced to the concept of electronic currency.
I've always wondered whether you could buy and hold permanent stamps as an inflation-tracking alternative to treasury bonds. It'd be like using "IOUs for loaves of bread" directly as a currency: no matter what the monetary policy of the country issuing it, as long as it's still legal tender, inflation can't devalue it. Price of bread goes up, core CPI goes up, inflation goes up—but the IOU still gets you 1 bread.
[+] [-] clamprecht|9 years ago|reply
For larger amounts, you'd have to have someone on the outside send money to the other person's people on the outside. These days, I suspect Bitcoin makes this much more efficient (for transfers happening outside the prison).
[+] [-] lukejduncan|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] leggomylibro|9 years ago|reply
It goes from people starting to use stamps instead of coins because they were lightweight and "backed by the government" for postage, to people slowly accepting notes of credit which are backed by gold in a vault, to people realizing that the notes aren't really backed by the gold, so much as they are by the city-state's entire economy and potential to do useful work.
"What is the value of a coin compared to that of the hand that holds it?"
[+] [-] chiliap2|9 years ago|reply
"It’s in the city itself. The city says: In exchange for that gold, you will have all these things. The city is the magician, the alchemist in reverse. It turns worthless gold into…everything."
[+] [-] ftlio|9 years ago|reply
Imagine you lived in an economy where all you had to do was pay robots in the required electricity to gather the requisite resources (from somehow politically uncontested, infinite stores), assemble them, and deliver the product to you (or you to your destination, etc). The cost of storing that electricity, and transferring it to them would be accountable in electricity (the purchase of the manufacture of batteries in electricity, the electricity losses due to transformation and heat loss on the wires, etc).
Humans have thus far been really bad at amortizing the costs of the actual things they're transacting with. It may be impossible, but Bitcoin is the first system that seems to have attempted a solution.
[+] [-] mirages|9 years ago|reply
Those two books are among my favourites, but I was really not expecting that part to be true
[+] [-] armenarmen|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] rocky1138|9 years ago|reply
One wonders what the author would think of fiat currency, which is what the world uses to-day.
[+] [-] pmiller2|9 years ago|reply
--
https://en.wikipedia.org/wiki/Greenback_(1860s_money)
[+] [-] strictnein|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] peeters|9 years ago|reply
> When people took them, they thought that they could convert them into this use at least, and that so long as letters had to go by mail they would have some value, and might therefore be safely regarded as currency.
The 1860s were right around the time that the electric telegraph was reaching worldwide popularity. So here in midst of the Civil War they have a fiat currency based on a commodity that is vulnerable to collapse in value, due to a disruptive technology.
The immediate threat to the currency is the USPS discontinuing acceptance of non-pristine stamps. And I think that's all the Times was intentionally referencing here. But I wonder if there was some understanding that stamps would make a terrible currency for this reason as well.
[+] [-] afarrell|9 years ago|reply
This seems to be a contradiction. The stamp is a demand upon the credit of the US Postal Service to perform an act of value. What is the difference between that and a piece of paper which is a demand upon the credit of a bank to perform the act of handing you silver?
[+] [-] hammock|9 years ago|reply
[+] [-] kirykl|9 years ago|reply
[+] [-] LyndsySimon|9 years ago|reply
[+] [-] kensai|9 years ago|reply
From the article: "The rebel Congress has passed a law, authorizing the issue of five millions of dollars in copper coins, of the denominations of five, ten and twenty-five cents. "
The REBEL congress!! :D
[+] [-] forinti|9 years ago|reply
This is what sounded old to me: "very gross wrong upon the people, in thus repudiating its own stamps".
[+] [-] MentallyRetired|9 years ago|reply
[+] [-] kevinmannix|9 years ago|reply
Podcast link: http://www.npr.org/sections/money/2017/02/10/514577243/episo...
[+] [-] derefr|9 years ago|reply
[+] [-] RJIb8RBYxzAMX9u|9 years ago|reply
[0] https://www.bogleheads.org/wiki/Treasury_Inflation_Protected...
[1] https://www.bogleheads.org/wiki/I_savings_bonds
[+] [-] k1m|9 years ago|reply