4 ms·
I see you are repeating something patently wrong and even adding some equally wrong "spice" to it, like that cash notes are non fungible by design, which is som
by buran77 4y ago
I see you are repeating something patently wrong and even adding some equally wrong "spice" to it, like that cash notes are non fungible by design, which is somehow "literally an inseparable part of their physical existence". This despite currency (in any form) predating the formalized concept of fungibility.
Money is fungible by every (literal) definition of the word, whether banknotes or coins. Being fungible doesn't refer to the physical aspect of being absolutely identical but to its value. Money exists to be fungible, fungibility is literally one of the big things that make money work. Going even further, money is probably one of the few things equally fungible whether new or used, and sometimes even old/outdated (think retired currency which can be converted to currency in circulation).
Whether coins or banknotes, they are interchangeable from one to another regardless of serial or the year stamped on them. And almost any other two new "identical" products are just as fungible: two loaves of bread, two planks of wood, two pencils, or two cars (not the case for used products). They're all mass produces, quasi-identical units.
And the serial numbers? They're used mainly for uniquely tracing the note and don't affect the fungibility in any way. The proof? Randomly pick a banknote every time you pay for something. If it works every time either you're the luckiest person in the world, or they're completely fungible.
- jacquesm 4y agoAgreed but the inflation point is well made and stands.
- imtringued 4y agoBecause money can be readily traded for anything else it is effectively a joker, equivalent to any other card but with the ability to respond to nearly any situation. This means people value money itself slightly more than the things you can buy with it. Since money doesn't spoil, this tricks our monkey brain into hoarding the stuff, no matter how much we already have, it is a type of "desire" that can never be saturated. This is known as liquidity preference and since money is worth more than the things it can buy, giving up liquidity must be compensated by paying for the loss of liquidity, this means the minimum interest rate gets stuck at a floor. When you consider that the optimal interest rate is 0% when markets are saturated we are in a pickle. So instead we decided that loans create new deposits, we no longer have to ask anyone to give us their money, no one has to give up liquidity, hence why interest rates are below liquidity preference. Of course the problem with that is that as long as yields are optimal and markets are saturated, you are going to need to expand the money supply. This in itself doesn't necessarily lead to inflation but to stave off deflation, central banks decided to target 2% inflation, this lifts the profitability of companies in the real world closer in line with liquidity preference, in other words, we need inflation to neutralise liquidity preference.