This is true.Boefke wrote:[ ....]. But beware, As Mises describes Money has only one function......medium of exchange.
That's Mises definition. [ ....]
THE most important thing is to understand ‘what actually IS money’
My view on money (written in my double dutch. )
**Several centuries ago Money Scrips are introduced to simplify the barter system. The scrip is in core a Medium of Exchange, there’s nothing more to it. On this I agree 100% with von Mises !
The local market superintendant provided the scrips to the merchants on local markets. Market superintendants at different local marketplaces used different scips e.g. different scrip Mediums of Exchange.
Before the market was open, they swapped these local scrips with the merchants against collateral (silver or gold). After the market closed, the merchants swapped their local scips again against gold and silver. So the merchants used the scrip medium, to exchange their goods (commodities) and only because a cow had a higher price than a chicken, you could buy a chicken for 1 scrip and sell a cow for 50 scrips. This was easier for the merchants than barter because merchant John Do could buy a cow without having 50 chickens to trade.
**Therefore all these local scrips were also called Unit of Account during daily market times. I can imagine that a farmer who sold several cows in those local markets couldn’t carry piles of scrips so maybe the market superintendant created scrips with numbers like a 1-Scrip a 10-Scip etc. All current currencies are based on these "2 scrip roots” and therefore are Medium of Exchange and Units of Account.
**Every country or territory used its own scrips and that is inconvenient when trade expands, so I can imagine that somewhere on the currency/scrip trail, Central Banks took over from local market superintendants. And this is true, Central Banks do provide enough currency for trade. Currency made out of the blue, for trade only. Central Banks can contract or expand the currency / scrip quantity dependant on the economic activity. Thus is the REAL market lubricating oil.Now how about this Store of Value thing ? Because scrips were never meant to be a Store of Value in the old ages. Silver and Gold were the true Store/s of Value. However I can image that during trading time scrips were temporarily Store of Value, so maybe that’s why we still consider our current currencies also a Store of Value, it’s somehow still in our minds.
**Now how about this debt in currencies ? Because in the beginning scrips were never meant to be a Store of Debt nor were they meant to be a store of Value.
Here Commercial Banks come in, when they took over from private money-scrip changers who also were private money-scrip lenders.
-These commercial banks were allowed to lend money against securities, they are so called debt.1 providers who create money. This debt (money) is secured by real assets of value. Before the lender get/s his money the Commercial Bank has to FIAT the loan. Actually this FIAT-money is a private- bond derivative because it is derived from commercial bonds.
-Now governments come in. Governments also want to lend money but Governments don’t owe things of value but they do owe future tax revenues. Nobody really knows how much tax will be paid in the future, because when economic activity is poor, citizens don’t pay much taxes. So Governments hired fortune tellers (economists) to forecast the tax revenue future and according to those fortune tellers, the future is always gorgeous sunny. Governments lend money from Commercial Banks (treasury debt) and Commercial Banks can create money out of it by persuading private investors to invest in these government bonds. This debt is so called debt.2 money. The only security underlying this debt is provided by fortune tellers, hired by the Governments. Actually the only security for this debt.2 and derived money is a Government promise.
This debt.2 and derived money is NO fiatmoney, because there was nothing to fiat for .... but fortunetelling and blue eyed promises.
Resuming there are actually 3 kinds of money we can use as Store of Value which would become a problem when not well managed by Central Banks (who also supervise Commercial Banks): scrip money, created by Central Banks providing the economy ; debt.1 money created (by fiat) and covered by securities, through Commercial Banks to provide Private Lenders; debt.2 money created through Commercial banks (by Government Promise) and covered by the Government/s blue eyes.
Mix those 3 functions of Store of Value money in a big melting pot without proper management and ask yourself what is what ?
My personal conclusion:
The core of (scrip)money is Medium of Exchange and later on also Unit of Account. If not well managed by Market Superintendants (C.B./s) this money can evolve in a unintended Store of Value.
When money exceeded it/s scrip-role it became fiat- debt.1 Store of Value and when Governments discovered the power of money blue-eye debt.2 Store of Value was created.
BTW. Duisenberg said: Economists (fortune tellers) know about MoE; UoA; SoV, but he himself stipulates that the most important quality of money is “a trusted social contract”
Therefore, hyperinflation is NOT triggered by an economic MoE; UoA or SoV event, but hyperinflation is triggered by a loss of confidence in the social contract.