A simple proof asserts that if A=B and B=C, then A=C. It can be useful to apply this to understanding real estate and money. We ask “Is land money?” to which the answer appears to be “no.” Yet a further inquiry into money substitutes gives us pause. The emergence of Bitcoin offers an interesting venue for this discussion.
The Bitcoin approach — there are others — posits that none of us has reason to trust governments to issue a stable medium of exchange. Surely by now we all agree on that. Bitcoin offers a “trust me” package based on a broad and mathematically based distribution of verification methodology. One can debate whether this is an improvement, but we must first ask how we obtain the trust initially required as the foundation of money.
Trust is a valuable human quality that is earned by one’s actions over time. The decision to be trustworthy originates in the mind of the individual and is rewarded by various forms of social acceptance, such as respect and prosperity.
Money substitutes involve institutions, the trustworthiness of which can never exceed the average of the trustworthiness of the individuals who make up any institution. Bitcoin and other money substitutes are, or seek to be, institutions. Institutional advertising to the contrary aside, only individuals earn trust.
All money substitutes are temporary. Coin of the realm in ancient Rome is as gone today as the lire. Its most recent replacement, the euro, is in doubt. US Federal Reserve shenanigans reveal that thinking the dollar immune from a similar fate is merely arrogance and provincialism.
What do we have left? Returning to the simple proof, imagine that trust equals “storehouse of value” as the essential characteristic of money. Now name that quality B, naming land and money, respectively, A and C. If land is a storehouse of value and a storehouse of value is money, then land is money. And that money is permanent.
But money has other important qualities. It should be fungible and portable, two things that land is not. How important are these things? And are we willing to trade permanence for them?
If we think of land as our forefathers did, we work the land. Its efficient use makes prosperity possible. The right to choose how we work the land is fundamental. He who controls your land controls your life.
The difference between a fight with the Taliban and a fight with a zoning board is more about firepower than philosophy. In the end, land is the ultimate right-to-work scheme and it is upon this notion that land obtains a reputation as a storehouse of value.
It has been said that most people work for a living; only some people vote for one. An example of the latter is Congress. If we play “Who do you trust” and your choices are your local carpenter or the random congressman, you get my drift. It gets worse when you consider that Congress votes to make the money you receive for your efforts.
Connecting land and work veers closely to the economic concept of utility, which neutralizes money in recognition that we are all just passing through money transactions in which we trade parts of our lives we call “work” for the parts of the lives of others that they call “work.”
From cowry shells to greenbacks to bitcoins, man has tried to devise a stable form of money as a storehouse of value in which to temporarily deposit his work until he exchanges it for the work of someone else. Even gold bugs must admit that while scarcity accounts for much, a portion of the value of precious metals is the work it takes to wrest those metals from the grasp of the land.
If we carefully define what ownership means, allow for broad distribution of land ownership, trust the values we embed in the land, and permit the populace to go to work upon it, we minimize the need for trust to propel money substitutes through society.
All money substitutes are suspect. The hard asset you seek is beneath your feet. All that glitters is not land.