Ben found a sticker printer! He says: "My stickers are money now. Swap me sweets for them!"
Do you swap your sweets?
Good money is hard to make.
If anyone can print loads, each one usually buys less. So good money is hard to make more of.
Ali pays you one scoop of ice cream as money. You want to keep it until tomorrow.
Where will you keep it?
Good money lasts.
At lunch, your ice cream is a puddle! Good money is still there tomorrow, and next year.
Next, Ali offers her piano as money. It is far too heavy to carry to the shop!
Cara moves across the sea. Posting her anything takes ages, and it can get lost. Good money is light and easy to send.
Ben tries to buy one sweet with his whole bicycle. The shop can't give change! Good money splits into small bits.
Ben sells you a shiny "gold" coin for ten sweets. You spot gold paint on his fingers.
What will you do?
Tap each thing, then tap its biggest problem as money.
A big kid grabs your jar of coins and runs off. You can't catch him!
Money can leak four ways.
Over time. Over distance. Grabbed by takers. Faked by cheats. Each leak drains your money battery.
Which way does each story leak? Tap a story, then tap its leak.
In World War Two, prisoners in camps used cigarettes as money. Even people who didn't smoke took them. Machine-made ones were all alike, so they were easy to check.
Then some prisoners rolled thin ones by hand. Everyone had to check each one, and the real ones vanished.
Source: The Economic Organisation of a P.O.W. Camp, R. A. Radford (1945) · Commodity money (Wikipedia)
Every kind of money leaks a little. The question is how much. Would you trust shells, gold or paper?
Shells, gold and paper face the tests in chapter 3.
🧠 What you learned
- Good money passes the tests
- Money can leak four ways
- No money is perfect
🎯 Question 1 of 12 · Easy
Why was Ben's sticker printer a problem?
Which test did the ice cream fail?
Why could Ali not use her piano as money?
Ben shows you a shiny "gold" coin. What should you do?
Which four ways can money leak?
A big kid grabs your jar of coins. Which leak is that?
Why is it handy when money splits into small bits?
Why were machine-made cigarettes good camp money?
Hand-rolled cigarettes started to be passed around. Why did that cause trouble?
Which of these fails the "easy to check" test?
Some money lasts, is light and splits well, but anyone can make loads. What is likely to happen?
Your jar of coins does not melt like ice cream. So can it never leak?
Well done!
You earned a badge: What makes money good?
Education, not financial advice. Never put in money you can't afford to lose.
👩🏫 Grown-up corner · 1 of 9
A list, not a law
These tests are a teaching list. Other lists exist. Wikipedia's article on money lists six: fungible (one unit swaps for another), durable, divisible, portable, acceptable and scarce. Every money scores well on some tests and badly on others. Yap's giant stones (chapter 1) are hard to carry, yet they worked because everyone remembered who owned each one.
👩🏫 Grown-up corner · 2 of 9
Prisoners and cigarettes
R. A. Radford was held in prisoner-of-war camps. In the journal *Economica* in 1945 he wrote that camp cigarettes worked as money. He listed their good points: all alike, reasonably durable and a handy size. Michael Saylor uses the same camp example.
👩🏫 Grown-up corner · 3 of 9
Money as a leaky battery
Michael Saylor argues that money is stored energy, so it should be judged like any other store of energy. He points out that power lines lose some energy on the way. An ordinary battery, he says, loses about 2% of its charge a month. In his view, the best money loses the least while it is kept and while it travels. Textbooks call keeping worth for later a store of value (chapter 1). The battery is a picture, not a measurement.
👩🏫 Grown-up corner · 4 of 9
Rubber raft, wooden ship
To compare moneys, Saylor pictures crossing the Atlantic. Fiat money, today's national money, is a leaky rubber raft you keep pumping up. Gold is a wooden ship that is heavy to steer and slowly rots. Bitcoin, he says, is a steel container ship.
👩🏫 Grown-up corner · 5 of 9
Gold's leaks, by his sums
Saylor adds up gold's leaks as about 1% a year to move it, plus about 2% a year from newly mined gold. That is roughly 3% a year, or half its worth in 22 years. These are his assumptions. Wikipedia says the world's gold stock grows by 1% or 2% a year, so 3% is the high end. He also says gold was the best way to store energy for thousands of years. Chapter 10 looks at Bitcoin's own weak points.
👩🏫 Grown-up corner · 6 of 9
Takers and bank promises
Saylor lists more faults in today's money. Confiscation: cash can be grabbed by someone with a gun. He says a bank or a government can also seize money kept in an account. Hypothecation (lending out against your deposit): more claims exist than coins. He admits a point for cash: a stolen bank card can be cancelled. Some countries insure bank deposits up to a limit (chapter 3). Chapter 4 shows how banks really create money.
👩🏫 Grown-up corner · 7 of 9
Not everyone wants a fixed supply
Saylor prizes money that is hard to make. The UK's central bank, the Bank of England, has a different job. The Government sets it a target of 2% rising prices a year. The US Federal Reserve also aims for 2% over the longer run.
👩🏫 Grown-up corner · 8 of 9
The case for a gentle rise
Economists disagree about whether prices should rise a little each year. Some say a gentle rise is a fair price for an economy that can adjust. Others say it quietly eats savings. Chapter 5's Grown-up corner explains why central banks aim for 2%.
👩🏫 Grown-up corner · 9 of 9
Hard money can still lose worth
In the 1500s, gold and silver poured into Western Europe from the Americas. Prices there rose about sixfold over 150 years, roughly 1.2% a year. Historians generally link this to the flood of metal, though other causes mattered too. It was slow, but it happened: even hard money can lose worth when a lot more of it turns up.