Saturday, February 16, 2013

Money Wisdom #84

"The separation of monetary and non-monetary functions is also behind the definition according to which money must be a thing unto itself in contradiction to all other objects (Menger, p93 - LSE reprint of 'An Article on Geld from 1900). Those who use this definition visualize a huge balance with all the money in one of the scales and all goods and services in another. This picture does not in the least fit primitive conditions where the majority of currencies have some non-monetary use and the same quantity, therefore, are apt to appear in both sides of the scales of the balance, though not necessarily at the same time. Moreover the simultaneous existence of several currencies have made it difficult to apply a clear-cut distinction between money and goods.

The existence of a price-mechanism through the functioning of the monetary system is yet another basis for the definition of money. It links up with the definition based on a sharp distinction between money and goods, since price-mechanism in the modern sense can only work on the basis of such a distinction."

Paul Einzig Primitive Money (1948) p.324

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