What is money?

I have recently become marginally involved in a project in my home town of Brixton, UK, to develop an alternative, complementary currency, the Brixton Pound. The currency has been around now for the best part of six months, and has been a great success in bringing Brixton to the attention of the world. It has worked triumphantly as a PR stunt, but whether it has worked as intended to revolutionise trade in Brixton remains to be seen.

But it has set me thinking about other aspects of currency – what actually is money? The thing is, I am not at all sure I know; although I do know that I do not have enough of it.

Money is a token for the the exchange of value. In many parts of the world, cowrie shells were used; for millennia, precious metals were used. But today, it’s mostly just numbers in a computer.  The Brixton Pound has gone down the very old-fashioned route of using only printed paper notes.

I find it rather disturbing that the whole edifice of global capitalism is built on these numbers in a computer. How is it that people’s lives and livelihoods can be thrown into disarray by these numbers? Why are they so significant and so important? And do we really need them?

Could we recreate a new form of monetary exchange? I’ve been reading a book, “Creating New Money” which suggests a re-nationalisation of money and credit. Its point is that most of these numbers-in-a-computer are created by private commercial banks, not by a central bank or mint; so money is out of the control of sovereign governments. Its proposal is that only the central bank (the Bank of England) should be allowed to create new money. But I am not at all sure that the approach is right.  I’m not convinced that governments are any more qualified to create money than banks. Is there any reason why I can’t create money myself? I’m a reasonably-competent computer programmer; I could write a program that handled the numbers in a computer for me.

Numbers in a computer are just information. If money is just numbers in a computer, it is just information – and subject to the same information-theory logic as any other form of information.  So transactions, the messages that convey the money information, are just messages.

One thing the information revolution has brought us is very cheap bandwidth for messages. The international banking system, however, uses very expensive bandwidth – for reasons, it says, of security. It costs at least ten pounds to send money abroad: that’s a message of a few bytes. It makes SMS texting seem dirt cheap. Surely we can be more efficient? Surely we can either transmit the same amount of information much more cheaply, or transmit more information.

I’m interested in the latter, as – in fact – is the Brixton Pound project. When I buy stuff, I’m not only interested in how much or how little it costs, but also how it has been produced. I’d rather spend my money locally, on low-carbon, fairly-traded stuff. All that information – the carbon footprint, the localism, the equity of the trade – is additional information that could enrich the message that is the transaction.


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