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'''Money''' is a commodity accepted by general consent as a ''medium'' of [[economic]] exchange. It is the medium in which prices and [[values]] are expressed; as currency, it circulates anonymously from person to person and country to country, thus facilitating trade, and it is the principal measure of wealth.

'''Money''' is a commodity accepted by general consent as a ''medium'' of [[economic]] exchange. It is the [[medium]] in which prices and [[values]] are expressed; as '''currency''', it circulates anonymously from person to person and country to country, thus facilitating trade, and it is the principal measure of [[wealth]].

The subject of money has fascinated people from the time of [[Aristotle]] to the present day. The piece of paper labeled 1 dollar, 10 euros, 100 yuan, or 1,000 yen is little different, as paper, from a piece of the same size torn from a newspaper or magazine, yet it will enable its bearer to command some measure of food, drink, clothing, and the remaining [[things|goods]] of life while the other is fit only to light the fire. Whence the [[difference]]? The easy answer, and the right one, is that modern money is a social contrivance. People accept money as such because they know that others will. This common [[knowledge]] makes the pieces of paper valuable because everyone thinks they are, and everyone thinks they are because in his or her [[experience]] money has always been accepted in exchange for valuable goods, assets, or services. At bottom money is, then, a social [[convention]], but a convention of uncommon strength that people will abide by even under extreme provocation. The strength of the convention is, of course, what enables governments to profit by inflating (increasing the [[quantity]] of) the currency. But it is not indestructible. When great increases occur in the quantity of these pieces of paper—as they have during and after wars—money may be seen to be, after all, no more than pieces of paper. If the social arrangement that sustains money as a medium of exchange breaks down, people will then seek substitutes—like the cigarettes and cognac that for a time served as the medium of exchange in Germany after World War II. New money may substitute for old under less extreme conditions. In many countries with a history]of high [[inflation]], such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the U.S. dollar, because the dollar has more stable [[value]] than the local currency. Furthermore, the country's residents accept the dollar as a medium of exchange because it is well-known and offers more stable purchasing power than local money.

The subject of money has fascinated people from the time of [[Aristotle]] to the present day. The piece of paper labeled 1 dollar, 10 euros, 100 yuan, or 1,000 yen is little different, as paper, from a piece of the same size torn from a newspaper or magazine, yet it will enable its bearer to command some measure of food, drink, clothing, and the remaining [[things|goods]] of life while the other is fit only to light the fire. Whence the [[difference]]? The easy answer, and the right one, is that modern money is a social contrivance. People accept money as such because they know that others will. This common [[knowledge]] makes the pieces of paper valuable because everyone thinks they are, and everyone thinks they are because in his or her [[experience]] money has always been accepted in exchange for valuable goods, assets, or services.  

 

At bottom money is, then, a social [[convention]], but a convention of uncommon strength that people will abide by even under extreme provocation. The strength of the convention is, of course, what enables governments to [[profit]] by inflating (increasing the [[quantity]] of) the currency. But it is not indestructible. When great increases occur in the quantity of these pieces of paper—as they have during and after [[war]]s—money may be seen to be, after all, no more than pieces of paper. If the social arrangement that sustains money as a medium of exchange breaks down, people will then seek substitutes—like the cigarettes and cognac that for a time served as the medium of exchange in Germany after [[World War II]]. New money may substitute for old under less extreme conditions.  

 

In many countries with a [[history]] of high [[inflation]], such as Argentina, Israel, or Russia, prices may be quoted in a different currency, such as the U.S. dollar, because the dollar has more stable [[value]] than the local currency. Furthermore, the country's residents accept the dollar as a medium of exchange because it is well-known and offers more stable purchasing power than local money[1].

[[Category: General Reference]]

[[Category: General Reference]]

[[Category: Economics]]

[[Category: Economics]]