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In a money economy 1000 goods have 1000 prices all

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would be needed. In a money economy, 1,000 goods have 1,000 prices, all denominated in the monetary standard, or numeraire . It is possible to imagine a time in the not-too-distant future when paper money and coinage would all but disappear, replaced by some sort of credit or debit card that can be used for all transactions. But even then, money’s function as a measure of value would remain. In the past it was common to make barter trades in a monetary frame- work without actually using money—$10 worth of wheat in trade for $10 worth of blankets, for example. This practice lives on today in computerized barter markets, where companies trade goods with one another within a framework of quasi-imaginary “barter dollars.” Money allows more than just trade. It allows, for instance, the creation of credits and debts measured in monetary units rather than Good Money Is Stable Money 2
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in specific obligations. No longer do adults need to rely on their obli- gations accumulated with their children for their old age. Those adults can loan money—to anyone—and thus expand the scope of their credits throughout society. This is “savings.” Very little in the economy is actually saved in a warehouse, for example. Virtually everything is consumed or put to use within no more than a year of its creation. To save for the future through debt obligations (bonds), humans don’t stockpile goods, or even money for that matter, but they accumulate promises, which are massless and, ideally, don’t deteriorate over time. Banks were the main means to stockpile mon- etary debt obligations, with direct bond finance pioneered first by governments and followed later by corporations. The creation of the joint stock company allowed humans to pool their capital in endeavors much larger and more complex than could be attempted without the organizing principle of money. A hundred investors pooling their money to fund a shipping expedi- tion to China are not inherently different than five humans build- ing their own boat and setting sail on a trading expedition with a mutual understanding that they will split the winnings of their voy- age. The main differences are the scale and the ability to divide ownership and its spoils through written contracts and numerical values rather than through an unstructured partnership based on direct association. The monetary market economy, though it has elements of com- petition, is primarily a system of cooperation. Until the past two cen- turies, the majority of humans directly produced their own food. They were hunters and gatherers, and later farmers. Most productive activity took place outside the monetary economy, within the circle of the agrarian family. The land provided food, clothing, shelter, and entertainment. Money and exchange were only intermittently nec- essary. People’s cooperative interaction with others was, by today’s standards, rather limited. Over time, people have become more and more specialized in
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In a money economy 1000 goods have 1000 prices all...

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