Not So Dismal

Making Economics a Little Easier to Understand

Posts Tagged ‘uncertainty

The New Sound Money

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There’s a great article on the Wall Street Journal’s opinion page today that can be found here.  Excerpt below, but I highly recommend you read the whole thing if you’re willing to swim in some moderately-deep economic waters.  Maybe I’ll cover the subject at a more elementary level in a few days.

The whimpering is real, and justified, because it hurts to have your world come crashing down. And global financial markets are definitely crashing, even when the impact is momentarily softened through massive injections of artificial money — “artificial” because the fiat money does not represent a store of genuine value but rather an airy government claim to future wealth yet to be created.

In the aftermath of this financial catastrophe, as we sort out causes and assign blame, with experts offering various solutions — More regulation! Less complex financial instruments! — let’s not lose sight of the most fundamental component of finance. No credit-default swap, no exotic derivative, can be structured without stipulating the monetary unit of account in which its value is calculated. Money is the medium of exchange — the measure, the standard, the store of value — which defines the very substance of the economic contract between buyer and seller. It is the basic element, the atom of financial matter.

It is the money that is broken.

Written by caseyayers

30 September, 2008 at 1:02 pm