[hamdani yusuf (OP)]

The problem of optimizing resources distribution is not restricted to individual level. It also applies to the subsystems as well as superorganism level.
In any level, optimizing resources distribution requires some methods of information exchange or signalling among parts of the system.

In early human societies, redistributing resources were done in several ways. Preys caught by a hunter gatherer group could be simply shared to its members. If they had no record keeping mechanism to track how much resources produced and consumed by each member, the group is vulnerable from being a victim of freeloaders. The most primitive form of that record keeping is by memorizing resource exchanges, productions or acquisitions, and consumptions by each member, which is done collectively by other members.

Let's get back to resources distribution. Simpler organisms have been practicing resources distribution long before humans even existed. Birds and mammals share food with their offspring. Ant and bee scouts share food with other members of their colonies.
In the case of parents giving foods to their offsprings, there's no need for record keeping, since the relationship is not equally reciprocal. The offsprings only have to provide service for the parents in the form of carrying their genes into the future. This situation opened opportunity for brood parasites such as cuckoos.

[hamdani yusuf (OP)]

In the case of parents giving foods to their offsprings, there's no need for record keeping, since the relationship is not equally reciprocal. The offsprings only have to provide service for the parents in the form of carrying their genes into the future.

For those who haven't found their purpose of their lives, this reminds us that our ancestors lived and died in the past so we can live the way we are now. Likewise, we live now so our successors will live better lives in the future.
Unlike before, we are starting to realize that discontinuity of identities and experiences are no longer seen as inevitable necessities for going forward with our lives. Advancements in biotechnology, robotics, AI, and nanotechnology are things that will make it possible.

[hamdani yusuf (OP)]

Unlike before, we are starting to realize that discontinuity of identities and experiences are no longer seen as inevitable necessities for going forward with our lives.

Just in case you are confused by the statement above, I'll give an illustration. My current body consists of different molecules and atoms than my body when I was born, so do my memories and experiences. But I retain my identity since the changes are always gradual.
But my identity is different from my parents, although I carry most of their genes and body plans. it's due to discontinuity of body composition and experience memories between mine and theirs.

[hamdani yusuf (OP)]

Let's get back to resources distribution. Simpler organisms have been practicing resources distribution long before humans even existed.

A simple example of resources distribution in reciprocal setup is shown in tit for tat situation.

Tit for tat is an English saying meaning "equivalent retaliation". It developed from "tip for tap", first recorded in 1558. It is also a highly effective strategy in game theory. An agent using this strategy will first cooperate, then subsequently replicate an opponent's previous action.
https://en.m.wikipedia.org/wiki/Tit_for_tat

To stay alive, an organism usually needs to consume a certain amount of resources. But the resources it can produce or acquire may fluctuate over time. Sometimes it doesn't meet the bare minimum.
Having companion to share resources can smooth out the quantity fluctuation of resources production and consumption, so they can overcome their hard times. Tit for tat strategy can be seen as an early form of insurance or debts. The records are kept in the brain of the participants.
For the scheme to work sustainably, it is necessary that the average resources production can keep up with consumption.

[hamdani yusuf (OP)]

For the scheme to work sustainably, it is necessary that the average resources production can keep up with consumption.

It's important to note that some kind of resources have expiry time. Excess of production will be wasted when they are expired. The resource sharing strategy can be helpful here.

[hamdani yusuf (OP)]

Some of you may start wondering where my recent posts will lead to, or what do they have to do with our current topic, but have little patience for following the step by step process. You might want to jump into the conclusion instead.
They are my attempt to make sense of modern financial systems from the perspective of universal consciousness. I'm trying to build a stream of reasoning starting from the most fundamental principles, and then only add barely minimum assumptions to get to currently existing complex financial systems.
I was interested in this since the news around gamestop stock short squeeze, and then speculation on crypto currency, to money printing frenzy through stimulus checks. I want to know the fundamentals or first principles behind those seemingly irrational trends in modern economic activities.

[hamdani yusuf (OP)]

People say you don’t know what you’ve got until it's gone. So to know what financial systems are, let's imagine that they don't exist. Some would say that the society would collapse. But what does it really mean? IMO, it only means that some, perhaps most modern human individuals would die, because they've become too dependent on other people's service to provide the resources they need to survive. We must acknowledge that there are some humans who still retain (or have gathered) the necessary skill set to live in the wild. They could survive without money, or other financial instruments.
So, it should be obvious that financial systems are just tools to distribute resources among their participants. They enable societies to utilize the economy of scale and skill specialization which make resources production more effective and efficient.

