9. Money and Prices

In the history of money, bartering was awkward because wants were not divisible. Direct exchange depended upon a double coincidence of wants. Demand for a medium of exchange grew until a general medium of exchange emerged, like gold and silver.

A medium of exchange should display these characteristics: must be generally acceptable, widely demanded for non-monetary uses, easily portable, homogeneous, highly divisible and highly durable.

Although it is beneficial to have more of any other commodity, it is not true of money. A greater supply of money merely dilutes the purchasing power of each money unit. The consequences of inflation include a rise in prices, a fall in purchasing power, and a stealth tax on citizens.

The ninth in a series of ten lectures, from Fundamentals of Economic Analysis: A Causal-Realist Approach.

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