MCViewPoint

Opinion from a Libertarian ViewPoint

Money: What Is It? The More Important Question: Why Is It?

Posted by M. C. on May 13, 2022

Because the type of money a society uses largely determines whether it will prosper or ultimately falter, an individual, or group of individuals, who prefers justice over injustice, prosperity over poverty, and liberty over tyranny must flatly reject fiat money regimes and embrace sound money.

https://mises.org/wire/money-what-it-more-important-question-why-it

Manuel Tacanho

Money is not the root of evil as many people mistakenly think. Corrupted money (i.e., fiat money and currency debasement), however, is the root of many economic, social and cultural evils. 

Most people know what money is, superficially, yes. Also, most don’t quite understand the concept of money. Otherwise, as Henry Ford put it “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” Indeed, if money was well understood, today’s fiat money system would not exist.

Money is first, foremost, and fundamentally a medium of exchange. A generally accepted good (physical and now digital also) that intermediates transactions within societies and between societies. In his new book Understanding Money Mechanics, which I recommend as it provides an easy-to-digest yet comprehensive overview of the theory, history, and practice of money, economist Robert P. Murphy wrote:

A formal definition for money is that it’s a universally accepted medium of exchange. Menger’s explanation showed how such a commodity could emerge from its peers merely through voluntary transactions and without any individual seeing the big picture or trying to “invent” money.

Besides being a medium of exchange, money can and does function as a unit of account and store of value.

Medium of Exchange

Before the concept of money emerged spontaneously (yes, money is an invention/discovery of the market, not of the state) early humans traded goods directly—the barter economy (direct exchange society). 

Direct exchange means for a trade, a purposeful and voluntary exchange of goods or services to take place, let’s say, between a hunter and a farmer, their wants would have to coincide. The farmer would have to want a piece of meat and the hunter a portion of the farmer’s potatoes. This is what economists call the coincidence of needs. 

Money emerged naturally as the solution to the ‘coincidence of needs’ problem and ushered in a new, more efficient way of trading and a superior social system altogether—the indirect exchange society. Human societies have been indirect exchange economies for thousands of years now thanks to money, a medium of exchange. 

Unit of Account (A Measure of Economic Value) 

See then rest here

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