What is money?
Dr. Ronald Nash Explains what money is and how it works in society. What Is Money? by Dr. Ronald Nash Money is first and foremost a medium of exchange. As human society became increasingly more complex, it became inconvenient for humans to barter one commodity or service for another or to exchange a certain quantity of labor for a certain quantity of some commodity. No one invented money; it simply developed. People who wanted to exchange something found that it was sometimes difficult to find someone who had exactly what they wanted and who at the same time wanted exactly what they had to exchange. In order to make exchanges easier, the circle of exchanges widened from two parties to three or more. A had what B wanted; B had what C wanted; C had what A wanted. In this way, indirect exchanges began to develop. Over a period of time, specialized goods that were more difficult to trade were exchanged for goods that were more easily marketed. As a consequence, the more marketable goods be
— Posted Wednesday, 7 October 2009 | Digg This Article | | Source: GoldSeek.com Part 3: Schizophrenic Economists If monetary theory is accurate, it is a subset of general economic theory, which must also be accurate. Monetary theory is not an independent theory of human action that is divorced analytically from a general theory of human action. Only the Austrian School of economics believes this and adheres to it in practice. All other systems of economic thought segregate monetary theory from general economic theory. There is a reason for this. Bankers for five centuries have benefited from a grant of privilege from the state: a legal privilege. Banks are allowed to write contracts that are prohibited to all other profit-seeking agencies. They are allowed to promise depositors immediate payment, yet they lend the depositors’ money to borrowers. The most detailed study of this grant of legal privilege is Prof. J. H. DeSoto’s 900-page masterpiece, Money, Bank Credit, and Economic Cycle
Economists often use words in ways that are not quite the same as the way the words are used in everyday speech. “Money” is such a word. In everyday speech we use the word “money” in a variety of ways, such as: “My father makes a lot of money,” or “Bill Gates has more money than anyone else,” or “General Electric made twice as much money this year as last.” In the first sentence above the word money could be replaced with income, in the second with wealth, and in the third with profit or net income. None is the way economists usually use the word “money.” The economic definition emphasizes that money is the medium of exchange, or what we use to buy things with. Economic activity can take place without money. All transactions can be barter transactions in which people obtain a good or service that they want by trading away some other good or service that they value less. Because barter is inconvenient, barter systems exist only when exchange is uncommon. Suppose we have the mini-economy
