Tuesday, 3 May 2011

The monetary nature of money

The monetary nature of money

Money is an economic item very different from the other two basic economic items because of its monetary nature, namely the unique combination of the following:

its three functions, namely

unstable medium of exchange,

unstable store of value and

unstable unit of account,


it is generally available in small change,

it is only money within (not outside) an economy (foreign exchange is a non-monetary item),

it is legal tender,

it is always automatically valued by inflation (hyperinflation) and deflation,

which affects all units of money evenly,

when it has no exchangeability it is worthless, etc.

Nicolaas Smith

Copyright (c) 2005-2011 Nicolaas J Smith. All rights reserved. No reproduction without permission.

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