Wednesday, June 4, 2008

Money Tree

We mention the time we were together
So long ago, well I don't remember
All I know is that it makes me feel good now
--The Motels

Per Mises (1934), there are three primary categories of money. Commodity money is employed as a medium for exchange (exchange is the primary function of money) due to its technological characteristics (scarcity, portability, etc.). Gold has commonly been employed as a commodity money.

Fiat money possesses a stamp from an authority that 'makes' it money, although this money possesses few of the technological characteristics that make it attractive for exchange. The US Dollar has been declared 'legal tender' by the US government. Our 'official' money.

Credit money is a claim falling due in the future that is used as a general medium of exchange. Loans of all sorts provide a means of exchange for the borrowers.

Which of these monies have been on the rise, and which on the decline, for the past century or so?

position in gold

References

Mises, L. (1934). The theory of money and credit. London: Jonathon Cape Ltd.

No comments: