Monday, December 9, 2013

Fundamentally fiat me

Lets define the basic bankers fiat, the stuff that is cards, currency, coins, bonds, and generally piles of paper. What is it? It is humans leaving piles of markers around their environment to signal paths that lead to good things.

For example, when I have a pile of fiat, sized ten, I know there is a gallon of milk, one dozen eggs and a loaf of bread nearby, reserved for me!

That is fiat. It has great properties as a pile, relative to, say, a pile of avocado farms. The fiat can make a pile of any size, down to the penny, yet it takes up very little warehousing to do that. In fact, all fiat piles can be carried around in our pockets. And fiat piles can exchange sizes reversibly, and piles of real stuff cannot.

Otherwise, the currencies of the realms are just easily constructed and deconstructed piles. That's my definition, and I am sticking to it.

One result. The cost of making fiat piles is much lower than the  cost of making other kinds of piles. Call that cost the atm transaction fee. The actual fee should be the cost of moving paper around, plus a reasonable pofit. That is much less than a half point of the pile size in our pockets.

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