Money Vs Currency
I thought of writing this blog after seeing a lot of buzz in the media such as "Federal Reserve is Printing Money" and right after that Media will show the printing press in US that is printing US Dollar bills.
It surprises me how simple it is to confuse Money vs Currency. Money is completely unreal, no one can touch it and yet in day to day life, we confuse it with currency. Money is not currency. Money is this imaginary, unreal concept that only helps us determine economic value of an asset such as the output of the country aka GDP, or economic value of labor force in the country.
These unreal, imaginary things are difficult to grasp at first when you hear about it but then a while later they start making perfect sense. For example, all the English alphabets are unreal, imaginary but when they are attached to something such as "Apple", "Boy", or "Charlie" and so on, these imaginary alphabets start making sense.
So, back to Money vs Currency - Money is unreal but when you assign a currency such as US Dollar to the United Stated GDP, it becomes real. Money can't be held in hands while currency can. One can't hold 10 Money in the pocket but one can hold 10 dollars or 10 Pounds in the pocket.
I thought of writing this blog after seeing a lot of buzz in the media such as "Federal Reserve is Printing Money" and right after that Media will show the printing press in US that is printing US Dollar bills.
It surprises me how simple it is to confuse Money vs Currency. Money is completely unreal, no one can touch it and yet in day to day life, we confuse it with currency. Money is not currency. Money is this imaginary, unreal concept that only helps us determine economic value of an asset such as the output of the country aka GDP, or economic value of labor force in the country.
These unreal, imaginary things are difficult to grasp at first when you hear about it but then a while later they start making perfect sense. For example, all the English alphabets are unreal, imaginary but when they are attached to something such as "Apple", "Boy", or "Charlie" and so on, these imaginary alphabets start making sense.
So, back to Money vs Currency - Money is unreal but when you assign a currency such as US Dollar to the United Stated GDP, it becomes real. Money can't be held in hands while currency can. One can't hold 10 Money in the pocket but one can hold 10 dollars or 10 Pounds in the pocket.
This is interesting. If there were no technology available with which to produce coin to use as money, individual transactors would be required to barter -- possibly trading chickens for grain. A barter economy exposes the transactors to potentially significant search, bargaining, and transaction costs -- especially if chickens are used as money. As the economy naturally seeks equilibrium, a more efficient medium of exchange will be found -- something that is easier to carry around than a bunch of chickens. In a mature economy this produces coinage, cash, and fiat money which in turn leads to issues of Means of Payment & Means of Settlement -- to which you are the expert. I would love to hear more about that.
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