What Is Money?

Initially gold and silver were valuable as is. But now it becomes valuable as a “facilitation of exchange” as well. As it does, people employ gold and silver for new purposes.

Over time the division of labor becomes larger and people become more efficient. Money becomes broadly employed due to the many transactions it facilitates. Thus the market gives rise to money. But it doesn’t happen quickly. It doesn’t become popular rapidly as bitcoin has done.

People are buying cryptocurrencies today, but more as an investment more than as “money.” Money is a “tool of production” that makes good and services easier to obtain. People do not invent money on purpose. Real money is predictable and creating it is a long-term process.

Ultimately, money is marketplace-based. The volume and value of money is determined by the market. What we have today is quasi-public money in which value and volume are determined by other forces than the market.

Wampum, for instance, was private. As were gold and silver. As soon as you have a small group of people issuing money and determining how much, then you don’t have money but an investment, which you can invest in – like bitcoin at $3,000 a coin.

It is why some people don’t consider cybercurrencies to be money. It’s voluntary but it has fixed denominations. Or worse like ethereum, it doesn’t have a cap except what the people at ethereum decide to offer.

Central banks and monetary control are bad for the economy and eventual cause large swaths to become dysfunctional. It is why our monetary system basically rearranges itself by going out of business every 40 or 50 years.

Something new inevitably springs up to take the place of what has become ruined. Now we are moving onto yet another “new” system of quasi-public, digital cybercurrencies that will replace the petrodollar which in turn replaced the gold denominated dollar. Real, long-lasting money evolves and is not dictated.

On the other hand, cybercurrencies, the good ones anyway, are directly linked to the underlying investment. they represent the value of the investment and may go up as the investment goes up.

They are not money in the traditional sense. But they might be considered a placeholder for the value of the larger project and thus, depending on their closeness, may be a liquid metaphor for its worth.

If money were not controlled by central banks the price would likely lift gradually rather than fall constantly as it does now. People would see their savings gradually accrue in value and this would expand their net worth over time.

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