[hamdani yusuf (OP)]

Here is an example of how trying to explain the economy without strong fundamental principles can lead to more confusions. Even among experts, there seem to be no agreement.

[hamdani yusuf (OP)]

It's important to note that some kind of resources have expiry time. Excess of production will be wasted when they are expired. The resource sharing strategy can be helpful here.

It's obvious that some resources have much longer expiry time than some others. But some of those resources with short expiry time are essential for our lives. So, if someday we produce those kind of resources more than what we can consume, it would be better if we can find someone else who need them while also have other resources with longer expiry time to exchange. This situation started the use of commodity money.

[hamdani yusuf (OP)]

The development of agrarian societies often produce excessive food with limited useful time. It requires massive amounts of commodity money to store its value. Handling of huge amount of commodity money can be costly and impractical. Additional costs in transporting,  storing, and protecting it from environmental factors as well as theft and robbery may outweigh the value of resources it supposed to save. This situation called for the invention of fiat currency.

[hamdani yusuf (OP)]

The idea that I want to convey here is that money was invented from practical necessities. It's a tool to help improving our ability to manage resources, their production and consumption. It helps us passing through difficult times by shifting the burdens to easier times. In turn, it helps us improving our chance to survive. Those who don't participate in the monetary system won't enjoy its advantages, and put them in a bad position in the competition.
Competition forced us to improve our system's effectiveness and efficiency.  It lead us to invent more complex financial instruments.

[hamdani yusuf (OP)]

Yuval Noah Harari called money one of the most powerful and universal stories humans ever told. People like Osama Bin Laden may reject ideas of secular democracy, freedom of speech, or universal human rights. But they won't reject US Dollars. Unfortunately he didn't explain why/how a story can be more powerful than the others.

[hamdani yusuf (OP)]

$27,000,000,000,000: America’s National Debt Explained - TLDR News

In recent weeks America’s national debt has remerged as a major talking point. With Biden set to spend trillions on new initiatives, many in the Republican party are growing concerned by the scale of the debt. So in this video we explain the state of the US national debt & debate whether Biden’s spending is a good idea or not.

In the end, whose idea is better will be determined by who made more accurate assumptions. If the debt is used as investments which gives higher return than the debt plus interest rate, then it's surely a good decision. Otherwise, it would be bad.

Borrowing money to buy food is not necessarily a bad thing, especially if the energy we get from the food can be used for productive activities which gives higher value than the borrowed money.

[hamdani yusuf (OP)]

Additional costs in transporting,  storing, and protecting it from environmental factors as well as theft and robbery may outweigh the value of resources it supposed to save. This situation called for the invention of fiat currency.

Theft and robbery are generally bad for the society. They reduce the quantity of resources available to the rest of the society, while producing nothing useful in return.
Response of the societies to these cases can determine their survival. They created moral rules and legal systems with reward and punishment to make their members well behaved. A common practice to enforce the law is by inventing the police institution.

the civil force of a national or local government, responsible for the prevention and detection of crime and the maintenance of public order.

Meanwhile, to protect from theft and robbery by rival societies, they created military forces. The forces can also be used to steal and rob from rival societies.

[hamdani yusuf (OP)]

How rich countries are making the pandemic last longer

Early in the Covid-19 pandemic, many of the world’s richest countries poured money into the race for a vaccine. Billions of dollars, from programs like the US’s Operation Warp Speed, funded development that brought us multiple Covid-19 vaccines in record time. But it also determined where those vaccines would go. Before vaccine doses had even hit the market, places like the US and the UK had bought up nearly the entire supply.

This turns out to be an old story. In nearly every modern global health crisis, from smallpox to malaria to H1N1, rich countries have bought up vital medical supplies, making poor countries wait sometimes decades for life-saving support. It’s effectively a system in which where you live determines whether you live or die of a preventable disease. Leaving a disease like Covid-19 to spread unchecked in some places also gives it a chance to mutate -- and variants of the virus are already raising alarms. So: how do we get vaccines to countries that can’t afford them?

