What Is Money?
medium.com
medium.com
> Money is simply trust. It is not backed by anything.
This is only true of fiat currencies. Not all currencies are fiat.
> A critical piece of information is missing from our education system. A clear definition of money.
That's because the notion of what money is has changed over time and, quite often, people can't agree on a proper definition.
> Because governments are incentivised to inflate the money supply and make debt easier to pay back, the critical “trust” component of the money has a non-zero probability of erosion. That means it’s just a matter of time until the currency fails.
This is definitely not a widely held view.
The main insight the author claims is:
> If money is trust, what are we trusting? We are trusting that a dollar maintains purchasing power. Purchasing Power is what you can buy for each of your dollars when you spend them.
Again, not a widely held view, and it's not clear that's where the value of a currency comes from.
With the risk of being too harsh, the author is clearly not an economist, doesn't have any deep insight into what money (more precisely dollars, in this case) is, and also comes off as biased (he works in crypto, which usually has an agenda against "mainstream" currencies).
The real trick with gold is that it has that nice shiny appearance that makes people covet it. As long as it maintains that, I'm pretty sure it will continue to sell at a significant premium over its raw industrial value. That said, I'd hardly be shocked if gold prices were to drop significantly, at some point in the future.
Trust in what, exactly? That people will accept it? What if they don't? Like someone that has a stick up their ass such that they want money from you, but won't accept your dollars? Ever read the part of bills that says "This note is legal tender for all debts, public and private."? That's because money is ultimately backed by government force. You can take your debtor to court and they will force him to accept your dollars. Bitcoin doesn't have that luxury.
This is extremely important and often misunderstood from a policy perspective. It’s actually not this simple, it’s demand for dollars rather than than economic output, but still, the point remains. Depending on execution, you can get inflation through taxation, or deflation through spending. The net economic effect is critical, and behavioral economics especially has a lot to say about how these can work in reverse.
- As a store of value.
- As a medium of exchange.
And that these two functions of money are somewhat in tension with each other, which adds to the problems people have using money the way they would like.