Aristotle’s Qualities of a Good Money

About 2000 years ago Aristotle defined the characteristics of a good form of money. They were as follows:

1.) It must be durable. Meaning it must stand the test of time and the elements. Money is a medium of exchange and a store of wealth so whatever form it takes, it must be able to handle the wear and tear of constant trading and transactions.

2.) It must be portable. Meaning it should be practical in the sense that it holds a high amount of ‘worth’ relative to it’s weight and size. In other words, it’s “worth” must be very dense. Imagine if money was in the form of lead bricks, these bricks would be very dense, but it would be a nightmare and near impossible to constantly exchange large amounts. And you can forget about carrying them around in your pockets.

3.) It must be divisible and consistent. Meaning it should be relatively easy to separate and distribute in smaller forms without affecting it’s fundamental characteristics. This concept also works in reverse in that it should be relatively easy to re-combine several divided pieces of the money into a larger, single piece. This makes houses and paintings and cars unpractical as forms of money because taking them apart would affect their fundamental characteristics. An extension of this idea is that the item should be ‘fungible’. Dictionary.com describes fungible as:

“(esp. of goods) being of such nature or kind as to be freely exchangeable or replaceable, in whole or in part, for another of like nature or kind.”

4.) It must have intrinsic value. This characteristic carries a bit of a subjective quality in that everyone views the world through a different lens and what I view as valuable may not necessarily be valuable to my neighbor, but for the sake of argument let’s just say that there is a consensus of value given to a certain material. The basic understanding behind intrinsic value is that the material carries ‘worth’ in and of itself. It does not derive it’s value from anything else. It just sits there and is valuable. This is why paper currencies with no backing will not stand the test of time. Paper currencies only derive their “value” from what is known as legal tender laws, which are in essence a threat of legal prosecution, and or force, if they are not accepted as money for payment.

This fourth point brings up the point of scarcity, which is in essence a matter of intrinsic value. Paper currencies in circulation today, such as the dollar, euro, yen, swiss francs, zimbabwe dollars, etc… they are all now purely fiat instruments. (by fiat, I mean that their use is declared by decree and usually by threat of force. Definition of fiat.) The governments that sponsor them have essentially unlimited power in their ability to create new supplies. Because of technology, it is now simply a matter of typing something into a computer and the amounts are instantly credited somewhere. So in theory the supply of dollars for instance is infinite, and it seems like lately the wizards in Washington are trying to see whether this theoretical limit can be reached. Take Zimbabwe as a practical real world example. It now takes trillions of Zimbabwe dollars to buy a roll of toilet paper.

Not a good form of money:

Not a good form of money:

A good form of money:

Do me a favor and think about it,
-Pip

Canadian 43-101 Definitions

As a resource investor it’s important to know the meanings as defined in the Canadian National Instrument 43-101 rules. I swiped the following from the NovaGold website because it’s written in an understandable manner.

Definitions

Mineral Resource

A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral resources are subdivided, in order of increasing geological confidence, into inferred, indicated and measured categories.

An Inferred Resource is that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

An Indicated Resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geologic and grade continuity to be reasonably assumed.

A Measured Resource is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geologic and grade continuity.
Mineral Reserve

A Mineral Reserve is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances or losses that may occur when the material is mined. Mineral reserves are subdivided in order of increasing confidence into probable mineral reserves and proven mineral reserves.

A Probable Reserve is the economically mineable part of an indicated, and in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.

A Proven Reserve is the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.