What is money?

[magus341]

Money is defined not by what it physically is, but by what it does. Money allows people to engage in indirect exchange. Without money, people would have to barter, which requires a double coincidence of wants; one person must have what the other person wants and want what the other person has and be willing to trade. However, using money, people

Comments

[psyllogism]

How about money supply? Or is that more advanced than what you're going for?

Also, I came across the theory of Social Credit the other day. It claims that while money may have once been a medium of exchange, it is now something more. The theory is considered quite wrong nowadays, but I wondered if you'd ever heard of it and had any comments on it?

[magus341]

That was an interesting article. In some ways that guy is way ahead of his time, and in others, he is a complete hack. I think he might have been good had he read some of the mainstream economics of the day. Money is created by banks when they make loans. I think this guy might have been drifting toward free banking, which I think might work. A few things demonstrate a lack of knowledge of basic economics, for example, he predicts unemployment will increase as capital replaces labor. That has not happened in practice, nor does it in most theories, since as long as labor has a positive productive return, people will be willing to pay one another to do work. Read the Chartalism article for another interesting (but in my opinion, slightly wrong) viewpoint. A blogger named "winterspeak" is a chartalist.

[magus341]

Money Supply is just the amount of money. I'll do a macro post eventually that lays it all out. I think I have a good paradigm for monetary policy and how to think about it worked out. The standard textbook view is mostly crap.