Casino-Chip Society

[Jack Jones]

https://brettscott.substack.com/p/casin ... ss-society

My takeaway is that I'll continue to cash out some of my chips into gold and Bitcoin.

[Mark Leavy]

That article showed up on Hacker news a day or two ago. I thought it was extremely well written. Thanks for posting it here.

For what it's worth, I didn't conclude from the article that bitcoin was the opposite of a "casino chip". But, hey. At least it is outside the fractional reserve system. It sounds like you are thinking along the right lines.

[dualstow]

Jack, I read this article this morning, interrupted only by a planned safe deposit box visit. Thank you for posting.

I’m not clear on where t-bills rank, layerwise. While we trade them with button clicks on a computer, I don’t think of them as digital, and I don’t think the author does either. He writes:

you’re supposed to assume that PayPal is holding 100 dollar chips in its bank account somewhere (or at least something that can be easily sold for dollars, like US government bonds).

Later, he writes,

it’s tricky to demarcate an exact final layer to the monetary system. US dollar bonds, for example, are promises-for-future-US-dollars issued out (sic) by the US government, but they can be exchanged in a ‘moneylike’ fashion.

Physical cash is layer 1, that’s clear. Treasuries are not casino chips (2). Are they 1? Or is the author saying that there really isn’t an answer.

[Xan]

Jack, I read this article this morning, interrupted only by a planned safe deposit box visit. Thank you for posting.

I’m not clear on where t-bills rank, layerwise. While we trade them with button clicks on a computer, I don’t think of them as digital, and I don’t think the author does either. He writes:

you’re supposed to assume that PayPal is holding 100 dollar chips in its bank account somewhere (or at least something that can be easily sold for dollars, like US government bonds).

Later, he writes,

it’s tricky to demarcate an exact final layer to the monetary system. US dollar bonds, for example, are promises-for-future-US-dollars issued out (sic) by the US government, but they can be exchanged in a ‘moneylike’ fashion.

Physical cash is layer 1, that’s clear. Treasuries are not casino chips (2). Are they 1? Or is the author saying that there really isn’t an answer.

I think the "level" ship has sailed long ago. Level 1 was gold, and any of various currencies (bank "chips", or dollar bills, or whatever) would potentially trade at a discount depending how reliable the issuing entity was. Everything is a casino chip now.

[dualstow]

Yeah, I mean, this is the first pp-related article where printed paper money actually comes out looking fairly good, relatively speaking.
At the beginning of the article, a thought popped into my head like, Is he just saying it’s even easier to create digital bucks than to print? because I didn’t yet know where he was going. But, I do feel he went deeper than that.

[Xan]

I guess he would say that what we call "printing" isn't really printing. Only what comes out of the presses at the Mint counts.

[Kbg]

Jack, I read this article this morning, interrupted only by a planned safe deposit box visit. Thank you for posting.

I’m not clear on where t-bills rank, layerwise. While we trade them with button clicks on a computer, I don’t think of them as digital, and I don’t think the author does either. He writes:

you’re supposed to assume that PayPal is holding 100 dollar chips in its bank account somewhere (or at least something that can be easily sold for dollars, like US government bonds).

Later, he writes,

it’s tricky to demarcate an exact final layer to the monetary system. US dollar bonds, for example, are promises-for-future-US-dollars issued out (sic) by the US government, but they can be exchanged in a ‘moneylike’ fashion.

Physical cash is layer 1, that’s clear. Treasuries are not casino chips (2). Are they 1? Or is the author saying that there really isn’t an answer.

I think the "level" ship has sailed long ago. Level 1 was gold, and any of various currencies (bank "chips", or dollar bills, or whatever) would potentially trade at a discount depending how reliable the issuing entity was. Everything is a casino chip now.

Fundamentally money is a human representation of "value" based on "faith" in whatever "made" the money.

Personally, I think derivatives terminology is more helpful.

Level 0: A real thing (backed by nothing because it exists and is an entity...a cow, land, a hamburger, a car, etc.)

Level 1: The USD (backed by the USG in this case)

Level 2: A check (backed by banks that have a credit line to the Fed)

Level 3: An actual casino chip (backed by the organization (and it's creditors who may or may not have credit lines to the Fed)

Counterparty risk goes up to the degree the representation of the real thing is removed from the actual via intermediaries.

Faith begins at level 1, increasing faith is required the further up the derivatives scale you go.

The point isn't really whether I got anything above level 0 correct or not, the point is level of abstraction/intermediaries from something real introduces increasing risk which is the point I think the author was making (full disclosure...skimmed the article)

[Hal]

Fundamentally money is a human representation of "value" based on "faith" in whatever "made" the money.

Personally, I think derivatives terminology is more helpful.

Level 0: A real thing (backed by nothing because it exists and is an entity...a cow, land, a hamburger, a car, etc.)

Level 1: The USD (backed by the USG in this case)

Level 2: A check (backed by banks that have a credit line to the Fed)

Level 3: An actual casino chip (backed by the organization (and it's creditors who may or may not have credit lines to the Fed)

Hmm...

Level 0: Gold Coin (piece of Gold stamped in a circle with USA written on it). Physical dollar note (piece of paper with USA written on it).

Note this does not define "value". ie if Farmer will only supply food in exchange for rolls of toilet paper, then Gold and dollars have less value than the TP.

Level 1. Treasury Bond. - promise to return dollars plus interest. Is it a promise to return "physical dollars"??

Where would Shares sit in this derivative structure??

[Kbg]

Hmm...

Level 0: Gold Coin (piece of Gold stamped in a circle with USA written on it). Physical dollar note (piece of paper with USA written on it).

Note this does not define "value". ie if Farmer will only supply food in exchange for rolls of toilet paper, then Gold and dollars have less value than the TP.

Level 1. Treasury Bond. - promise to return dollars plus interest. Is it a promise to return "physical dollars"??

Where would Shares sit in this derivative structure??

In my book gold is never level zero other than representing itself nor is a piece of paper with very fancy counterfeit defeating printing on it. If you like gold because it's shiny or the dollar bill because of the "cool" printing great...level 0 it is. Other than that both are level 1. Actually, I would categorize gold as level 2 in the context of "money", because the only way it can be used is in exchange for the printed stuff (or digital representations thereof). Obviously if someone is willing to trade some of their real stuff for gold then gold is level 1. However, for purposes of this discussion I have what is called the Walmart test (or pick any large commercial entity that doesn't buy/sell trade precious metals). If they don't accept it, then it isn't "money." Nor is the USD money in Australia only the AUD is.

Shares...well first of all my previous answer was regarding money, but the same concept applies.

Level 0 is the company (assets, people, tech, processes, goods...standard balance sheet stuff for the most part)

Level 1 is the company stock (we could probably throw in corporate bonds here as well since there is a Level 1 claim on profits/actual assets)

Level 2 is a single stock future or option

Level 3 is a swap or other similar derivatives (but I wouldn't quibble too much if these were classified as level 2)

Again, the main point is the level of abstraction and intermediaries from the "real thing." And as regarding risk, the more levels the more at risk something is.

[Jack Jones]

However, for purposes of this discussion I have what is called the Walmart test (or pick any large commercial entity that doesn't buy/sell trade precious metals). If they don't accept it, then it isn't "money." Nor is the USD money in Australia only the AUD is.

US Gold Eagles pass your Walmart test since they are legal tender for $50. Ha!