Real Money, by Robert Gore
Here’s a definition of money that will be rejected by conventional economists of all persuasions, but could clear up analytical confusion for those outside the dismal science. Money is that which serves as a medium of exchange, a store of value, and a unit of account, has intrinsic value, and which is not a liability of an individual or entity, including a government. The immediate objection to this definition is that it does not describe anything that currently functions as a medium of exchange. Something must be wrong with a definition of money that excludes everything that people now think of as money.
Perhaps it’s not the definition of money that’s flawed, but present monetary arrangements. Everything that now serves as a medium of exchange, a store of value, and a unit of account has minimal or no intrinsic value and is somebody’s liability. Even the US currency is a note, or debt instrument, of the Federal Reserve. These notes pay no interest and have no maturity date, and they can only be redeemed at the Fed for more notes, but they are liabilities on the Fed’s books. Precious metals, on the other hand, which have served as money, or have been the basis of fully convertible paper currencies, are not liabilities.
This is an excerpt. Please click the link above for the full article.
Perhaps it’s not the definition of money that’s flawed, but present monetary arrangements. Everything that now serves as a medium of exchange, a store of value, and a unit of account has minimal or no intrinsic value and is somebody’s liability. Even the US currency is a note, or debt instrument, of the Federal Reserve. These notes pay no interest and have no maturity date, and they can only be redeemed at the Fed for more notes, but they are liabilities on the Fed’s books. Precious metals, on the other hand, which have served as money, or have been the basis of fully convertible paper currencies, are not liabilities.
This is an excerpt. Please click the link above for the full article.
It's no wonder the push is on this year to move to a moneyless system.
Medium of exchange - We can do that with bitcoin or mainstream currencies.
Store of Value - This is harder. It's impossible to compare value over decades, but we certainly could measure the going rate for a basket of goods and services and compare them year-to-year. It's not trivial to create a vehicle that preserves value from year-to-year because the number of goods and services in an economy changes, but companies and gov'ts do produce products that do this. They are not used as media of exchange.
Unit of Account - Mainstream currencies adjusted for inflation are the best vehicle for this. You could use anything adjusted to the cost of the basket of goods/services (i.e. inflation), but things like the dollar have been pretty stable in the 2.5% inflation range and are widely understood.
Intrinsic Value - I assume this means intrinsic value near its value as a medium of exchange. So if they coined a quarter dollar out of 1 oz of copper, it would be close enough to meet the requirement, right?. If they make a $5 piece out of 1 oz of copper, though, it wouldn't meet this requirement.
Not a liability on someone else's books - This would exclude any money put in a bank.
To someone who has been a user of money only within a "modern" banking system, this seems absurd. You're asking for too much out of one vehicle. The hardest one is intrinsic value. Suppose you made 1oz Cu quarter dollars. They're worth $0.15 melted down, but if the forces of supply and demand for whatever reason cause Cu to double, people start melting down their currency. People start cutting/raising prices and wages on a monthly basis in response to the vagaries of the commodities markets. This sounds patently absurd, but you don't post things that are absurd, so I probably just don't get part of it.
Instead of looking at what is used as a medium of exchange and then defining it as money, I defined money and put everything else in the category it belongs: debt. By the definition, precious metals and paper currencies fully redeemable for precious metals are money. Value is measured in terms of real money, not fiat debt. The market determines the real purchasing power of real money, not government officials and central bankers. While my preference is for purely private money, we had a preview of precious metal money during the gold exchange standard era, and it worked very well. The main purpose of my article was to look at things in a new way, looking at precious metals as by definition real money and fiat debt as fiat debt, subject to expansion with no effective limit. Before we can have a much needed monetary transformation, we have to have an intellectual one. SLL