The new Michael Lewis book about high frequency trading and gaming the system through front-running is all the rage this week. Flash Boys is a good book: Mr. Lewis is perhaps the U.S.’s most readable investment and finance author. Even so, I’ll be contrarian.
Check out Money–The Unauthorized Biography, by Felix Martin (Knopf, 2014). In Money, you meet the citizens of Yap (yes, a real place). In Yap, currency is rocks, big rocks. Some, in fact, are too big to move. If Citizen A has a big two-ton stone on Citizen B’s property, the giant rock is still Citizen A’s property and belongs to A or his or her descendants until is sold. All the citizens of Yap are in agreement about these property rights.
Money gives one a whole new perspective on the whole “medium of exchange” idea. In Yap, for example, there may be little exchange, but there is plenty of money, or, I should say, rocks.
In Felix Martin’s fascinating book there is a quote from an official in the Russian city of St. Petersburg, made after the collapse of the Soviet Union: “Please understand,” the director of bread productions says, “that we are keen to move towards a market system, but we need to understand how such a system works. Tell me, for example, who is in charge of the supply of bread to the population of London?”
The author points out that “…nobody is in charge of bread…the decentralized system of money and markets is what keeps Londoners supplied with everything…,” including probably dozens of types of bread. Smith, Keynes and pretty much all the other economic players of note appear in Money.
If you think moolah is only a medium of exchange, think again. And, by the way, consider rushing out to buy (or download in the comfort of your own home) Money.