Back to the Bureacracy

Posted on 2005/12/20 10:39:30 (December 2005).

[Monday 19th December]
After a spell relatively free of it, today I was re-emmersed into the wonderful world of bureaucracy. Partly this was down to lots of tasks that need completing in order to move into our new flat (hopefully this coming Friday!). Also though I needed to transfer some money from my Japanese bank account to my UK one, in order to pay off my credit card for all the expenses I had incurred whilst on my business trip in America, which I had then been reimbursed for in Yen.

All of this made me wonder what money actually is, a conundrum that has often baffled me. When you have a stack of notes or a heap of coins in your hand it is easier to reason about, but even that is of course "virtual" wealth - a promise from the national bank that issued it to turn it into something more tangible, like gold, should you ever ask (which of course no one ever does). Whilst I'm confused enough by that, the whole concept of electronic transfers between banks, and even more so between banks in different countries confuses the hell out of me. What actually happens?

If your confused by all that, just look up "fractional banking" in google and that'll really make your head go pop!

Posted by Kev at 2005/12/20 10:59:24.

The link between gold and national currency has long gone. All major currencies are fiat money - i.e. unbacked by any form of fixed assets. What actually happens, although there are a few that try to deny it, is that banks create money literally out of thin air - nothing more than numbers on a screen.

You will note that the price of gold has shot up in recent weeks - mainly due to peoples lack of faith in national currencies.

Posted by i-cee at 2005/12/20 11:18:02.

Yep, the link between gold and national currency has long gone, especially since a few years ago our(UK) Chancellor sold off 2/3 of the uks gold reserves when they were at a 20year low ( ~$200 ) and then cannily invested in Euros - which then tanked too!

Posted by Kev at 2005/12/20 11:40:00.

Just out of curiosity John, did MS gave you the money that the banks chanrge for international wires in different currencies? Those money transfer can get pretty expensive if I recall...
As for the money question I-cee and Kev are right, the Bretton Wood agreement (if I remeber correctly) has died a long time ago, though I am not sure it was written off officially. Prime material markets shot up a lot as a bar of gold always keeps its value, a stack of pieces of paper (even the nice ones) might not do the trick forever...

Posted by Lox at 2005/12/20 14:57:37.

It's been a bit of an "incredible journey" for the money involved in my expenses on my recent trip to the US. Let's take just one item as a for instance - the hotel bill.

1) So this USD expense went on my UK (i.e. GBP) credit card - involving of course a change of currency. Somehow money moved electronically from my UK credit card company to the hotel's bank account.

2) Later, I calculated the amount my company owed me, based on the standard GBP-JPY exchange rate at the time of the transaction, plus the USD-GBP rate I was charged by my credit card company. This amount, in Yen, was then reimbursed into my Japanese bank account - so money moved from my company's bank account to my bank account here in Japan.

3) Next, I had to draw out a frighteningly large wad of cash (JPY), and walk this from one building (which had a branch of my Japanese bank) to the one next door (where my UK bank has its Tokyo branch).

4) However, I couldn't actually pay this money directly into my UK account. It gets paid instead into a remittance account which I had to set up on the day.

5) From the remittance account I could then send money by wire to my actual UK bank account, at which point another change of currency (JPY-GBP) occurs. Amazingly this showed up in my UK bank account on the same day, although this may have been slightly helped by the time difference.

6) The final step was to then arrange a payment from my UK bank account to my UK credit card account.

It's interesting to me to think that at all these different stages this is effectively "the same money", which has taken many different forms along the way. At one point it became something tangible - when I drew it out in cash - but it was only like that for a few minutes, and before and after the entity only existed as numbers in a computer system somewhere.

Posted by John at 2005/12/21 06:44:00.

John, I notice you use the term "frighteningly large wad of cash" - was it still nerve wracking even though you knew that if you tripped up and dropped it all, lots of nice Japenese people would politely help you pick it up - unlike Reading where you wouldn't have made it 3 feet out of the NatWest.

Posted by Kev at 2005/12/21 11:03:20.

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