One solution underway is called Covax. It’s a program co-led by the World Health Organization; Gavi, The Vaccine Alliance; and the Coalition of Epidemic Preparedness Innovations (CEPI). Its goal is to get vaccines to lower- and middle-income countries at the same time as rich countries. So how is it supposed to do that? And will it be enough?

[hamdani yusuf (OP)]

This situation called for the invention of fiat currency.

Earlier versions of fiat currency are likely used bilaterally between participants of a transaction. Instead of receiving commodity money in exchange for real resources, which is not urgently needed anyway, the resource supplier received bond certificate or some form of contract, that the resource consumer will return in the future.
There are times when the creditor can not collect the debt for various reasons, like they migrate to other places, or dead. There are also times when the creditor (resource producer) need to use the resources before the payment deadline, hence the debtors (resource consumer) haven't ready to pay the debts. In these cases, the creditor can exchange the contract or bond certificate to a third party with other resources.

[hamdani yusuf (OP)]

Here is a joke about economists from internet. It gets funnier when it's close to real life situation.

Experienced economist and not so experienced economist are walking down the road. They get across sh1t lying on the asphalt.

Experienced economist: “If you eat it I’ll give you $20,000!”
Not so experienced economist runs his optimization problem and figures out he’s better off eating it so he does and collects money.

Continuing along the same road they almost step into yet another sh1t. Not so experienced economist: “Now, if YOU eat this sh1t I’ll give YOU $20,000.”

After evaluating the proposal experienced economist eats sh1t getting the money.

They go on. Not so experienced economist starts thinking: “Listen, we both have the same amount of money we had before, but we both ate sh1t. I don’t see us being better off.”
Experienced economist: “Well, that’s true, but you overlooked the fact that we’ve been just involved in $40,000 of trade.”

This case shows that GDP alone is not adequately reflecting the wealth or economic well being of a society. It shows that without specifying our terminal goal, our efforts would be ineffective because we would confuse between terminal and instrumental goal, and make us use wrong prioritization.

In the game of life, survival is the prize, while extinction is the penalty.

[hamdani yusuf (OP)]

A common practice to enforce the law is by inventing the police institution.

Meanwhile, to protect from theft and robbery by rival societies, they created military forces.

Running these institutions requires some resources provided by the society. The burden is shared among society members as taxes.
In earlier times, taxes might be paid using consummable resources. But practicality would lead them to use commodity and fiat money. 

[hamdani yusuf (OP)]

This situation called for the invention of fiat currency.

Earlier versions of fiat currency are likely used bilaterally between participants of a transaction. Instead of receiving commodity money in exchange for real resources, which is not urgently needed anyway, the resource supplier received bond certificate or some form of contract, that the resource consumer will return in the future.
There are times when the creditor can not collect the debt for various reasons, like they migrate to other places, or dead. There are also times when the creditor (resource producer) need to use the resources before the payment deadline, hence the debtors (resource consumer) haven't ready to pay the debts. In these cases, the creditor can exchange the contract or bond certificate to a third party with other resources.

And this escalated the need for multilateral usage of fiat currency. The creditor may want to sell some fraction of the bond certificate while keeping the rest of it. When the creditor was a bank, they issued banknotes.

 

A banknote (often known as a bill (in the US and Canada), paper money, or simply a note) is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued by commercial banks, which were legally required to redeem the notes for legal tender (usually gold or silver coin) when presented to the chief cashier of the originating bank. These commercial banknotes only traded at face value in the market served by the issuing bank.[1] Commercial banknotes have primarily been replaced by national banknotes issued by central banks or monetary authorities.

https://en.m.wikipedia.org/wiki/Banknote

[hamdani yusuf (OP)]

In the game of life, survival is the prize, while extinction is the penalty.

I'd like to remind you that the prize is not necessarily awarded to the particular individuals who won the game. It could be some duplicate copies of them. While defending ant colony, some workers and soldiers may die, but the colony, which contains their copies, can survive. While defending against microbial parasites, some of our white blood cells may die, but we, which contains their copies, can survive.

Everyone of us is a modified copy of who we were. Our body compositions are pretty much different than how they were when we were born. We are also modified copies of our ancestors. Their deaths don't necessarily mean that they've lost the game of life. The extinction of our non-human ancestors don't mean that they failed either, since we are here to continue their legacy. Even the extinction of human species doesn't necessarily mean our failure, as long as we can produce/raise our successors who will continue our efforts to achieve our terminal goal.