Category: Money

  • Interest

    The most significant characteristic of money in our society that is not contained in the common definition is its ability to generate “interest.” Interest is commonly described as a form of rent charged when money is lent to someone else. Economic theory also talks about interest as the “price of money” or the “price of…

  • Origins of Money

    Most textbook discussions of money describe it as deriving from barter.  This is a myth based on the assumption that society consists of autonomous individuals acting out of self-interest. Such an assumption is clearly a projection of a modern ideology of individualism. Even a cursory survey of 20th century anthropology reveals that what we think…

  • Circulation

    It is not just the amount of money in circulation that has consequences for the health of the economy, but also the velocity with which money circulates as a result of economic transactions.  The idea that money “circulates” conjures up images of a fluid being pumped through pipes. Government spending to invigorate the economy is…

  • Types of Money

    Contemporary economic theory distinguishes between three main types of money: commodity money, paper money and bank money, and it views them as stages in the evolution of markets from barter to the current global system. Commodity money is something which has inherent value. Its most common form is a “precious metal,” but it can be…

  • How Is Money Created

    While there is a lot of talk about “printing money” as though money is created by government printing presses, money is primarily created by bookkeeping entries. About 10% of the money circulating in the US economy is paper currency or coins. The rest is essentially a host of bookkeeping entries in a vast infrastructure of…

  • What Is Money

    The most common definition of money is a three-part functional description: money serves as a unit of account, a medium of exchange, and a store of value.  Unit of account refers to the numerical metric used to assign values or prices to things.  In this sense a dollar is like an inch. A medium of…