Where Do You Stand on these Two Competing Views on the Future of Money

I recently read two books with similar names: The Evolution of Money, by Percy Kinnaid, published in 1909. and Evolution of Money, by Rupert Ederer, published in 1964. They both contained nuggets very appropriate to today as the authors wrote about money morphing from a value-based currency tied to gold, to one based on credit and good faith.

 

Here is a takeaway from Kinnaid’s book: “Money has evolved from concrete objects of intrinsic worth, used as standards of value, to paper representatives of ‘words’, originated to express the unit of value and its multiples and subdivisions.”  This is a profound change where promise and/or good faith  has replaced intrinsic value.

 

Ederer, in his book, wrote that extending credit would result in more good outflow in an economy which in turn would reduce gold’s supply and reserves. He added that taking us off the gold standard facilitated exchange and progressed the evolution of money to making money more functional and emancipating it from an imposed limit.

 

Ederer also wrote about and distinguished two theorists: the commodity theorists and the nominalist theorists. Broadly speaking, Ederer surmised that the commodity theorists advocate that the nature of money itself gives it value. They appreciate the present through the past, and value the origin of money, tying it to gold. The nominalists advocate that anything can be used for money. They appreciate the present by ignoring the past, and are divorced from money’s association to gold, believing money still has value. They point to the cultures where gold was never part of their money system and yet these cultures flourished.

 

Today, with traditional money, cryptocurrency, bitcoins and other types of currency in development, along with easing of credit, it is fascinating to listen to those on either side of money and its future value. Where do you stand? Should the future of money be based on solid ground like gold or shifting sand like new currencies, when it comes to “money” and its value?

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