How does the bit work?

[BlinkZ 1,151]

So how does the ecomomy of Equestria work? I know what your thinking "oh your just overthinking a kids show' and yes i'm aware. But really makes me wonder how the bit works.

For example, the history of money is really in depth but i'm just theory here. Could the Bit be gold standard...well i'm not sure how considering that unicorns and such can remake things into other things. sure High level magic but still if you can turn rocks into gold you invalidate gold as being well rare and hard to make.  

Not to mention the unexplained matter of gemstones that apparently can get you an industrial pet hair dryer for such a tiny little gem.  Rarity hands those things out like candy in Rarity takes manhattan.

 

So it is like modern time and the bit is just worth X amount because everyone says it is. So anyway overthinking what do you think?

Edited November 25, 2016 by BlinkZ

[sweetolebob18 728]

It does seem possible that Bits are not the only medium of exchange.  IRL the USA had gold coins until 1933 and silver coins until 1965 + paper money & base metal coins

 

One big difference. In the USA most stores sell most items for a set price.  In Equestria, prices seem to vary widely implying it is usual to haggle (plus Putting Your Hoof Down Fluttershy gets charged more).  If gems are used as currency, ponies must have the ability/training to evaluate gems far beyond what most humans do.

 

HIE or Ponies on Earth, this is going to be a shock.  (I can see what happens to a street vender trying to sell fake jewelry) 

[silvadel 1,393]

I would assume that bits have some sort of magical signature on them as an anti-counterfeiting measure.  As for gems, you can't go by Rarity for scarcity.  She has an unfair advantage when it comes to finding them.

[Ziggy + Angel + Rain 11,303]

I'm currently writing my thesis on this very subject: "A Fundamental and Not Overly-Convoluted Theoretical Understanding of Equestrian Economics Surrounding the Established and Widely-Accepted Bit Currency."

 

Here it is in its entirety:

 

 

Step 1: Pony A gives Pony B an agreed-upon number of Bits.

Step 2: Pony B gives Pony A an item in exchange for said Bits.

Step 3: There is no step three.

 

(It's a fairly short thesis.)

 

 

[Fhaolan 4,484]

It's pretty easy, actually. The exchange rate is 2 bits to a shave and a haircut.

 

Yeah, yeah. Actually that's completely correct. Not that long ago a 'bit' was an accepted term for 1/8 of a US dollar. A quarter therefore being 2 bits. This was a holdover term from Colonial times in the US when the main currency was the Spanish silver dollar, which was worth 8 'Reals' which Colonists referred to as Bits because in English calling money 'reals' must have seemed silly.

 

So there are 8 Bits to a Buck, for reals....

 

Okay, I'll get my coat...

[BlinkZ 1,151]

I would assume that bits have some sort of magical signature on them as an anti-counterfeiting measure.  As for gems, you can't go by Rarity for scarcity.  She has an unfair advantage when it comes to finding them.

Hmm yeah I suppose there has to be someway to make sure no conuterfits are made. I know a kids show would never got into detail about money. 

 

Yeah II know Rarity has her spell so she can find them easy. Still imagine how much Twlight pays for to feed spike those gems. well assuming he dosn't need them and that they are candy to him.

[silvadel 1,393]

Twilight has NEVER had to pay for the gems to feed Spike.  When Spike was growing up, they came from the crown.  Celestia provided them.  In Ponyville it is likely a combination of gems from Canterlot, her royal stipend (whatever that is now), and Rarity.

[Tropical Melody 6,457]

Something has just occurred to me - a bit is also of course part of a horse bridle. Coincidence?

[weesh 690]

the world seems INUNDATED with valuable materials.

more gold and gems than you can shake a stick at.

I would suggest that the bits don't have intrinsic value, but have value because ponies BELIEVE that they have value, just like Americans believe their cotton paper money has value, even though it isn't backed by gold or anything else.

Given that the state of equestrian finances seems to be really good, I'd suggest that the COULDN'T have some standard backing their currency, because such systems' economies are limited by that standard, and can't grow and thrive past a certain point.

they could very well be made of gold, but that may only be because gold is a good material to make currency out of because it doesn't rust or tarnish.  it might have been selected because its a plentiful and useful material to make beautiful looking currency out of.  

As far as counterfeiting goes, if the economy is strong, and you don't NEED to counterfeit to meet your daily needs, it will go down.   
Furthermore, fine craftsmanship, and difficult processing could serve as a deterrent in the same way that modern countries deter counterfeiting by making it difficult.  

Something has just occurred to me - a bit is also of course part of a horse bridle. Coincidence?

 

this occurred to me as well, as that is what I thought this thread would be about.  

I'd suggest it was an intentional pun, if perhaps a bit stealthy.

Edited November 26, 2016 by weesh

[Luminance 2,186]

A bit is probably only worth a couple grams of gems, like change. A gem is rarer and worth more like larger bills. I think there can also be a bank that allows you to convert gems into bits for exchange purposes. As for gold, well it's gold so everypony can trade as long as it's equilivent value.