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My take was always that money is a medium of exchange. A mechanism by which you can buy or sell things. Wealth is something that people want. Lawnmowers or a m
by randomsearch 6y ago
My take was always that money is a medium of exchange. A mechanism by which you can buy or sell things.
Wealth is something that people want. Lawnmowers or a movie stream.
One consequence of this distinction is that if money fails as a medium of exchange (eg everyone loses confidence in the dollar) then those dollars are now useless. But no wealth has been destroyed.
So I conclude money is not a store of wealth.
- lisper 6y ago> But no wealth has been destroyed. No, that's not true. One of the things that people want is the ability to easily acquire new things that they need. If there is no universally accepted medium of exchange, that adds friction to the economy which destroys actual wealth. It's kind of like if you drain the oil out of your car. The value of the car goes down by more than the cost of the oil.
- randomsearch 6y ago> No, that's not true. That's an interesting but slightly pedantic point. If we continue that line of thinking, if the "end of the dollar" is actually caused by switch to (say) the euro as a currency in our hypothetical world, then the "loss of medium exchange as a loss of wealth" argument no longer holds, but your original mechanism has been destroyed, so I think my point stands.
- lisper 6y agoWell, yeah, but that's a big if. A switch from the dollar to the Euro is unlikely to be seamless, especially in the U.S. which is still the world's biggest economy.