money

Money can be seen as a convenient fiction that is used to define an abstract numerical value for a good or service. That numerical value changes based on the influences of supply and demand. People look in their wallets or on their bank statements, and believe that they are looking at money. We’re not. Paper bills and coins represent value, but they are not value. Money doesn’t exist as a physical object. Bank computers hold electronic and magnetic impulses that represent value. When you buy a gold coin for $100, that $100 goes to the dealer, which goes into a bank. When you pull money out of an account, you are borrowing some value that you will use to purchase a good or service elsewhere. You don’t keep value, you keep physical objects representing value.

While this view puts money completely into the category of the intangible, a theory that describes the relationship between credit and money is more comprehensive. Money is the medium of exchange in which final settlement of debts occurs.

There is a novel concept of money that attempts to unify credit and money into a ledger theory of money. This is tantalizing because bitcoin is a new form of money and it is a ledger. This theory is contradicted by the understanding of bitcoin as a novel form of fiat money, in that it does not have use value, while it is produced at cost in the free market.