7. The Concept of the Value of Money
Summary
The main task of economic theory is to explain money’s objective exchange value, or what is often called the purchasing power of money. This refers to the amount of goods that someone can obtain in the marketplace with a unit of money. This explanation in turn ultimately goes back to subjective valuations.
8. The Determinants of the Objective Exchange Value, or Purchasing Power, of Money
Summary>
The usefulness of money derives solely from its purchasing power. Therefore, today’s valuation of money is dependent on its purchasing power yesterday, which in turn was influenced by money’s purchasing power two days ago. Such reasoning does not lead to an infinite regress, because at some point in the past we arrive at the state of direct exchange, when goods were only valued for their direct use.
9. The Problem of the Existence of Local Differences in the Objective Exchange Value of Money
Chapter Outline
1. Interlocal Price Relations
Money can perform its services from virtually any location. Gold stored in the cellars of the Bank of England can be used as a common medium of exchange anywhere in the world, through the use of banknotes, checks, and clearing systems. In contrast, physical location is a crucial feature of other economic goods.
10. The Exchange Ratio Between Money of Different Kinds
Chapter Outline
1.
11. The Problem of Measuring the Objective Exchange Value of Money and Variations in It
Chapter Outline
1. The History of the Problem
Some of the greatest minds in economics have devoted themselves to the development of indexes that would provide an objective measurement of the change in the purchasing power of money. However, such statistical techniques have never lived up to their promises, as even their own creators often admitted.
12. The Social Consequences of Variations in the Objective Exchange Value of Money
Chapter Outline
1. The Exchange of Present Goods for Future Goods
People often exchange present goods for future goods, for example by lending money today (a present good) in exchange for a promise of repayment of future principal plus interest, or by agreeing today to exchange goods against money in the future.
13. Monetary Policy
Summary
Originally, citizens judged the success of monetary policy by the soundness of the coinage it maintained in circulation. In modern times monetary policy refers to government (or central bank) efforts to alter the purchasing power of money. The chief instrument through which the State carries out monetary policy is its strong influence on the kind of money used by the citizenry.
14. The Monetary Policy of Étatism
Summary
Étatism as a theory is the doctrine of the omnipotence of the State. As a policy, étatism is the attempt to regulate all social and economic affairs by authoritative commandment and prohibition.
III. Money and Banking
15. The Business of Banking
Summary
A banker is one who lends out other people’s money; a capitalist lends out his or her own money. The business of banking falls into two distinct categories: (1) the negotiation of credit through the loan of other people’s money and (2) the granting of credit through the issue of fiduciary media.
