What Has Government Done to Our Money

Abstract

3. Indirect Exchange Indirect exchange (you sell your product for a good that you can in turn sell for the good that you want to have) solves these two problems and permits civilization to develop. If one good is more marketable (if everyone is confident that it will be readily sold) then demand will become greater because it will be used as a medium of exchange. Several criteria determine the marketability of a good: 1. non-exchange demand, 2. divisibility, 3. durability 4. transportability More marketability causes wider use as a medium of exchange which causes more marketability  reinforcing spiral. Eventually, one or two commodities are used as general media and we call these money. Money can only arise through cumulative development of a medium of exchange on the market (Mises’s regression theorem) because embedded in the demand for money is knowledge of the money-prices of the immediate past (this is a distinction with directly used consumer or producer goods) but if we continue to trace this back this means that originally money had to be a commodity valued for its direct use. Money is simply a commodity that now mainly gets used as a medium of exchange.

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